Efficient warehousing is all about knowing what’s working, what’s failing, and what can be improved. When you measure and analyse the right warehouse KPIs, you can make better-informed business decisions based on real data.
That's why, with so many possible variables to track, it’s critical to know which metrics matter most.
What are 'warehouse KPIs' and why should you use them?
Warehouse KPIs (key performance indicators) are measurable values that reflect how successful your warehouse processes are at achieving desired results. Put simply, Warehouse KPIs measure how efficiently your warehouse is performing.
They’re an effective way to identify trends, uncover bottlenecks, and mitigate risks in your current warehouse processes. For example, the warehouse KPI ‘Receiving accuracy’ can determine if your receiving process is as accurate as you need it to be.
Warehouse KPIs can be split into 6 categories:
- Performance
- Inventory
- Storage
- Receiving
- Order picking
- Safety
For a complete understanding of how well your warehouse is operating, you need to be tracking KPIs for all the categories we just listed – this will help you focus on improving the areas that need the most attention right now.
Tracking different warehouse KPIs from each step in the fulfilment process provides better insight into the overall health of your business.
What are the most important warehouse KPIs to track?
There are dozens (if not hundreds) of warehouse management KPIs you could be tracking. However, tracking 50 irrelevant warehouse metrics is far less valuable than tracking a few hyper-useful ones.
Therefore, you must focus your efforts on the most important warehouse KPIs so that you have complete vision over all areas of your operations.
If you’re short on time, here’s a quick summary of what’s covered below.
The 12 most important warehouse KPIs to track:
- Total order cycle time
- Order lead time
- Inventory turnover rate
- Inventory accuracy
- Inventory carrying cost
- Space utilisation
- Receiving cycle time
- Receiving efficiency
- Picking accuracy
- Order pick rate
- Total recordable incident rate
- Time lost due to injury
We recommend you measure at least two warehouse KPIs from each of the categories we mentioned earlier. This will give a good idea of how well your warehouse is performing overall and make it much easier to identify areas for improvement.
Warehouse performance KPIs you need to track
Warehouse performance KPIs reveal how smoothly (or jerkily) your business operates.
They give an idea of how likely customers are to be happy with your service and which areas in your fulfilment process need a bit of work.
Order cycle time
(Delivery Date – Order Date) / Total Number of Orders Shipped = Order Cycle Time
Order cycle time is the average time it takes for an order to be shipped from when it was placed.
It measures the efficiency of your warehouse fulfilment process, giving you a window into whether you’re meeting customer expectations.
Long cycle times give businesses a bad reputation amongst customers. This results in fewer customers willing to buy from you again or recommend your products to somebody else.
How to improve your order cycle time:
- Reduce travel time during the picking process.
- Optimise the layout of your warehouse for faster picking.
- Prioritize replenishments to prevent stockouts and order delays.
Order lead time
Supply Delay + Order Delay = Order Lead Time
Order lead time is the amount of time it takes for an order to be received by a customer from when it was placed.
It measures the efficiency of your entire fulfilment process, including delivery.
Another formula you can use for calculating order lead time is: Order Cycle Time + Shipping Time = Order Lead Time
Short lead times keep customers happy and make them more likely to refer your products to a friend. Long lead times leave customers frustrated and less likely to order from you again.
How to improve order lead times:
- Procure reliable carriers and suppliers.
- Keep fast-moving products close to the packing area.
- Carry a sufficient volume of safety stock.
Warehouse KPIs, such as order lead time, help business owners forecast and improve customer satisfaction.
Other warehouse performance KPIs you can track
Rate of return
Number of Units Returned / Total Number of Units Sold = Rate of Return
Rate of return is the percentage of your products that are returned by customers.
It’s an important metric for identifying which products are not meeting customer satisfaction requirements and may need to be recalled.
Customer backorder rate
Total Orders Delayed Due to Stockouts / Total Orders Placed = Backorder Rate
Customer backorder rate is the percentage of orders that are unable to be fulfilled at the time of purchase because of insufficient available stock.
This KPI helps you understand the efficiency and accuracy of your demand planning and forecasting processes.
On-time delivery rate
Number of Orders that Arrived by the Promised Delivery Date / Total Orders Delivered = On-time Delivery Rate
On-time delivery rate is the percentage of customer orders that are successfully delivered on or before the promised delivery date.
Tracking your on-time delivery rate will help you understand the accuracy of your lead times so you can better manage customer expectations.
Time in transit
Total Time Orders Spend in Transit / Total Number of Orders = Time in Transit
Time in transit is the average time it takes for an order to arrive at a customer’s address from the moment it leaves the warehouse.
When you know how long your orders take to deliver, you can provide more accurate lead times which will result in happier customers and more sales.
Warehouse inventory KPIs you need to track
Inventory KPIs help you understand how well you’re managing your products, parts, and assemblies.
