Warehouse KPIs – discover the 15 warehouse KPIs you should monitor

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Identifying and measuring the most important warehouse KPIs creates the foundation for optimizing processes within a logistics center, enabling warehouse managers to take the right corrective actions to increase productivity and improve resource utilization.

Moreover, constant monitoring of Key Performance Indicators (KPIs), together with the implementation of improvement strategies, leads to continuous operational efficiency and increased customer satisfaction.

Discover the 15 most important warehouse KPIs every manager should track for optimal logistics space management:

1. Storage Cost (Carrying Cost of Inventory)

Storage cost represents the total expenses incurred by a company for storing goods from the moment they are received until they are shipped to customers. These costs can be fixed or variable and typically include warehouse space, utilities, labor, and costs related to expired or damaged goods.

The cost of storing goods is an indicator often expressed as a percentage of a company’s total inventory. Logistics best practices state that the ideal value of storage costs is between 20% and 30%, although this may vary depending on the nature of the stored goods or the size of the business.

Calculation formula: Storage Cost (%) = Total storage costs ÷ Total inventory value × 100

WMS for measuring storage cost

A high-performance WMS software system is capable of providing the information needed to measure this type of KPI, regardless of the nature of the goods. It is important that the configured workflows in the system are well defined and accurately reflect the actual warehouse processes. Therefore, the WMS warehouse management system can provide information such as:

Storage days per pallet / box / square meter (configurable)
Number of inbound operations (received units, received pallets, additional operations – product labeling, etc.)
Number of outbound operations (delivered pallets, handled units, additional operations – wrapping, etc.)
Counting of VAS-type operations (Value Added Services), performed outside standard workflows (repackaging, labeling, wrapping, on-demand inventory counts, etc.)

Reorganizing the warehouse and optimizing warehouse workflows represent an effective way to reduce storage costs. A better arrangement of goods in the warehouse will facilitate their rapid identification, as well as reduce the number of activities an operator has to perform.

2. Inventory Turnover

Inventory turnover is the indicator that shows how many times a company replenishes its inventory over a certain period of time as a result of sales. Calculating the specific inventory turnover rate makes it possible to assess purchasing performance and product demand. Well-managed inventory levels indicate that a company’s sales are at an optimal level, costs are under control, and overall operations are synchronized.

The KPI related to inventory turnover measures how many times per year distribution goes through the entire inventory. By comparing this rate with industry averages, companies can gain a clear picture of warehouse performance. As a parameter, inventory turnover should be used in correlation with lead time / order delivery time (described in point 7) in order to optimize inventory levels.

Calculation formula: Inventory turnover = Cost of goods sold ÷ Average inventory

WMS for measuring inventory turnover rate

A modern warehouse management system (WMS) is designed to provide full visibility, enabling accurate demand forecasting to keep goods moving efficiently. Through such a system for optimizing logistics activities, companies can use storage space efficiently, eliminate warehouse congestion, and ensure smooth operations even during peak periods.

The WMS solution allows received products to be allocated to storage locations based on the turnover rate of each product type or according to standard inventory management rules (FIFO / FEFO / CMP).

3. Inventory-to-Sales Ratio

The inventory-to-sales ratio helps companies identify cash flow issues early and take action when inventory levels tend to increase while sales begin to decline.

In addition, monitoring the KPI related to the inventory-to-sales ratio can prevent order delays by highlighting sales flow trends and the potential for increased purchasing during certain periods of the year.

Calculation formula: Inventory-to-sales ratio = Ending inventory balance for the month ÷ Sales for the same month

WMS for tracking the inventory-to-sales ratio

A WMS system helps assess the inventory-to-sales ratio by providing real-time data on inventory levels, movements, and transactions. This data can be used to generate analyses and dashboards that display the inventory-to-sales ratio for different goods, categories, locations, or time periods. The data can also be used to track trends and inventory turnover patterns and to identify the factors influencing them, such as seasonality, changes in demand, or supply chain issues.

By measuring the inventory-to-sales ratio, valuable insights can be obtained regarding the performance and efficiency of the warehouse, enabling informed decisions to optimize inventory. Moreover, inventory levels can be adjusted to match sales volume, thus avoiding overstocking or understocking and improving service quality while increasing customer satisfaction.

4. Inventory Accuracy

The physical inventory should match the company’s recorded inventory, but there is often a difference between the two, especially in large and very large warehouses. Such inventory inaccuracy can lead to unexpected orders, dissatisfied customers, and ultimately higher costs.

The inventory accuracy rate can be improved by performing regular checks in the database and using cycle counting as a method of continuously validating information.

Calculation formula: Inventory accuracy rate = (Inventory shown in the database ÷ Physical inventory) x 100

WMS for improving inventory accuracy

A robust WMS provides real-time inventory tracking capabilities. It monitors and records the movement of each item in the warehouse, from the moment it enters until it leaves. Thanks to real-time visibility and continuously updated information, warehouse managers can make informed decisions regarding inventory replenishment, reducing or even eliminating the risk of stockouts or overstocking.

