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35. Warehouse KPIs (Key Performance Indicators)
35. Warehouse KPIs (Key Performance Indicators)
Measuring and Improving Warehouse Performance
What Are Warehouse KPIs?
Warehouse KPIs (Key Performance Indicators) are quantitative metrics used to measure, monitor, and improve the performance of warehouse operations. These indicators help businesses understand how efficiently a warehouse is running, identify bottlenecks, reduce costs, and ensure customer satisfaction.
Tracking the right KPIs allows companies to make data-driven decisions about inventory management, labor productivity, space utilization, shipping accuracy, and more.
Why Warehouse KPIs Matter
A warehouse is more than just a storage space — it's a key part of the supply chain engine. Poor warehouse performance leads to:
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Delayed orders
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Lost customers
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Increased costs
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Overstock or stockouts
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Inefficient use of labor and space
Measuring KPIs allows managers to set goals, track progress, and implement continuous improvements.
Core Warehouse KPIs
Below are the most important warehouse KPIs, with explanations:
1. Order Throughput
This measures the number of orders processed in a given time frame (hour, day, week).
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Formula:
Orders shipped ÷ Time period -
Purpose: Evaluates how quickly the warehouse fulfills customer demand.
2. Inventory Accuracy
Shows the difference between recorded inventory (on paper/system) and actual physical inventory.
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Formula:
(Accurate inventory count ÷ Total items counted) × 100 -
Purpose: Ensures the system reflects reality. High accuracy avoids lost sales and errors.
3. Picking Accuracy
Measures how often the correct item and quantity are picked for customer orders.
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Formula:
(Correct picks ÷ Total picks) × 100 -
Purpose: Directly impacts customer satisfaction and return rates.
4. Order Cycle Time
Tracks the total time taken from receiving an order to shipping it out.
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Formula:
Order shipment time – Order receipt time -
Purpose: A shorter cycle means faster delivery and better service.
5. Dock to Stock Time
Time it takes to receive, inspect, and store incoming goods from the moment they arrive at the dock.
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Purpose: Measures receiving efficiency and how fast products are made available for sale.
6. Carrying Cost of Inventory
Represents the total cost of holding inventory in the warehouse over time.
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Includes storage costs, capital cost, insurance, shrinkage, and obsolescence.
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Purpose: Helps minimize overstock and improve inventory health.
7. Space Utilization
Shows how effectively the available storage space is being used.
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Formula:
(Used storage space ÷ Total available storage space) × 100 -
Purpose: Improves warehouse layout and expansion planning.
8. Labor Productivity
Measures the output per worker or per shift.
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Example:
Orders picked per hour per worker
Lines picked per day per team -
Purpose: Tracks workforce efficiency and helps plan staffing.
9. Return Rate / Reverse Logistics KPI
Percentage of total orders that are returned by customers.
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Purpose: High return rates may point to errors in picking, packaging, or product quality.
10. On-Time Shipping Rate
Measures how many orders are shipped on or before the promised date.
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Formula:
(Orders shipped on time ÷ Total orders) × 100 -
Purpose: Directly impacts customer satisfaction and brand reputation.
11. Damage Rate
Tracks the percentage of products damaged during handling or storage.
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Formula:
(Damaged items ÷ Total items handled) × 100 -
Purpose: Helps reduce loss and identify packaging or process issues.
Advanced or Supporting KPIs
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Inventory Turnover Rate – How fast inventory is sold and replaced.
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Lines Picked per Hour – Useful in high-SKU environments.
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Backorder Rate – Orders delayed due to stockouts.
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Shrinkage Rate – Percentage of inventory lost due to theft, damage, or errors.
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Putaway Time – Time taken to move received goods into storage.
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Cycle Count Accuracy – Accuracy of inventory counts done without full stock takes.
Best Practices in Using Warehouse KPIs
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Define clear goals (e.g., “95% picking accuracy target”).
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Monitor trends over time, not just single data points.
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Use KPIs in context — poor performance in one area may be due to pressure in another.
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Combine KPIs with real-time dashboards to detect issues early.
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Train staff to understand and contribute to key metrics.
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Review regularly to adapt to new business needs.
Summary
Warehouse KPIs are essential tools for managing logistics operations. They reveal where you're doing well and where there’s room for improvement — from receiving and inventory to order fulfillment and shipping.
Tracking the right KPIs can reduce costs, boost customer satisfaction, and support sustainable growth. In a competitive logistics landscape, what you measure is what you can improve.
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