Warehouse Management Metrics: KPIs You Need to Be Tracking

If organizational stakeholders or investors ask about the efficiency of your warehouse operations, can you support your response with hard data? If not, you’ll probably end up having to rely on anecdotal evidence and generalized answers.

Unless you are tracking relevant warehouse management metrics, it’s impossible to understand what goes on in the day-to-day. If you encounter an issue or are tasked with improving a particular process, you’ll have to rely on guesswork instead of timely, relevant data.

To get that clear visual of your warehouse operations, start with some basic warehouse management metrics to assess your current processes and whether they’re empowering you to achieve your goals. 

What Are Warehouse Management Metrics?

Warehouse management metrics, also known as key performance indicators (KPIs), are essential tools used to measure, analyze, and improve the productivity of your operations. They allow you to focus on big-picture data points like total production output and analyze things like the rate of return. 

Warehouse KPIs can offer insights into various aspects, such as: 

  • Cost 
  • Time management
  • Customer satisfaction 
  • Efficiency 
  • Production rates 

By tracking these metrics, you’ll empower your decision-making processes and boost warehouse efficiency. 

There are dozens of different warehouse management metrics you can track. However, it’s easy to get lost in the data if you attempt to monitor too many KPIs at once. To keep things simple, we’ve identified 15 metrics and divided them into five core categories.

Cost Metrics

Cost metrics provide a glimpse into your operational and production expenses. Keeping an eye on financial KPIs is critical to maintaining liquidity and supporting long-term business growth. Here are three of the most important cost-of-inventory metrics you need to consider. 

Inventory Carrying Costs

The cost of inventory carrying refers to the total expenses involved in holding inventory, including storage, insurance, taxes, and depreciation. This KPI helps you optimize inventory levels and understand the financial impacts of stored stock. 

Knowing your carrying costs is a critical part of inventory management. While holding some physical inventory is vital, the goal is to carry just enough stock without shorting yourself or driving up carrying costs to unsustainable levels. 

Cost per Order

Cost per order involves the total costs of processing a single order. It encompasses labor, material, and overhead expenses. 

Tracking this metric helps you pinpoint opportunities for cost reductions. For instance, if your overhead expenses have recently increased, you can explore why and determine whether there is a way to push these costs back down. 

Cost of Warehouse Space per Square Foot

This metric assesses the cost-effectiveness of your warehouse space. It is vital to evaluate whether you are using the space efficiently and to guide decisions about expansion or consolidation.

One way to decrease the cost of warehouse space per square foot is through the use of vertical racking and storage systems. By expanding upward instead of outward, you can delay or sometimes avoid expansion altogether while still supporting customer demand. 

Time Metrics

Today’s consumers want their order, and they want it yesterday. If you want to keep your customers and trading partners happy, you’ve got to achieve and maintain efficient shipping times

However, shipping time is only part of the equation. There are numerous other processes that impact the speed and nimbleness of your operations.

Order Lead Time

Order lead time calculates how much time passes from receiving an order to shipping it out. Shorter lead times indicate that your warehouse is responsive and agile. Inventory accuracy, overall process efficiency, and the skill of your staff are a few factors that contribute to order lead time. 

For instance, if picking and packing take longer than they should, order lead times will suffer. Likewise, if your inventory levels are inaccurate, you may not have the requested items on hand, which drives up lead times. 

On that note, you may also want to track the backorder rate. This metric identifies what percentage of overall orders are backorders during a set period of time. If your backorder rates are high, it signifies that your inventory management protocols are misaligned with customer demand. 

Dock-to-Stock Cycle Time

The dock-to-stock cycle time tracks how long it takes you to move goods from the receiving dock to a ready-to-sell storage location. It is a critical metric for assessing the efficiency of receiving and storage processes.

Issues with your dock-to-stock times could indicate staffing problems or process bottlenecks. If left unresolved, these problems could negatively impact order lead times and overall inventory accuracy. 

Order Picking Accuracy 

The order picking accuracy KPI tracks the accuracy of your picking processes over time. High accuracy levels lead to fewer returns and increased customer satisfaction

When order picking accuracy is low, your rate of return rises. Conversely, if you increase order picking accuracy, your rate of return should drop. This is an example of a negative correlation between warehouse management metrics. 

Tracking these and other warehouse management metrics isn’t simply about analyzing operational performance. The goal is to determine which levers you need to manipulate to achieve a desired outcome.  

Customer Metrics

At the end of the day, everything you do should be geared toward keeping customers happy. That’s why you need to be tracking at least a few customer-centric warehouse management metrics, such as the following examples.

Order Accuracy Rate

The order accuracy rate measures the percentage of orders shipped without any errors. This is essential for customer satisfaction and loyalty. 

