Maximizing Warehouse Efficiency: Unleashing the Power of Data and Metrics

Want to get the most out of the data sitting in your warehouse management software? Here are some ways to look at that data that could potentially give you a new perspective on your warehouse and your business.

The idea of keeping tight metrics and producing real-time reports for a warehouse is definitely not new. Warehouse managers know that the right metrics and analytics help their efficiency and, in turn, their bottom line. 

But while having reams of data at your disposal is one thing, knowing the best ways to use it is another. Finding new and unique ways to use your reports and KPIs can reveal all sorts of new ways to make improvements and increase efficiency, from warehouse layout and daily operations to quality control processes and supply chain.

Here, then, are some easy-to-implement ideas for your reporting and metrics:

Using Real-Time Data

WMS software and tools like barcode labels and barcode scanners allow managers to view real-time inventory data. This is great for getting rid of old-fashioned manual cycle counts and avoiding backorder situations. But real-time data’s usefulness can go even further:

1. Use product velocity to pick prime storage locations. Real-time sales data helps determine what belongs where in the warehouse. Move popular items closer to a forward picking area or packing station.
2. Plan next season’s catalog using product velocity and sales-to-inventory ratio. Seeing that an item is selling fast and never sitting on your shelves for long can prompt your purchasing department to order more of a popular product. Meanwhile, the sales team knows when to offer a sale on slow-movers. Ultimately, this data could determine what products to discontinue.
3. Measure employee performance individually. When looking at KPIs like picking accuracy and orders picked per hour, don’t just look at averages. Get reports on each gun or scanner used to get fine-grained data for each employee to measure their performance and make recommendations for further training.

Using Historical Data

Looking at historical data, especially in regard to purchasing from vendors, can help warehouse managers make choices that can increase productivity and save money. WMS can track a company’s experience with various members of their supply chain and point them in the direction of the best value. This may not always mean buying materials from the cheapest supplier, but also from the one with the most favorable delivery times, payment terms, and customer service.

• Is it a trend or a fluke? Tracking past performance can help determine if something is a one-time blip or a more serious concern. For example, a delay in delivery from a vendor might not be traumatic…unless it's the fifth time it has happened this quarter. 
• Or maybe it’s history repeating itself? Historical data can also help you spot seasonal patterns in problems, too—like a vendor that always seems to deliver late when the holiday season rolls around, or has an increase in spoilage over the summer. If you can forecast certain kinds of events, you can prepare for them.
• Comparison shop for more than low prices. Even if a vendor or carrier is increasing its prices, it still might be offering the best deal compared to the competition. Check their record and assess vendors along the lines of the number of defective products, P.O. accuracy, and on-time deliveries for a more holistic look.

Generate the Right Reports

Just as managers should pay attention to historical data, they must also use their WMS to help them look forward. Instead of trying to predict what can be accomplished on any given day by studying trends of the past, warehouse management software can create a daily plan.

• Set realistic goals by combining order-lead time and picking productivity. In a perfect world, every order is filled each day. In reality, a warehouse may not have every product in stock, enough people to pick and pack the orders, or a carrier available to take them to the customers. Real-time inventory numbers, combined with KPIs that calculate order lead time and picking productivity, can give a more accurate picture of what can actually get done. 
• Call in reinforcements on days when lead times are long. Scheduling and staff assignments should result from reports outlining the next day’s goals. For example, a sudden influx of orders, especially orders with a longer lead time, should alert management to the need for more workers.
• Use failures to find and fix flaws in efficiency. Missed goals provide an opportunity to dig deeper into operations to find problems. For example, if a team consistently fails to fill all the orders that are assigned, it might not mean they are too slow. Perhaps the order cycle time is too long because the pick paths are not as efficient as they can be. Or, they need to hire an additional worker.

Make Measurements Meaningful

Tracking the time it takes to get a product out the door after it’s been ordered is one way of measuring a warehouse’s efficiency. But there is so much more to learn about the time in between. Nearly every action between the receiving area and shipping area can be examined to maximize productivity.

• Incremental benchmarks are a must. If overall order fulfillment benchmarks are being met, everything’s running efficiently, right? Not necessarily. Think of moving things through the warehouse like going on a trip. Flying will get you to the destination, but every stop on a car trip will show you something new. Examine metrics for every step in the warehouse process to get the full picture of what’s going on.
• Find out if one department is covering for another. Without incremental benchmarks within the system, one group of workers might be compensating for the inefficiency of another. When customers return items because they arrived damaged, managers might blame packers for being sloppy. If benchmarks are placed on each department, it might be discovered that the pickers are slow, forcing the packers to rush in order to meet their goals. 
• Improvement is possible even in well-run warehouses. Let’s look at an example where pickers have subpar accuracy, but quality control is catching and correcting their mistakes before things are shipped. This is a good thing, and proves the effectiveness of good quality control. But imagine how much more productive and profitable the warehouse could be with a top-notch picking team that did things right the first time. 

Manage by Exception

One of the most powerful tools that WMS warehouse metrics provide is the ability to make decisions based on exceptions to a baseline or norm. Every warehouse is different, and each will have a different “normal” when it comes to its analytics. Based on assumptions about what usually happens, preset benchmarks will help a warehouse stay on track. Whenever a KPI ventures out of that normal zone, it’s a red flag to managers that some type of action is called for.

• Instant alerts make materials appear like magic. In basic terms, every time a product’s inventory dips below a certain level, a notice can go out to the appropriate purchasing agent to order more. Add in analytics that track lead-time from the vendor and never run out of stock. 
• Transportation cost per package can drive layout and equipment acquisitions. Base cost per package on the number of feet or the time it takes an item to travel through the warehouse. If this metric rises, it can indicate a flaw in the warehouse layout, or the need for a new, faster conveyor.  

Track Returns

While it’s important to know how many sales are made, a huge test of a warehouse operation lies in its returns. Returns are a given when it comes to the world of order fulfillment. Every company has an idea of how much merchandise they can expect to have customers send back. While analytics can show how much of each item is returned, a more important metric is the reason why. Having a return procedure that asks that question is crucial. And as with any other metric, a sudden shift in those typical reasons could be an important clue in finding a problem.

• Use reasons for returns to make improvements. When a given reason appears more often than not, you can make a diagnosis. For examples:
• Received the wrong item: A problem with picking.
• The order was incomplete: A problem in quality control.
• The item arrived damaged: A problem in quality control, packing, the shipping carrier, or a vendor sending subpar materials.
• Item was not as expected/didn’t like: A problem with the e-commerce site’s description or representation of the product.

• Do workers need more incentive, or are they being pushed too hard? The KPIs for various departments and teams can help to determine why some return reasons may increase. Let’s take the example of a surge of returns due to incorrect items being shipped. An increase in the KPI for orders picked per hour might mean that the pickers are working faster, but are also making more mistakes. This could be because of new employees who need additional training, or perhaps daily goals that are too aggressive and push workers beyond their capabilities.

Crack the Warehouse Metrics Code

The more managers understand their WMS and the metrics and KPIs it provides, the more the data will do for them. Finding the right KPIs to track, or the strategic combination of a few different metrics can open up a variety of possibilities to make a warehouse more productive and efficient.