There are countless KPIs that can impact freight management, and it can be tough to keep track of them all. Here we highlight 8 of the most crucial warehouse KPIs that give you insights into warehouse performance and where you can streamline.
1) On-Time Deliveries
By definition, on-time delivery is the percentage of shipments delivered within the promised timeframes set by the organization. In other words, it measures how well your organization meets its customer's expectations.
It's vital to monitor on-time deliveries closely and identify trends or patterns in logistics that could indicate potential problems. For example, if continual shipping delays cause shipments to arrive late, or transloading/cross docking is too slow, consider using a different carrier or changing your shipping routes.
2) Lead Time
Lead time is the time that elapses between when an order comes through and when the customer receives it. Obviously, the shorter the lead time, the better. That's because shorter lead times mean happier customers.
You can do several things to reduce lead time in your warehouse. One is to streamline your order-picking process. Ensure your pickers clearly understand what to do and how to do it efficiently. Another is to invest in automation. Automated systems help speed up the pick and pack process and reduce errors.
3) Fill Rate
One of the most important metrics you can track is the fill rate. Fill rate measures how often an inventory order is filled completely and shipped on time. You can identify areas where your operation needs improvement by tracking your fill rate.
There are a few different ways to calculate the fill rate. The most common method is to take the total number of orders filled and divide it by the total number of orders placed. This gives you a percentage that represents your fill rate. For example, if you have a fill rate of 80%, 4 out of every 5 orders placed is filled and shipped on time.
4) Ease Of Doing Business
The ease of doing business is affected by many factors, such as your warehouse layout, the training employees receive, and the quality of your warehouse management software.
Improving the ease of doing business in your warehouse is one of the best things you can do to improve your freight management. When your employees can get their work done more quickly and easily, it frees up time for them to focus on other tasks, like ensuring cross-docking is efficient, which leads to increased productivity.
5) Compliance With Routing Guides
Routing guides can be very specific, detailing which carrier should be used for each leg of the journey, what service should be used, and even which route should be taken. In some cases, routing guides also specify the minimum acceptable transit time.
Failure to comply with routing guide instructions can result in significant delays and additional costs. That's why it's essential to have a good understanding of routing guides and to ensure that your shipments comply.
6) Growth Potential
This KPI measures how well your company is positioned to grow in the future. Many factors contribute to growth potential, including:
- The ability to scale
- The size of your target market
- Your competitive advantage
7) Return Rate
The return rate measures how much product is returned to the warehouse relative to how much was shipped out. A high return rate indicates that many products are being sent back for various reasons, which can be costly and lead to inefficiencies.
There are a number of factors that can impact the return rate, from poor quality control to damaged goods. But whatever the cause, it's essential to keep the return rate as low as possible to maintain a healthy operation.
8) Hassle Or Cost to Serve
The hassle or cost to serve is the direct opposite of the ease of doing business. It factors in all of the behind-the-scenes work required to service a customer, including but not limited to: order processing, returns handling, customer service interactions, etc.
This metric is important to freight management because it provides a way to measure and benchmark the total cost associated with servicing a customer. Too often, companies focus on the cost of goods sold and overlook the hidden costs associated with servicing customers. By evaluating the cost of goods sold AND the hassle or cost to serve, companies can get a more accurate picture of their overall profitability, while also determining which, if any, customers are actually unprofitable for the business.
By understanding and tracking these warehouse KPIs, you can optimize your freight management process to improve your bottom line. While some of these metrics may be easier to track, all are important indicators of how well your warehouse is performing.
Video On Demand - Manufacturing and a Shipping Recession
Don't miss the recording of our recent logistics panel discussing the realities of tightening processes and reducing costs in your supply chain in the face of a recession. This powerhouse team of experts discuss how you can best manage logistics in downtimes, leverage your technology, and generally get the most out of what you have. Watch on demand.
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