Is cost reduction all that there is in measuring Supply Chain performance? It is really the long-term sustainability of the business that tells you whether it is lean or not." This ratio helps warehouse managers identify early cash flow problems by holding increasing inventory levels up against declining sales rates.

Identifying causes for return — such as damage, late delivery, inaccurate product description or wrong item shipped — makes it easier for warehouse managers to address underlying issues and make the necessary improvements. If you are a current or prospective Cerasis customer, we invite you to reach out to us to learn how our combined capabilities can deliver new services, solutions and enhanced value to your supply chain. You can decrease your back order rate by accurately forecasting and vigilantly monitoring your warehouse’s inventory-to-sales ratio. Inventory Days On-Hand: The number of days it would take to consume current on-hand inventory. Because this process is crucial for any company looking to increase profitability and efficiency, it’s essential that appropriate managers review the right data and analytics to ensure success. var isJotForm = (e.origin.indexOf("jotform") > -1) ? break;

switch (args[0]) { Key Definitions. Get the latest industry advice on logistics, transportation management, best practices, trends, tips and more! iframe.style.height = args[1] + "px"; Again, similar to receiving cycle time, put away cycle time measures the total amount of time it takes to put away items. If you’re looking at lean manufacturing progress, how much you spend compared to your budget doesn’t matter. (Number of Units Returned) / (Number of Units Sold) = Rate of Return. Learn about each warehouse KPI, how it’s measured and how it helps drive savings in your distribution center. Order lead time not only has a direct effect on customer satisfaction — the shorter the lead time, the happier the customer — it also affects the amount of inventory a warehouse needs to carry at any point in time. } One easy way to improve your put away cycle time is to rearrange your warehouse or invest in better employee training. var src = ifr.src; Total Cycle Time (TCT)

break; Always measure multiple inventory item numbers in terms of currency (i.e. else if (window.document.webkitExitFullscreen) window.document.webkitExitFullscreen(); The receiving cycle time reflects the total amount of time it takes to process a delivery.

An effective lean warehousing strategy depends on measuring the right key performance indicators (KPIs). Table of Contents. A short receiving cycle time is a clear indicator of an efficient delivery process, whereas a long receiving cycle time points to process inefficiencies. window.addEventListener("message", handleIFrameMessage, false); An inaccurate order can result in inventory being returned to shelves, increased shipping time per average order, a higher rate of return and so on. 2. + 1); (Number of Units Delivered on Time ) / (Number of Units Shipped) = On-Time Delivery. (Lost Time in Hours Due to Accidents) / (Total Number of Hours Worked) = Time Lost Due to Injury. var ifr = document.getElementById("JotFormIFrame-80944974393168");

else if (window.document.mozCancelFullScreen) window.document.mozCancelFullScreen(); The inventory-to-sales ratio of a successful warehouse distribution center will reflect a streamlined order fulfillment process. Thanks to the Amazons of the world, consumers now expect near-instant gratification, meaning online channels must be able to deliver at increasingly rapid rates in order to remain competitive. If you’re interested in seeing how the full Freedom eWARE suite can work for your company, contact us or download your free trial of Freedom eLOG to get started.

Delivery Performance (Total Time for Put Away) / (Total Time) = Put Away Cycle Time. } In the 1980s, the concepts of Total Quality Managements (TQM) and Six Sigma that were advocated for by W. E. Deming and Bill Smith respectively were reintroduced to US businesses. Lean manufacturing hopes to achieve a highly-efficient, waste-free operation by more effectively managing materials, manpower and energy. true : false; This field is for validation purposes and should be left unchanged. case "exitFullscreen": As a result, time lost due to injury is a valuable metric to monitor because it can help warehouse managers identify preventative measures they can take to ensure workplace safety in the future. (Cost of Goods Sold) / (Average Inventory) = Inventory Turnover. var args = e.data.split(":"); 4. Although all of the KPIs listed are important to eCommerce fulfillment performance, there are a few that are critical indicators of your ability to deliver value directly to the consumer: Partially filling an eCommerce order is one of the quickest ways to lose an online sale. if (window.addEventListener) {

