How to Align Warehouse KPIs to Your Company's Strategic Goals

November 17, 2022

The best warehouse is the one that most effectively helps the business reach its objectives.

There’s plenty of advice about which metrics are the most important for warehouses to track. But none of it matters if you’re not clear on what the business as a whole needs to achieve.

Once you have that, it’s fairly straightforward to loosely define a warehouse performance strategy:

Business StrategyCommon Business KPI typesWarehouse Strategy
Financial HealthProfitability Liquidity Inventory Turnover Return on AssetsReduce Costs: per period, per volume, or per order
GovernanceCSR, ESG and DEI Structure & Accountability Resilience & Continuity Audit AccuracyExpand Reporting, Improve Safety & Sustainability
GrowthCustomer Acquisition Cost Sales Revenue Brand Awareness Headcount & Asset ValueFree Up Capacity, Be Ready to Scale
Process & System PerformanceProductivity & Waste Project Success Rate Output Quality CapabilityAdopt New Technology and Build Digital Maturity
Customer SatisfactionChurn Rate Net Promoter Score Customer Lifetime Value Perfect Order RateShip faster, in full and with thorough documentation
Culture & EffectivenessEmployee Retention Participation & Satisfaction Profit per Employee Performance of IndividualsImprove employee quality of life and learning opportunities.

The next problem is the actions that can move the needle on these strategies might not be obvious. For that, we need to go down another level and get more granular.

Warehouse Performance Metrics for Financial Health

Even when the business is doing well, there are many reasons why a CEO could want to tighten budgets. It might mean being able to get better credit terms from the bank, or they might be looking into making a major investment in new equipment or properties.

Whatever the underlying motivation, warehouse managers often find themselves on the front lines. They are expected to cut expenditure even in the midst of increased demand or a shortage of permanent staff.

In this situation, it’s a good idea to track a few KPIs that take into account these other variables. That way what your report shows is not just ‘what it costs’ but ‘why it costs’:

Another useful approach is to isolate the sources of unpredictable costs, especially those that might be reduced with the help of capital investment:

GovernanceKPIs for Warehouse Managers

In times of change, businesses typically face more scrutiny from the government, investors, creditors or even from customers.

Warehousing isn’t usually the first place executives worry about. But an astute warehouse manager can be proactive and put data collection at the heart of their operations. That way, when it comes to audits, concerns over business resilience, or heightened attention from the media, executives have some reliable knowledge in their back pocket:

Safety and sustainability initiatives also need to start with data:

Warehouse KPIs that Support Rapid Growth

Business success sometimes brings logistics chaos. It’s tempting to hunker down and wait until the senior leadership is ready to invest in additional facilities or expansions that can take the pressure off.

But waiting is a mistake. Logistics should not be a barrier to growth.

It’s important to consider that growth isn’t driven only by internal processes. One of the most valuable ways a warehouse can support business growth is by maintaining excellent relationships with carriers, suppliers, and customers:

Measuring Warehouse Performance in Terms of Processes and Systems

Businesses that want to stay competitive in the long-term have to examine their processes closely, and root out inefficiencies.

At this level of detail, the focus starts to shift from ‘measuring performance’ to ‘measuring how well we can measure performance.’ Instead of asking ‘how long does it take to put away’, we ask ‘how long does it take for us to change when we see that putaway is taking too long?’

This is the kind of systems-based thinking that made Toyota successful. To bring that philosophy into the 21st century, we also need to take a measure of digital maturity and ‘readiness’ for technological change:

The disadvantage of these metrics is they can be vague. There are a few more tangible indicators that can provide some insight into the systems effectiveness of the warehouse:

The Warehouse Metrics that Contribute to Customer Satisfaction

When it comes to customer satisfaction, the most obvious factors are speed and accuracy of fulfillment. But there are others: when customers have a problem, the business needs to diagnose the cause. A well-prepared warehouse can streamline that process.

Some less common and more complex metrics include:

Culture and PersonnelKPIs for Warehouses

If your business aspires to be a people-centered organization, relying heavily on temporary staffing agencies is not a viable approach in the long term.

Warehouses in this scenario should measure themselves on how well they’re able to retain and develop their associates:

As for the more complex wellbeing and development-based KPIs:

Other KPIs for Your Warehouse to Consider

Other KPIs for Your Warehouse to Consider

Of course, there are more general operational key performance indicators that may be useful for warehouse managers with less visibility into overall business goals.

There are also times when qualitative observations are more helpful than strict SMART goals.

If the marching orders are as simple as improving overall inventory management efficiency, you may want to consider:

When choosing between qualitative and quantitative metrics, it’s a good idea to consider the resources and technology available.

Typical metrics, such as inventory turnover and order accuracy, provide a solid foundation for evaluating performance and setting goals. Unconventional and innovative metrics, such as predictive maintenance and employee engagement, can provide a more comprehensive evaluation of performance and support continuous improvement.

A warehouse manager should choose a mix of both types of metrics to ensure a well-rounded evaluation of performance and support continuous improvement.

The best warehouse managers understand the interconnectedness of people, processes, and systems. They balance business needs with the desire to create positive experiences for employees, customers and suppliers. Prioritizing accountability while pursuing continuous improvement is one of the best strategies for achieving this balance fairly.

In the end, a successful warehouse manager is not only a master of logistics, but also a skilled leader who is able to cultivate a workplace environment where people thrive.

How DataDocks Helps Warehouses Measure and Hit Their KPIs

Most warehouses can only track their performance based on internal processes. These metrics don’t tell the whole story.

Warehouse managers need to start looking more closely at loading dock operations. Making shipping and receiving more predictable and measurable makes the entire cycle more efficient, and lays the foundations for real supply chain visibility. When it comes to reporting, it’s much more valuable to be able to account for why performance is at a certain level.

DataDocks transforms the way facilities interact with their carriers and suppliers, incentivizing partners to book appointments in advance and stick to them. In the process it collects a treasury of data and produces reports that show exactly where the bottlenecks are.

For an in-depth discussion of what DataDocks can do for your warehouse,book a demo with our team or call us on (+1) 647 848-8250.

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