5. Inventory Shrinkage

Inventory shrinkage is a KPI used to monitor losses caused by theft, damage, errors, lost items, obsolescence, or supplier fraud. Inventory shrinkage is calculated by comparing recorded inventory with the actual physical stock in order to identify discrepancies.

A high volume of inventory shrinkage can negatively impact a company’s profitability, which is why it is very important for warehouse managers to investigate in detail each loss case in order to identify the root cause.

Calculation formula: Inventory shrinkage = Recorded inventory – Physical inventory

WMS for eliminating inventory shrinkage situations

The WMS system provides real-time visibility into inventory and its location, thereby reducing the risk of misplacement or loss of items. Another way a WMS helps prevent inventory loss is by optimizing warehouse layout and processes. The WMS solution can use algorithms and analytics to determine the best way to store, pick, pack, and ship items, helping to improve efficiency and accuracy of warehouse operations while also reducing the chances of handling errors.

The WMS system provides real-time visibility into inventory and its location, thereby reducing the risk of misplacement or loss of items. Another way a WMS helps prevent inventory loss is by optimizing warehouse layout and processes. The WMS solution can use algorithms and analytics to determine the best way to store, pick, pack, and ship items, helping to improve efficiency and accuracy of warehouse operations while also reducing the chances of handling errors.

6. Out Of Stock (OOS)

Out of Stock (OOS) is an extremely important indicator for a company’s image. Such measurements highlight the company’s ability or inability to meet customer demand, which is why it is extremely important to maintain a low percentage for this indicator.

Closely related to products that are unavailable on demand is the Order Fulfillment Rate indicator. When products are missing from the warehouse at the time the customer places an order, and the replenishment time extends over several days, the customer may cancel the order, causing the company to lose a sales opportunity. That is why it is important for the order fulfillment rate to be as high as possible.

Calculation formula: Order fulfillment rate = (Total orders – Orders not fulfilled due to stock shortages) ÷ Total orders x 100

WMS for monitoring high-demand products

A modern warehouse management system enables quick filtering of all items that require attention—for example, products that have recorded significant sales and continue to show strong sales potential. This allows companies to quickly replenish stock, significantly reducing situations where sales may be lost due to stock depletion.

7.Order Lead Time

Order delivery time, commonly referred to as “lead time”, represents the time required for a customer to receive an order from the moment it is placed. Lead time has a direct impact on both customer satisfaction—the shorter the delivery time, the more satisfied the customer—and on the amount of inventory a warehouse needs to hold at any given time.

A long delivery time leads to customer dissatisfaction and may force a company to rely heavily on demand forecasting capabilities in order to fulfill orders, which is why it is important to closely monitor this KPI.

Integrated systems for managing order lead time

Managing lead time as efficiently as possible, from the moment the customer places the order until the parcel is received, requires a balance between all the applications that manage this process: Ecommerce -> ERP -> WMS -> courier integration (SeniorAWB) -> actual courier delivery.

With the help of these integrated solutions, companies gain visibility into the path followed by each received order and have the ability to intervene in time whenever something is not working properly.

8. Perfect Order Rate

This KPI measures how many orders a warehouse can prepare for delivery without incidents. To meet the “perfect order” standard, the customer must receive the order on time, complete, without issues, and with correct documentation.

To improve the perfect order rate, it is important to implement and follow warehouse operating procedures. Additionally, by identifying problems as they arise and eliminating them at the source, “imperfect orders” can be detected before they are shipped to the customer.

Calculation formula: Perfect order rate = (Number of complete and on-time orders ÷ Total number of orders) x 100

The WMS solution helps increase the perfect order rate

WMS systems are designed to help identify errors or inaccuracies before orders are shipped from the warehouse. The warehouse management solution helps increase the perfect order rate by optimizing workflows, reducing errors, and increasing customer satisfaction. A perfect order is one that is delivered on time, in full, and without damage or defects.

The WMS solution can help achieve this objective by automating picking and packing processes, which increases the accuracy and efficiency of order preparation. The reports and analyses generated by the system enable continuous improvement and performance monitoring, while automation further enhances the accuracy and efficiency of order fulfillment.

9. Order Picking Accuracy

In addition to tracking the shipment and delivery status of orders, it is also important to measure the accuracy of the picking process. An inaccurate order can lead to stock being returned to shelves, increased delivery time per order, a higher return rate, and these are just a few examples. This KPI is also considered an important one for electronic commerce (ecommerce).

Calculation formula: Picking accuracy rate = (Total number of orders – Number of incorrectly picked orders) ÷

WMS for improving order picking accuracy

A modern WMS software solution helps improve picking processes by supporting warehouse operators in correctly identifying products in the warehouse and picking the quantities specified by the customer. With a warehouse management system (WMS), each item is placed in a well-defined location, which means that whenever an operator searches for an item, it will always be exactly where it is supposed to be.

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10. Average picking time per order line / order

This indicator is extremely important for any warehouse manager, as it provides a clear view of the order preparation capacity for customers. The lower the time spent by each warehouse operator on preparing an order, the more orders the company can deliver, and consequently, the lower the cost per order line.