In receiving, the cost per line KPI is used to measure the cost to receive a line item on a purchase order. }, In January 2020, Cerasis was acquired by GlobalTranz, a leading technology and multimodal 3PL solutions provider. It can also prevent back orders by highlighting an influx in sales and the potential for an increase in buying in order to satisfy a spike in demand. Listen to "Shipping Rates for 2020: What does the Crystal Ball Say?" There isn’t much that’s more important to monitor than inventory management as a wholesaler or distributor. The more fearful your leadership team — meaning, the more given they are to control, manipulation, bureaucracy, internal competition, etc. Volume / (Number of Man Hours) = Receiving Efficiency. Quality break; Schedule a Pick Up – 1-800-734-5351 Ext. Employees simply rate how likely they would be to recommend your company’s workplace on a scale of 0 to 10, with 0 indicating “not at all likely” and 10 indicating “extremely likely.” Employees who rate your company anywhere between 0–6 qualify as “detractors,” while those who rate it a 7 or 8 are considered “passive”; you should take time to address employees who fall into either of these categories to find out what would make their workplace experience better and what cultural improvements they recommend. src = src.indexOf("?") If your warehouse has a high ETR, you might want to consider consulting your staff to find out where there’s room for improvement. Sure, supply chain cost reduction is important in reducing the cost of goods sold (COGS) and increasing profit, but there are other measurements which should not be forgotten. For lean manufacturing, you need to review lean-focused KPIs. 5. To that end, your company’s cultural entropy score is a measure of the overall cultural health of your workplace environment. They should be adjusted to measure processes and areas relevant to each company. script.src = src; (Total Number of Orders) / (Perfect Order Rate) = Order Picking Accuracy. To subscribe to our blog, enter your email address below and stay on top of things. if (window.document.exitFullscreen) window.document.exitFullscreen(); Order lead time, more commonly known as just lead time, refers to the length of time it takes for a customer to receive an order once it’s been placed. If cost reduction is not the only thing to measuring supply chain performance, that begs the questions: “Maybe we should be measuring other Supply Chain Management activities and what would they be?”. Analyzing TCT will provide a measure of manufacturing performance rather than financial inventory. "You can measure inventory turns and those kinds of things, but everything is relative.

else if (window.document.msExitFullscreen) window.document.msExitFullscreen(); 2. Again, like accidents per year, this one’s pretty self-evident and is a key indicator of warehouse safety. An experienced supply chain engineer can help you identify additional performance metrics for your warehouse or distribution center. window.handleIFrameMessage = function(e) { These are just a few examples of key performance indicators for inventory management.

As a manufacturer, there are numerous ways to take quality into account; however, to ensure lean manufacturing success, you should look at quality in the eyes of the customer.

Depending on your industry, you may or may not be realistically expect your UPT to increase. Warehouse managers should carefully monitor this KPI and leverage it as a tool for forecasting and predicting future inventory needs. A high rate of inventory inaccuracy can result in unexpected back orders, dissatisfied customers and, ultimately, higher overall costs. For clarity, in measuring supply chain performance, we should be focusing on: Cost reduction is still very important. A low cultural entropy score is an indicator of strong leadership, a culture of accountability and trust, a highly engaged workforce and an overall positive workplace environment. If you’re adjusting this metric to accommodate shipping promises or policies, you won’t be measuring the correct KPI. The put away cost per line KPI is essentially the same thing as the receiving cost per line KPI, with the clear exception that it measures the cost to put away a line item on a purchase order. The inventory turnover KPI quantifies how many times per year your distribution is able to go through its entire inventory. Before we get started, we recommend downloading our warehouse KPI checklist to use as a guide for improving KPI-driven performance in your warehouse.

This is also considered to be an eCommerce KPI. // ]]> For full functionality of this site it is necessary to, instructions how to enable JavaScript in your web browser. Inventory management software allows businesses to more effectively manage their KPIs and outline the most effective behaviors for a supply chain operation in a quick, easy-to-understand way. Your warehouse’s back order rate is a telling indicator of whether you’re successful at forecasting purchases and inventory supplies. No equation needed here — the accidents per year KPI measures exactly what its name implies. Other areas to consider measuring as it relates to transportation: We still focus on costs.

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