Whenever you ask a Logistics or Supply Chain Manager what are his objectives before implementing a WMS solutions, they are often imprecise. What they know is that they want better performance, they want the WMS system to improve logistics operations. Ok, this is clear, this is what everyone’s looking for. After the go-live, what should they look at to know if their business is improving?
Use the Right Warehouse Metrics to Measure your Success Rate
Regardless of the industry, every company needs to introduce a system of metrics, not just to measure the success of the business, processes and human resources, but especially to be able to identify the processes needing to be tweaked.
In order to do so, businesses need to have reliable metrics. The first step in selecting the right WMS metrics is to understand the role the warehouse plays in your organization. Let’s take distribution as an example. If within your business, the warehouse has one of the most important contributions, which is ensuring the customer receives his order within the best delays, then you should concentrate on external and customer facing metrics.
- Perfect order – what is the percentage of orders shipped on time, full quantity and with correct documentation?
- The percentage of shipped complete orders
- The percentage of fill rate – what percentage of orders were completed within the client’s expectation?
- Customer retention – what percentage of customers are ordering for more than the first time?
- Order cycle time – ship date minus order date
If the warehouse is viewed as necessary, but not strategic, then you should check cost control and cost reduction. Some metrics to be followed using your WMS:
- Productivity
- Warehouse cost vs. revenue – helpful for cyclical businesses as well as measuring against other companies
- Capacity utilization – what percentage of available resources are being utilized
If the value of the inventory is disproportionate to the cost of running the warehouse, then you should trac
- Inventory accuracy (your physical count should match your database)
- Inventory turns (the annual cost of goods sold vs. the inventory value)
- Inventory obsolescence (the inventory that risks of never being sold)
When picking your WMS metrics, you need to make sure these are aligned with the strategic mission of your organization: improve customer satisfaction, lower your operational costs, reduce inventory costs, etc.
If you don’t measure it, you’ll never know if you’re getting better.
