Despite it usually being largely hidden from view to all but a relatively few employees in a business, the warehouse is an essential element to the smooth running of most enterprises.
Nowadays, businesses are fond of applying the concept of KPIs, (Key Performance Indicators) to each element of their organisation, with a view to assessing their level of performance, efficiency and overall contribution to the business as a whole.
Here are some headline examples of KPIs which could usefully be measured in the warehouse operation of a business:
TL;DR
- KPIs turn a hidden warehouse into a measurable one: pick a KPI for space use, replenishment, wastage, safety and financial contribution, then measure and compare.
- Store fast-moving items where they are easiest to reach to save time when picking, moving and replenishing.
- Good replenishment respects supplier lead times and seasonality and uses clear re-order trigger points so stock never runs out on a long lead time.
- Training cuts waste and damage: better trained forklift operators mishandle less stock, and cross-trained staff can cover for absence.
- Safety is a KPI too: an untrained forklift operator is a serious danger, so training, materials handling, PPE and fire procedures all belong in your measures.
- Warehouse efficiency is good procedures plus trained, regularly assessed staff: equipment in untrained hands is dangerous and expensive.
How well are you using your warehouse space and resources?
Measure how effectively your space and people are used, not just how modern your racking is. This involves rather more than just installing the latest in warehouse shelving or racking. For example, ensuring that those items that are moved the most frequently are stored in the most accessible way in order to save time when picking, moving and replenishing. A simple KPI here is the time or distance taken on a typical pick, which quickly shows whether your layout is helping or hindering the operation.
How efficient is your inventory replenishment?
Efficient replenishment is measured by how quickly and reliably stock is replaced before it runs out. One important part of the whole supply chain management process in the speed with which stock can be replenished. Does the process take into account supplier lead times and seasonality? Does the system in use, manual or computerised, recognise trigger points for re-ordering so that the item is never in an out-of-stock situation with a long lead time? Tracking the number of stock-outs and the time to replenish gives you a clear picture of how well this is working.
How can you reduce wastage and damage in the warehouse?
Reduce wastage by improving stock rotation, handling and training, then measure the waste that remains. Obviously this varies from business to business. Some warehouses in which perishable or date-sensitive products are stored need more sophisticated picking and stock rotation procedures in order to avoid waste. Other waste, due to damage or mishandling, can often be improved with better training,
e.g. in the operation of warehouse equipment such as fork lift trucks and by having a well thought out process of fork lift truck driver training.
Wastage does not only refer to damaged or out-of-date stock however. Other forms of waste include inefficient use of warehouse resources, including of course, warehouse personnel. If the forklift operator is sick or on holiday, can someone cover for him/her, is there a need for forklift truck driver training so that such shortfalls can easily be covered?
Then there are packaging materials; are these being recycled at every opportunity in order to improve the efficiency of the enterprise with regard to environmental issues?
How do you maintain safety and a healthy environment in the warehouse?
Treat safety as a measurable KPI, because a badly run warehouse puts both people and the business at risk. We’ve all seen the horror stories which occur when a warehouse or stockroom is badly run with regard to standards of health and safety. Faulty shelving, badly stacked products, too much weight badly distributed on a shelf and staff using equipment incorrectly. A forklift truck driven by an untrained or badly trained individual is a very dangerous thing, both for the operator and for those working with or near him/her. There’s also the very important area of materials handling, are the warehouse staff trained to handle products safely and efficiently in order to reduce accidents in the warehouse?
Some materials used in the warehouse may have to be disposed of in different ways. Some are recyclable whereas, currently, others may not be. Some may be toxic or harmful to the environment and wildlife if not disposed of correctly, are all these concerns being addressed. C02 emissions are a major concern and procedures such as the burning of waste materials are usually strictly controlled, does your organisation fully conform to such legislation and guidelines and are there procedures in place to monitor this?
Heat, of course, is an expensive commodity and is often difficult to provide properly in a warehouse due to the nature of the business and the products stored. If heating is installed is it regularly maintained to ensure both safety and efficiency of operation? Are the warehouse staff provided with suitable clothing in cases of low temperature working?
On the subject of clothing, are the warehouse staff equipped with clothing to minimise injury if an accident does occur? High visibility clothing, gloves, head protection and protective footwear are all important considerations and a failure to meet regulations with regard to these could be disastrous, not to mention expensive, for the business if an accident or other mishap occurred.
The matter of fire prevention is also an important one in many businesses which handle products that are highly flammable. Even in cases where the stock is not particularly flammable the packaging very often is. Does the organisation have measures in place to ensure the correct operation of fire extinguishers, fire blankets and other safety equipment. Are the fire exits clear from obstruction and in good working order? Is there a well-planned evacuation procedure in place, complete with a designated assembly point in case of evacuation, and are there adequate first aid facilities available. It is normal to have someone appointed as a “fire officer” to deal with roll call and at least one person trained in first aid.
