How to Measure Warehouse Efficiency

by Scott Shpak; Updated September 26, 2017
warehousing two workers working in storehouse

The chance that a consumer will select a more expensive product because it was "quality warehoused" is slim. Stocking and distribution adds cost, not value, so efficient warehousing is crucial to streamlining expense and maximizing profit. Warehouse performance is measurable in a number of ways, such as operations, fulfillment and stocking.

Operational Efficiencies

Certain jobs and equipment exist primarily in the warehouse. Workers such as pickers, stockers and inventory counters staff the warehouse, while forklifts and other material handling equipment service the job functions. These are the operations components of the warehouse, typically focused on the number of activities performed in a period. The volume of incoming and outgoing shipments can be monitored and compared to previous periods to evaluate gains and losses in performance. Other measures of operational efficiency include labor hours as a percentage of weekly sales and equipment downtime.

Fulfilment Performance

When a warehouse team goes from 50 to 75 orders shipped daily, it is a marginal improvement at best if 20 orders are now inaccurate. Fulfilment is about giving the customer what he wants and when he wants it. Direct measures such as on-time orders, order accuracy and shipping damage can be gleaned from customer complaints and feedback. New customers and customer retention compared between time periods such as quarterly or annually can illustrate customer satisfaction with both product and fulfillment.

Stocking and Storage

Items are ideally placed by location, height and handling to aid operational efficiency. Monitoring inventory for items with high turnover rates aids placement for both ease-of-access and avoiding congestion. Shelf vacancy rates can also be assessed, assuring that hard-to-reach locations have higher vacancies, or are stocked with low-turnover items. Dock-to-stock time is the measure of effort getting items from receiving to the shelf, ready to pick. Monitoring this cycle may suggest changes to shipping packages, for example, to improve efficiency.

Inventory Accuracy

Enterprise software systems, including sales, order and inventory modules, allow for precise tracking of inventory by sales, but do not account for shrinkage, count errors or other discrepancies. Measuring actual inventory conditions against computer-based counts provides a check for inventory databases, preventing over- and under-stocks. Monitoring turnover cycles and comparing these to sales cycles provides optimal levels of goods, so that a warehouse is stocking neither too much nor not enough of each Item.

About the Author

As an operations and technical projects manager in the photofinishing industry, Scott Shpak is also an experienced audio engineer and musician, as well as Editor-in-chief, feature writer and photographer for Your Magazines Canada.

Photo Credits

  • endopack/iStock/Getty Images
bibliography-icon icon for annotation tool Cite this Article