Measuring Performance

The key objectives of any distribution channel include providing the right product, at the right place, right time, and damage free at a competitive cost. Fundamental to achieving and sustaining these objectives is measuring performance. The most common performance measures are handling productivity, space utilization, accuracy, damage, service, cost, and inventory.

• Handling productivity is often measured in units or lines picked per hour or total handling cost per unit.
• Space utilization is evaluated based on the percentage of total space available for storage, percentage of useable storage space actually used for storage, and storage cost per unit of product.
• Accuracy involves measures of location and record accuracy, the percentage of items picked correctly, and the percentage of orders picked correctly.
• To measure the damage, percentage of items picked that are undamaged when received by the customer are considered and the percentage of orders picked without damaged merchandise are considered.
• Service as a measures of performance include fill rate which is based on the number of orders that were filled completely.
• Cycle time is also a critical performance measure to determine service and efficiency where dock to stock cycle time is a critical measure of how long it takes to make material available following receipt and order cycle time measures the elapsed time from order receipt until order shipment. Order cycle time may also include transportation to measure the total elapsed time until the customer receives the product.
• Cost and inventory is a performance measure which includes total distribution centre cost per unit handled, distribution centre cost as a percentage of sales, and inventory turnover.

Performance Monitoring

The continuous measurement of performance is obviously essential to monitor process improvement. Warehouses need to operate within tight service and cost standards.

Warehouses are trying to achieve a number of objectives simultaneously, such as cost minimization, on-time dispatches, and order accuracy. It is therefore common to monitor a range of performance metrics to ensure that the warehouse is operating effectively. These measures typically include:

Service levels:

• percentage of orders dispatched on time;
• percentage of orders fully satisfied (ie all order lines supplied);
• accuracy of order fill;
• stock availability in the warehouse;
• order lead time;
• returns and customer complaints.

Operational efficiency:

• number of cases picked per person hour;
• number of order lines picked per person hour;
• equipment uptime (eg percentage hours equipment available, with no breakdowns or
• routine maintenance).

Cost efficiency:

• cost per case throughput;
• cost per pallet stored;
• conformance to budget (eg for staff costs, rent, equipment maintenance, packing materials).

Resource utilization:

• percentage pallet storage capacity used;
• number of hours per day equipment is used (eg sorters or narrow-aisle trucks) –
• although note that high utilizations may prevent peak throughputs being achieved, so
• these measures need to be interpreted with caution;
• number of standard hours worked.

Stock integrity:

percentage of locations with correct stock (ie in accordance with the computer records,

• as measured during a physical stock-take);
• percentage of SKUs with correct stock;
• stock-turn (ie annual throughput/average inventory level). This figure is also oft en represented as the number of weeks of inventory held in the warehouse (ie a stock turn of 10 equals 52/10 or 5.2 weeks of inventory in the warehouse).

Cycle times:

• average number of hours between arrival of goods on site and put away to storage location (ie available for replenishment or picking);
• average number of hours between customer order receipt and dispatch of goods.

Safety:

• number of days without an accident;
• number of days safety training;
• adherence to safety audits and hazard monitoring.

Personnel:

• number of days skill training;
• percentage of staff multi-skilled;
• absenteeism and sickness rates.

Environment:

• electricity and gas usage;
• water recycling;
• percentage of returned goods or packaging recycled.