What else could your KPIs indicate?
Your KPIs can also reveal the warehouse’s financial contribution, not just its physical performance. Other key performance indicators could include aspects of financial contribution to the business. Is the warehouse a profit centre or a cost? In either case, is the contribution it makes being correctly assessed?
There is a great deal of pressure placed on most businesses to outperform the competition in terms of cost and delivery time. This is especially true of online businesses where people can place an order 24 hours a day and expect similarly responsive delivery performance, only possible if the supplier has their warehouse efficiency well and truly under control.
So, if you haven’t already done so, take a trip around your warehouse or storage facilities as soon as possible and try to attribute a KPI to as many aspects of it as you can. When you start to measure and compare results you might be surprised at how efficient your warehouse operation is, or maybe a different kind of surprise awaits!
Which warehouse KPIs should you focus on first?
The table below groups the main areas above so you can see what to measure and how each one can be improved.
| KPI area | What to measure | How to improve it |
|---|---|---|
| Space and resources | Pick time and layout efficiency | Store fast-moving items in the most accessible places |
| Inventory replenishment | Stock-outs and time to replenish | Use re-order trigger points that respect lead times and seasonality |
| Wastage and damage | Damaged, out-of-date and mishandled stock | Better stock rotation and forklift and materials handling training |
| Safety and environment | Accidents, near misses and compliance | Trained operators, correct PPE and fire procedures |
| Financial contribution | Cost versus profit contribution | Assess whether the warehouse is a cost centre or profit centre |
Improving warehouse efficiency is usually a combination of good procedures, correctly implemented and monitored. Training and regular assessment of staff is also vital, equipment in the wrong, or untrained, hands can be dangerous and expensive.
Frequently Asked Questions
What are warehouse KPIs?
Warehouse KPIs, or Key Performance Indicators, are measures businesses apply to each part of a warehouse operation to assess its performance, efficiency and contribution. Common examples include use of space and resources, inventory replenishment, wastage and damage, safety, and financial contribution. Measuring them turns a largely hidden operation into something you can compare and improve.
Which KPIs matter most for warehouse efficiency?
The most useful KPIs cover space and resource use, replenishment speed, wastage and damage, safety, and financial contribution. Each one highlights a different way efficiency can be gained or lost. Starting with these headline areas gives most businesses a clear improvement picture quickly.
How can better forklift training reduce warehouse waste?
A large share of avoidable waste comes from damage and mishandling, much of which can be improved with better training. Well trained forklift operators handle stock and equipment more carefully, so less product is damaged. Cross-training staff also means absence can be covered without disrupting the operation.
Why is safety treated as a warehouse KPI?
Safety is a KPI because poor standards are both dangerous and expensive. A forklift driven by an untrained operator is a serious risk to that operator and everyone nearby, and faulty shelving or bad stacking can cause injuries and damage. Measuring accidents, near misses and compliance keeps safety visible and improving.
How do you improve inventory replenishment?
Good replenishment takes supplier lead times and seasonality into account and uses clear re-order trigger points. Whether the system is manual or computerised, it should re-order in time so an item is never out of stock when it has a long lead time. Tracking stock-outs and time to replenish shows how well the process is working.
What safety equipment should warehouse staff have?
Warehouse staff should be equipped with clothing and PPE that minimises injury if an accident occurs. High visibility clothing, gloves, head protection and protective footwear are all important considerations. Failing to meet the regulations on these can be disastrous and expensive for a business if an accident happens.
Is the warehouse a cost centre or a profit centre?
It can be either, and a useful KPI is knowing which. Some warehouses are run as profit centres and others as costs, but in both cases the contribution should be correctly assessed. Understanding that contribution helps a business decide where to invest for the best return.
How does staff training improve warehouse efficiency?
Improving warehouse efficiency is a combination of good procedures and trained, regularly assessed staff. Equipment in the wrong or untrained hands is dangerous and expensive, so training protects both people and the bottom line. A small investment in expertise is often rewarded many times over.
Does AFTT provide accredited forklift training for warehouses?
Yes, Advanced Fork Truck Training is an AITT-accredited training provider offering forklift and materials handling training for warehouse operations. Accredited, documented training gives employers independent proof that their operators are competent. This supports both safety and the efficiency KPIs discussed above.
There’s never been a better time to evaluate your warehouse efficiency than right now, today, a small investment in expertise can often be rewarded many times over.
To improve warehouse efficiency and ensure health and safety in the workplace, please call 01438 222157 or email enquiries@aftt.co.uk.
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