They let you know which products are the most popular, whether your current facilities are meeting the demand of your customers, and the overall accuracy of your warehouse inventory records.
Inventory turnover rate
Cost of Goods Sold / Average Inventory = Inventory Turnover
Inventory turnover rate measures the amount of time it takes for an item to be sold after it has been added to stock.
High inventory turnover rates indicate strong sales or insufficient stock on hand. Low inventory turnover rates indicate weak sales or too much stock on hand.
This formula can therefore be used to forecast the number of days it will likely take to sell your current stock on hand.
How to improve your inventory turnover rate:
- Compare your prices to your competitors – you may need to adjust your pricing strategy.
- If market demand for your goods is waning, consider adding new stock to your catalogue.
- Assess your sales and marketing strategies and try something new if they’re underperforming.
Inventory accuracy
Database Inventory Count / Physical Inventory Count = Inventory Accuracy
Inventory accuracy informs how accurately your inventory database reflects the real stock quantities of your warehouse. It’s usually calculated by first performing a stocktake and then comparing the results to the numbers in your system.
This is a crucial warehouse KPI that should be measured regularly – monthly, quarterly, or annually.
Inaccurate inventory can mean theft; inefficient receiving, put-away, or order-picking processes; poor inventory management; or possibly infestation (if you’re a food manufacturer).
It’ll be up to you to investigate each inaccuracy and find the root cause.
How to improve your inventory accuracy:
- Minimise room for human error by installing warehouse inventory management software.
- Implement a mobile barcode scanning system.
- Analyse and optimise your receiving, order-picking, and put-away processes.
Other warehouse inventory KPIs you can track
Inventory-to-sales ratio
End of Month Inventory Balance / Sales for That Month = Inventory to Sales Ratio
Inventory-to-sales ratio measures the amount of stock you have on hand in a given period compared to the number of orders you’re fulfilling for the same period.
It measures the general efficiency of your warehouse inventory management processes and can tell you when it’s time to adjust your stock levels to improve your margins. A higher ratio indicates strong sales or insufficient stock on hand.
Inventory shrinkage
(Cost of Recorded Inventory – Cost of Physical Inventory) / Cost of Recorded Inventory = Inventory Shrinkage
Inventory shrinkage measures the loss of products that are a result of unexpected or unforeseen circumstances. For example, employee theft, water damage, or premature spoilage.
Shrinkage is often a result of unethical reasons, such as theft, and should therefore be monitored regularly.
Inventory-related warehouse KPIs are vital for measuring product popularity and inventory management success.
Warehouse storage KPIs you need to track
Storage KPIs allow you to track how efficient your current facilities and warehouse logistics are for storing all your items.
They give you a heads-up when it might be time to expand (or shrink) your warehouse. They also allow you to identify whether you’re making the most of the space available, and how much it’s costing you to use it.
Inventory carrying cost
Inventory Carrying Rate × Average Inventory Value = Carrying Cost of Inventory
Inventory carrying cost is the total cost of all the expenses related to storing goods in your warehouse. This includes warehousing costs, employee salaries, taxes, transportation, shrinkage, depreciation, and insurance.
Your inventory carrying cost can be used to determine how much income can be earned based on your current stock levels.
It also helps to determine whether production needs to be ramped up or slowed down to optimise cash flow.
How to reduce inventory carrying costs:
- Consider switching to a just-in-time inventory strategy.
- Use promotions and bulk deals to get rid of stale inventory.
- Evaluate each individual SKU for sales potential.
Space utilisation
(Total Inventory Space × Warehouse Space Clear Height) / Overall Volume of All Inventory = Space Utilisation
Warehouse space utilisation measures how efficiently you’re making use of your storage locations.
This warehouse KPI will tell you if there is a more optimal warehouse layout you could be implementing. It helps businesses minimise storage costs and maximise storage efficiency.
How to utilise warehouse space more efficiently:
- Make the most of your vertical space – consider building a mezzanine or installing vertical lift modules (VLMs) if there is a lot of unused vertical space.
- Match the size of your products to their storage locations.
- Design your warehouse with minimum aisle space – this may free up room for another aisle to be added.
Other warehouse storage KPIs you can track
Loading dock occupancy
Loading Docks Used / Available Loading Docks = Loading Dock Occupancy
Loading dock occupancy measures how occupied your docking area is at any given time of the day.
A loading dock that is constantly occupied can create bottlenecks in your receiving and shipping processes.
Tracking your loading dock occupancy will help you identify when it's time to expand the warehouse or find a new one.
Warehouse receiving KPIs you need to track
Receiving KPIs let you know if your receiving processes need to be improved.
They also help you calculate how much time and labour you’re spending on receipt, how fast you receive items, and how often things get received incorrectly.
Receiving cycle time
Total Time for Delivery / Number of Deliveries = Receiving Cycle Time
Receiving cycle time records the average time it takes to process received stock.