Calculation formula: Average picking time per order line = Total picking time ÷ Total order lines

WMS for improving picking time

A WMS software system helps warehouse operators view picking lists using a mobile terminal and guides them to product locations by indicating the shortest route. After scanning barcodes, operators are shown the characteristics of the products to be picked, as well as the quantities ordered by customers. In this way, the WMS application helps operators easily identify products from picking lists and avoid errors during the picking process.

A higher on-time delivery rate indicates a higher level of customer satisfaction and operational efficiency. However, on-time delivery can be influenced by various factors, such as production capacity, inventory management, supply chain reliability, demand forecasting, quality control, and order processing.

11. Back Order Rate

A consistent back order rate indicates that demand forecasting and supply processes are operating optimally. A sudden increase in demand will naturally result in a temporarily high rate of supplier-backed orders for a given item, but a consistently high or increasing back order rate is a clear sign of inefficient planning and lack of responsiveness.

The back order rate can be reduced through accurate planning and close monitoring of the warehouse inventory-to-sales ratio. Additionally, a high inventory accuracy rate will also improve the back order KPI.

Calculation formula: Back order rate (at the time of order placement) = Unfulfilled orders at the time of purchase ÷ Total number of orders placed x 100

Improved accuracy in fulfilling back orders with WMS

One of the main benefits of implementing an automated warehouse management system is improved accuracy and productivity. Automated systems use advanced technologies such as RFID (radio-frequency identification) and barcode scanners to track and locate items within the warehouse.

Automated warehouse management systems are known for ensuring efficient operations. RFID can be used to sort items related to back orders, which can then be used to prioritize the shipping process in order to deliver items to customers on time.

12. Return Rate

The return rate is an extremely useful KPI in a distribution center, especially when segmented by return reason. Identifying the causes of returns—such as damage, delayed delivery, incorrect product description, shipping the wrong item, or courier errors—helps warehouse managers address root issues, resolve them, and implement the necessary improvements to minimize future inconveniences.

Calculation formula: Return rate = Number of returned units ÷ Number of units sold x 100

The WMS system helps reduce the return rate

The WMS application helps reduce the return rate. The system improves inventory management accuracy and supports efficient monitoring of the location, quantity, and condition of each item in the warehouse, thereby reducing the chances of shipping incorrect or damaged products to customers.

By automating picking, packing, and shipping processes, orders are completed faster and with fewer errors. This can increase customer satisfaction and loyalty while also reducing the likelihood of returns due to delays or mistakes. Additionally, since the WMS system can generate real-time reports and alerts regarding inventory and order status, warehouse operations can be monitored and adjusted as needed.

13. Receiving Efficiency

Receiving efficiency is a metric used to evaluate the productivity of employees in the warehouse during the goods receiving process. Inefficiencies in the receiving area can negatively impact overall warehouse operations, which is why it is essential to detect and eliminate them as quickly as possible in order to optimize the rest of the workflow. Receiving efficiency is influenced both by human factors and by the nature of the goods. Time-based receiving targets can be set by supplier / pallet type / product, etc.

Calculation formula: Receiving efficiency = Total volume of received goods ÷ Total number of hours worked by warehouse employees

WMS software improves goods receiving efficiency

WMS software can increase labor productivity and warehouse staff efficiency by providing them with clear instructions and guidance on how to perform receiving tasks such as unloading, inspection, labeling, sorting, and storing goods. In addition, the WMS system can be used to track and measure performance and productivity indicators such as cycle time, output, accuracy, and more.

14. Receiving Cycle Time

Receiving cycle time reflects the total time required to process a goods receipt, from the moment the goods arrive at the warehouse until they are available for delivery. A shorter duration of the receiving cycle indicates an efficient process, while a longer duration may signal process inefficiencies.

Calculation formula: Receiving cycle time = Total time allocated to goods receiving ÷ Number of receipts

WMS eliminates long goods receiving cycles

Implementing a WMS system enables a much faster receiving process with the help of mobile barcode scanning devices. Additionally, the WMS system provides employees with a clear view of available storage spaces, and goods can be placed based on the system’s recommendations.

15. Monthly employee productivity

Employee productivity is also an extremely important KPI for any warehouse manager. Depending on the processes implemented in the WMS system, this KPI can provide detailed insights into various factors that influence execution time:

Number of operations by transaction type – number of receipts, number of deliveries, number of picking operations per employee
Number of kilograms handled per each type of transaction / user
Number of transactions per hour, by warehouse area
Monthly productivity per employee shift
ABC category report and fluctuations of products that frequently change category
Audit trail of changes and internal operations in the application
Logging of picking deviations per user (recording the number of deviations from the system’s recommendations)

Measure important warehouse KPIs with the WMS solution from Senior Software

Suitable for any industry, the WMS solution from Senior Software enables efficient goods management, from receiving to order preparation and delivery to the customer.

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Monitor the most important warehouse KPIs with high-performance software systems

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