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How to Find the Best KPI’s for Every Retail Distribution Center

Posted by Kenny English on Tue, Apr 28, 2015 @ 02:07 PM

How to Find the Best KPI for Every Retail Distribution Center

We’re always talking with our clients about ways to improve their operations. For example, we’re often asked how to reduce the number of returns or the best ways to manage inventory. Regardless of where improvements are needed, the insight we gain and the recommendations we make are rooted in data. And that data almost always comes from KPI’s.  

Here are a few baseline considerations when thinking about how to measure your performance - and what to do with them once you start tracking.

Keep track of what matters most to you

Let’s get right to it – what should you track? It all boils down to which metrics will be the most accurate and impactful measurement of your operations. While I’d love to give you a definitive list, it varies from company to company, and even between individual warehouses and distribution centers.

When you create your list of KPI’s, here are a few baseline metrics to keep in mind.

INVENTORY MANAGEMENT

  • Inventory accuracy
  • Inventory levels
  • Average age of inventory
  • Rate of inventory turnover

NEW ORDERS & RETURNS

  • Volume of new orders
  • Fill rate per SKU and per order
  • Order accuracy
  • Volume of returns
  • Average time to process returns

RETAIL TRANSPORTATION

  • Units shipped
  • Loading dock time
  • Transit time

FINANCIAL

  • Labor costs
  • Real estate costs
  • Operating costs
  • Cost per unit
  • Revenue 

The best thing to do is to sort these into category areas – above we included inventory management, new orders and returns, retail transportation, and financials. Depending on your business you may have more.

Review your performance to spot trends

Now that you’re tracking a few additional metrics, it’s time to pull together the numbers and find out how you’re doing. How efficient are your processes right now? Where might you be lagging behind?

We recommend a combination of daily, weekly, monthly, and annual numbers as well as averages. Tracking on a daily or weekly basis will let you see smaller trends and get down to the details. Monthly and annual averages then can help you see the larger picture, where things are improving or declining.

Make the necessary improvements

When you have a clear picture of how you’re doing now, you’re likely to find a few easy wins as well as uphill battles ahead of you. The easy wins are the simple things you can do to become more efficient or profitable, such as staffing up during your busy times and reducing staff when you’re slow. The uphill battles are the bigger tasks, such as increase warehouse capacity or consolidating distribution centers.

Your KPI’s are the key to identifying your supply chain’s strengths and weaknesses. Once you shine a light on where you need to improve, you can see a little more clearly how to get started.

 

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Topics: Returns, Retail, Inventory Management, E-commerce, Transportation