The one must-have metric for warehouse operations

  • January 21, 2021
Large Storage Container

It’s simple: If you want to improve your warehouse operations and increase efficiency, you need to know where you’re starting from. Fortunately, there's one metric that’s the perfect introduction to data-driven improvements.

When you want to diagnose your warehouse operations, the best place to start is analyzing the data. Unfortunately, the “right” data isn’t always easily accessible, and conflicting interpretations can make it difficult to make sense of the data. All too often, the discussion disintegrates when the following statement is uttered: “(Insert unusual event here) happened during that time, so the results would have been better had it not been for that.”

Sound familiar?

You can’t manage what you don’t measure

When assessing your warehouse operations, start by using a simple-to-understand metric that translates easily between disparate facilities and is nearly indisputable. We recommend this because the more you attempt to make your metric global or all-encompassing, the more you’ll find that the effort to obtain the data rises exponentially. You also discover that the more granular the metric is, the more people become sensitive to it. This fact leads to inevitable disputes. And it’s true even if you have a labor-management system in place. Like any tool, you can inadvertently misapply these systems and end up producing low-quality data, which leads to misconstrued metrics if not used properly.

The most useful warehouse metric of all

So, if you’re looking to start tracking meaningful data and making immediate improvements, start with throughput. In the simplest terms, throughput is:

total items shipped (X) ÷ total direct labor hours = items shipped per hour

For the X value, identify the most meaningful, relevant unit of measure that you can easily obtain for your business. For instance, if you routinely process a combination of cases and pallets, use total cases as the relevant unit. Convert any pallets to cases. Then use the aggregate result as the input.

Once you’ve decided on a metric, standardize how and when you’ll capture the data. It’s best done on a daily, weekly and monthly basis. Then you can evaluate the results with the goal of driving variability to within ±5%.

The point of all this is to get good at managing your daily throughput by shifting either demand or labor to maintain a level of consistency. Doing so makes it possible to generate savings for line items such as rush freight charges and overtime. Once you’re adept at measuring and applying the throughput metric, consider adding metrics to gain further visibility and increased operational control. It’s another milestone on the never-ending journey toward efficient and predictable supply chains.

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