Warehouse Performance – How good are you? How good can you be?
What are the key metrics to establish the performance effectiveness of your warehouse operations? We believe they include:
- Productivity – How many lines per worker are picked in an 8-hour shift?
- Density – How effectively and efficiently do you use your warehouse space?
- Inventory Accuracy – How accurate and timely are your inventory records?
- Picking Accuracy – How accurately are items picked?
- Shipping Accuracy – How accurately are items shipped?
- Availability Speed – How quickly after arrival are inventory items available to be picked?
- Order Cycle Time – How quickly after order receipt are items shipped?
- Training – How quickly can you train new employees? Hours, or days?
- Safety – What is your safety record?
Before implementing a new Warehouse Management Software solution (WMS) a serious effort should be made to measure these parameters. Measurements can be taken with the following data:
- Productivity – Divide the number of lines picked per day by the number of warehouse personnel, divided by the number of hours. The objective is to get a number of lines picked per hour. If possible, measure the lines picked per worker in addition to global averages.
- Density – Divide the number of SKUs by the cubic capacity of the warehouse. Establish the cost per cubic foot of warehouse space and calculate the cost per SKU. If possible, establish the length of time each SKU is “on the shelf” and compute the cost over time of holding that inventory.
- Inventory Accuracy – Calculate the percentage of inventory items that are misplaced or mislabeled. If possible, calculate the personnel cost associated with correcting these inaccuracies.
- Picking Accuracy – Calculate the percentage of inventory items that are picked incorrectly. If possible, calculate the personnel cost associated with correcting these inaccuracies.
- Shipping Accuracy – Calculate the percentage of inventory items that are shipped incorrectly. If possible, calculate the personnel, shipping and lost sales cost associated with correcting these inaccuracies.
- Availability Speed – Determine how long it takes from when a delivery of inventory arrives until it is entered into your inventory system and is available to be picked on the warehouse floor. If possible, determine the “safety stock,” or additional inventory that is held to offset any delay.
- Order Cycle Time – Accurately calculate the average time from receipt of an order from a customer until that order is shipped.
- Training – Compute the time required to train a new warehouse employee to be independent and fully functional in your warehouse. Add to that cost the time and expense of the trainer and the number of hours of labor time that are consumed by having new employees hired too early and the wasting of unnecessary trainer’s time.
- Safety – Examine your safety records and look for patterns of areas or personnel with frequent or severe injuries. Are there jobs or locations that could be reconfigured to reduce accidents and injuries?
By diligently assessing these factors it will become clear where your savings can be found. This will help you to choose the correct WMS for your application and prudently calculate a return on investment. We believe it will also accelerate your search for the best WMS, because you will realize how significant the cost savings will be.
Once you have quantified the benefits of implementing a sophisticated WMS, we encourage you to consider the implementation experience of the WMS provider. The best software in the world will not achieve the optimal savings unless it is implemented by an experienced and sophisticated supplier. Avectous Integrated Software offers over 20 years of experience implementing sophisticated software solutions for our customers.