It covers checking received stock against your sales order, unboxing and sorting the goods, disposing of any packaging, and any other steps included in your receiving process.
This warehouse KPI can help you to identify lapses in receiving and increase overall warehousing efficiency.
How to improve receiving cycle time:
- Focus on receiving one SKU and one delivery at a time.
- Perform one receipt action at a time – for example, count all the received goods from a delivery before putting them away.
- Reduce manual processes with inventory management software.
Warehouse KPIs are an effective way to ensure your receiving, picking, and shipping processes are optimally structured.
Receiving efficiency
Volume of Received Goods / Number of Labour Hours = Receiving Efficiency
Receiving efficiency measures how well your receiving process is functioning.
It can tell you when things have started to slide and help you track improvements as you take steps to optimise how you receive goods.
Optimising your receiving processes can help free up labour time and reduce stockouts caused by inaccurate inventory records.
How to improve receiving efficiency:
- Break your receiving process down into micro-steps then see if there are any tasks that could be done more efficiently.
- Use the right tools and equipment for the job – especially when it comes to moving pallets around, opening crates, and inspecting shipping containers.
- Reduce travel time by dedicating a specific time of day to deal with inward goods.
Other warehouse receiving KPIs you can track
Receiving accuracy
Total Inventory Correctly Put Away / Total Inventory Put Away
Receiving accuracy measures how many items are put into their correct locations around the warehouse after being received.
It helps you identify areas for improvement in your receiving process.
Put-away cycle time
Total Time to Put Away Received Goods / Total Number of Received Goods = Put-away Cycle Time
Put-away cycle time measures the average time it takes to complete all the put-away tasks after receiving a delivery.
It helps you to understand how efficient your current put-away processes are, and identify which areas can be improved.
Warehouse order picking KPIs you need to track
Warehouse order picking KPIs measure the efficiency and accuracy of your picking processes.
Around 50% of total order picking time is spent moving around the warehouse. This means tightening up your processes and optimising the layout of your warehouse has a huge impact on overall warehouse efficiency.
Picking accuracy
Total Number of Orders / Perfect Order Rate = Order Picking Accuracy
Picking accuracy measures the precision with which customer orders are picked in the warehouse.
It’s an important metric to consider because it informs whether your current picking processes are working. Accurate order picking impacts multiple areas of the business including customer satisfaction, fulfilment times, and reorder frequency.
When you reduce the number of picking errors, you can build better relationships with customers and save time and money on managing returns.
How to improve order picking accuracy:
- Organise inventory in an obvious, strategic layout.
- Investigate every discrepancy when stocktaking to determine the root causes.
- Implement automation and technology to minimise human error where possible.
Order pick rate
Total Number of Orders Picked / Total Number of Labour Hours
Order pick rate tells you how many customer orders, on average, are being picked every hour.
It helps you predict how many orders can be picked in a certain amount of time so that you can forecast total fulfilment times and provide accurate lead times to your customers.
Order pick rate is also a handy metric for determining the frequency of carrier pick-ups needed per day, and how many warehouse employees you should hire.
How to improve order pick rate:
- Implement the order-picking methods that are best for your warehouse.
- Keep warehouse aisles and picking paths clear of debris and trash.
- Use bins, shelving, pallet racks, and bin dividers to keep SKUs neatly organised and separate.
Warehouse safety KPIs help you track and minimise any injuries that happen in the workplace.
Warehouse safety KPIs you need to track
Warehouse safety KPIs tell you how safe your storage facilities are for employees and visitors.
They're also handy for bringing attention to insufficient safety regulations and comparing your safety standards and safety record with other businesses.
Total recordable incident rate (TRIR)
(Number of Recorded Injuries in a Year × 200,000) / Number of Hours Worked in a Year = Total Recordable Incident Rate
Total recordable incident rate (TRIR) measures your warehouse’s safety record against other companies.
A low TRIR means your business is less dangerous than your peers. A high TRIR means you need to improve your safety record and protocols.
How to lower your total recordable incident rate:
- Prioritise safety by implementing a no-tolerance policy for malpractice.
- Review every incident and take action to prevent the same event from occurring again.
- Perform regular safety inspections and mitigate risks before they become a problem.
Time lost due to injury
Lost Time in Hours Due to Accidents / Total Number of Hours Worked = Time Lost Due to Injury
Time lost due to injury measures how many extra labour hours were required to carry out warehousing tasks due to injuries that occurred.
It helps you calculate how much money you’re losing because of injuries and understand the financial impact of inefficient health and safety protocols.
How to minimise time lost due to injury:
- Respond to incidents quickly and practically.
- Ensure employees take sufficient time off after an injury, so they do not return to work half-healed.
- Host regular company safety meetings to remind employees of your health and safety regulations.
