WAREHOUSE MANAGEMENT -

BPMG 3133
Presented by: Dr. Fariza bt Ahmad Mahyadin@Mahidin
STML, UUM
Objective(s) of course :
After completing this course, students should be able to:
i. Understanding the fundamental theories in warehouse management
ii. Acquire the history, concept and theory in warehouse management
iii. Develop the transport environment knowledge around them
TOPIC 3 : MEASURING &
BENCHMARKING WAREHOUSE
PERFORMANCE
SUB-TOPIC TO COVER:
3.1 Benchmarking warehouse performance
3.2 Warehouse performance measure
3.3 Warehouse performance index
3.4 Do’s and don’ts for warehouse automation
3.5 Warehouse practice and warehouse performance

The Singapore Logistics Association. (2009). The Practitioner’s Guide : Warehouse Practices. (2nd. ed). Singapore :
Straits Time Press.

Richards, G. (2018). Warehouse Management: A Complete Guide to Improving Efficiency and Minimizing Costs in the
Modern Warehouse. 3rd ed. Kogan Page Publishers.
3.3 Warehouse Performance Index

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
• Warehouse KPIs (Key Performance Indicators) are the answer
for tracking warehouse performance
• Warehouse KPIs allow WH Manager to set a benchmark for month-on-month
improvements. And help identify areas that (when combined with a solid procedure
and warehouse management system) will have  a direct effect on both overall
business costs and customer satisfaction.

https://www.veeqo.com/blog/warehouse-management-kpis
 3.3 Warehouse Performance Index
Warehouse KPI Examples #1: Receiving Efficiency
A warehouse operation all starts with actually receiving and booking in incoming stock. It
involved receiving of :
•Multiple new stock deliveries each week.
•Customer returns of good items.
•Customer returns of damaged items.
•Return to vendor stock.

Such an important part of the warehouse operation needs to be tracked and measured with its
own key warehouse performance indicators. This can be done by paying close attention to time
taken for received stock to be counted, booked in and ready to put away.

It’s a good idea to record exact timestamps of all delivered stock. Then record another
timestamp as soon as this stock is ready for putting away. You can then calculate an average
for the month and compare to previous performance.

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
Tips for improving receiving efficiency;
•Systemize the process and assign the task only to trained staff.
•Create a unique SKU to individual product variants.
•Assign each SKU to a specific warehouse bin location for quick put away.

The Veeqo Scanner, for example, can be used to

scan each product as a new delivery arrives in the
warehouse:
As soon as a product is scanned,
you’ll be able to choose the quantity
that have arrived in the purchase order
and book the figure into active
inventory right there

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
Warehouse KPI Examples #2: Picking Accuracy
Order picking is one of the more complex of activities in a warehouse. An
incorrectly picked order means returned items and paying to correct the mistake.
So this is something that can again have a huge impact on costs and customer
satisfaction.
To calculate picking accuracy we can use some data taken from the ‘rate of
return’ KPI (see below) and total order number in the following equation, this then
gives a percentage of the number of orders that were picked correctly.
Tips for improving picking accuracy;
•Organise and set up your warehouse in a logical way.
•Use the most appropriate picking systems for your
operation.
•Invest in minimising labour turnover to keep experienced
pickers around longer.
•Adopt a digital pick & pack system with the use of a barcode
scanner

https://www.veeqo.com/blog/warehouse-management-kpis
 3.3 Warehouse Performance Index
Warehouse KPI Examples #3: Carrying Costs
The longer inventory stays in the warehouse, the more it costs a business.
Total carrying costs is the sum of everything it costs a business to hold its
stock over a certain timeframe. This includes costs like; i)Cost of Capital;
ii)Storage Costs; iii) Equipment & Software; iv)Materials; v)Taxes

This gives a better indication of how much profit that allows you to see how
much profit current stock is truly bringing – and what impact warehouse
performance is having on this.
Tips for improving carrying costs;
•Embrace automation to reduce labour costs without
sacrificing warehouse productivity.
•Improve forecasting to limit amount of time inventory
sits in the warehouse.
•Work to reduce inventory shrinkage taking place.

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
Warehouse KPI Examples #4: Inventory Turnover
It is basically the frequency at which you sell out your inventory. In other
words, how quickly you sell and ship stock once it’s been put into storage.

Obviously, this is one of the warehouse KPIs you’re looking to keep high and
increasing. The faster you move stock, the less it costs to store it and the more
profit you can make on it.

Keeping track of this performance metric enables greater insight into the popularity
of certain items to gauge future buying practices.

Tips for improving inventory turnover;

•Master your inventory forecasting skills.
•Identify slow moving stock and put 
inventory reduction strategies in place.

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
Warehouse KPI Examples #5: Rate of Return
As the term suggests, it determines how often items are being returned by
customers. This obviously gives a great insight into customer satisfaction as a
whole.

But the key to getting best use out of this warehouse management KPI is
to segment by reason for return.

This way, the warehouse or operations manager can start looking at exact reasons
why this KPI may be high and put into place strategies to resolve.

For example, a lot of returns due to incorrect item indicates the picking process
needs looking at. Whereas a lot of buyer’s regret returns may mean something in
the sales channel product description needs addressing.

https://www.veeqo.com/blog/warehouse-management-kpis
3.3 Warehouse Performance Index
Warehouse KPI Examples #5: Rate of Return

Tips for improving rate of return;

•Segment by reason and investigate.
•Ensure product descriptions are accurate.
•Train staff on your systems and product
catalogue.
•Store products in a way that minimizes
spoilage and damage.
•Give packers a barcode scanner to
confirm accuracy before shipping out.

https://www.veeqo.com/blog/warehouse-management-kpis
 3.3 Warehouse Performance Index
Warehouse KPI Examples #6: Backorder Rate
A high backorder rate means a lot of
orders are coming in for items that
aren’t in stock. Of course, sudden
unexpected rises in demand can
account for this.

But if the backorder rate KPI is

consistently high then it’s likely a result Tips for improving backorder rate;
of: •Forecast using as much data as possible.
1.Poor planning and forecasting. •Use properly determined reorder points and
2.Poor inventory tracking. safety stock.
•Use best inventory tracking practices to
Either way, backorders create a really prevent overselling.
bad experience for customers and
should be tracked and minimized. 
https://www.veeqo.com/blog/warehouse-management-kpis
 3.3 Warehouse Performance Index
Warehouse KPI Examples #7: Order Lead Time
Order lead time is a warehouse management KPI that feeds into backorder rate. This is simply
the average length of time it takes for customers to receive orders once they are placed.

The lower you can get order lead time, the happier your customers are going to be.
As long as items also arrive in perfect condition, optimizing order lead time can also have a direct
effect on a more general KPI: order cycle time. This is the amount of time between customer
orders – bringing improved retention.

Tips for improving order lead time;

•Make sure you’re managing orders in the best way
possible.
•Choose the right picking system for your business, and
consider digital batch picking.
•Use a better/quicker shipping carrier/service.
•Bulk ship orders to get more out the door per day.

https://www.veeqo.com/blog/warehouse-management-kpis