The Benefits of Measurement in Warehousing and Distribution
‘If you don’t know where you want to go, then it does not matter which way you go.’- An Alice in Wonderland inspired line hold true for warehouse management.
In order to ensure best management practices in the warehouse, managers are required to know the status of the management practices currently employed and target the status they want to achieve with reference to the business bottom line and act accordingly to improve any lagging aspects. One of the best ways to achieve this is to quantify various aspects of warehousing management activities into suitable metrics. Through use of such metrics, managers can know where they are and where can they reach.
Typically, the metrics for measuring warehouse performance are focused on customer, operations, financial, capacity, employee, and orders. Once these performances are accurately quantified, they are benchmarked against the best-in-class performance. Best practice performers have 4-6% (of grosssales) lower total logistics costs. Therefore, any warehouse management should strive for best-in-class results in the performance metrics.
For illustrating the benefits of measurement in warehousing, let us consider a warehouse whose results of benchmarking compared with best-in-class performance are:
Metrics Results Best-in-class results
On-time shipments 90% 98.5%
Orders Picked and shipped 3per hour 6 per hour
For this warehouse, some customers are most likely to complain about slow responses. The manager, after study of the metrics compared to best-in-class, would address the issue by dealing with factors contributing to delayed shipments. (e.g. narrow shipping dock, documentation errors). For low numbers of Orders Picked and Shipped, possible explanation could result from low number of workers employed. After such malpractices are identified and corrected, the warehouse would benefit both from customer retention, and economic bottom line.
Clearly, measurement of key performance indicators, allows managers to assess the status of their warehouses and help identify performance inhibiting factors that have been affecting the business bottom line. In addition, it allows better visualization of the gap the warehouse has between the current performance and the performance it should target to achieve best-in-class practices. Best-in-class practices ensure that customer satisfaction is achieved while boosting the business bottom line.