For instance, let’s say that last week, you shipped out 100 orders, 98 of which were error-free. In this scenario, your order accuracy rate was 98%. 

Generally, you’ll track order accuracy rates over a longer period, such as 30-day intervals. If your total shipping volume is low, you may even want to monitor the order accuracy rate in quarterly intervals.

On-Time Shipment Rate

The on-time shipment rate tracks the percentage of orders that were shipped on or before the promised date. This metric is crucial for maintaining customer trust and satisfaction. If you are consistently shipping packages late, you’ll have a tough time earning repeat business.

Always watch your on-time shipment rate, as any drops in on-time percentages need to be addressed immediately. The sooner you remedy any shipment problems, the lower the chances that said issue will damage your reputation. 

Return Rate

The return rate is the percentage of products returned by customers. A lower return rate often indicates higher customer satisfaction and order accuracy. Conversely, a high return rate indicates there is an issue with one of your fulfillment or shipping processes.

However, you’ll have to dig deeper to pinpoint what’s causing the high return rate. We recommend gathering information about the reason for returns when processing these requests. Ask customers to explain exactly what they are dissatisfied with and why they are returning the item. Use this data to identify what’s going wrong and fix it. 

Efficiency Metrics

Efficiency metrics provide a high-level overview of the smoothness of your workflows and how effectively you are utilizing available resources. In addition to tracking efficiency-centric warehouse management metrics, you need to set target thresholds and ensure that you are consistently meeting or exceeding those minimum standards. Let’s consider a few metrics you should track.

Inventory Turnover

Inventory turnover measures how often inventory is sold and replaced over a specific period. Higher turnover rates can indicate that you are managing inventory efficiently. Conversely, if stock is sitting on shelves for months at a time, you are probably carrying too much inventory.

Inventory turnover is an especially important KPI for organizations that deal in perishable goods. It’s important to keep inventory turnover rates high so you can avoid spoilage and product waste. 

Warehouse Capacity Utilization

Warehouse capacity utilization assesses how well you are using available warehouse space. Optimizing space utilization can significantly enhance operational efficiency. However, you don’t want to use 100% of your warehouse capacity, as doing so limits your flexibility.

Ideally, you should keep your warehouse capacity utilization rate in the mid-90% range so you have the ability to adapt as demand fluctuates. For instance, you might need to temporarily increase your stock of a hot ticket item ahead of a holiday sales event. This way, you’ll have the space to do so.

Employee Productivity  

Employee productivity can be measured in a variety of ways. However, the standard approach is to track the number of tasks completed per hour. You can measure the output of individual staff members or an entire shift.

Tracking employee productivity helps you identify your top performers and determine which team members may need extra support or training. Once you gain a better understanding of your workforce’s capabilities, you can put people in a position to thrive. 

Production Rate Metrics

Production rate metrics are another critical category of warehouse management KPIs. Again, simply tracking these data points isn’t enough. You also need to set a target performance threshold and compare actual performance to these standards. Here are a few metrics to monitor. 

Picking Productivity

Picking productivity is the number of items picked per hour. This metric reveals whether your picking processes are efficient or in need of restructuring.

If your picking times are consistently below your target thresholds, it may be time to reorganize your warehouse or invest in some automation solutions. When you combine efficient processes with powerful technologies and a skilled workforce, you’ll be better equipped to meet productivity milestones. 

Receiving Efficiency

Receiving efficiency is the rate at which you receive, inspect, and store goods. It is essential for maintaining a smooth flow of goods and accurate inventory.

Think of receiving efficiency as another big-picture metric. It monitors the overall productiveness of your receiving workflows. However, if your receiving efficiency isn’t up to par, you’ll have to explore more granular warehouse KPIs to get to the bottom of the issue. 

Put-Away Time

Put-away time is a component of receiving efficiency. This metric tracks the time taken to store items in their designated locations after the initial reception and inspection process. Faster put-away times can improve overall warehouse efficiency.

Put-away time is a granular metric—it’s the performance indicator to track if you want to improve receiving efficiency. If it is up to your standards, you’ll need to seek efficiency gains in your inspection and dock-side receiving processes. 

Ready to Start Tracking These Warehouse Management Metrics?

Keeping a close eye on warehouse management metrics will help you better understand how your facility is performing. It will allow you to track granular data points to identify process-level inefficiencies or combine data from multiple KPIs to get a glimpse of the big picture.

While these metrics give you a great starting point for improving operational efficiency, your warehouse is just one part of the entire customer-to-cash cycle. To learn how to streamline every single stage of order fulfillment, download this short guide to best practices and kick your operation into high gear.