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What To Do With Your Distribution Center Metrics?

Businessman checking inventory in stock room of a manufacturing company on touchscreen tablet

To run a successful, small business, it’s imperative that your distribution center (DC) runs efficiently.  After all, the health of your business and the satisfaction of your customers depend on you having popular items in stock and orders shipped on time. Perhaps in the past year, you’ve moved from manual inventory tracking, like spreadsheets or handwritten records, to an automated inventory management system. This has certainly made life easier, cutting down on time and human error and providing you with a lot of valuable information.

But now what? What reports are most significant? And how can you best use that information?

So Many Numbers, So Little Time

The DC Metrics Report, published by the Warehouse Education and Research Council (WERC), released the most important metrics for DCs in 2016.  The following are the top five reports DCs used most frequently to benefit their business.

On-Time Shipping Performance

The number one challenge a DC is up against is time. Little wonder, since omnichannel marketing now has a significant influence on sales and customer satisfaction. People anticipate seamless transitions between digital and in-store experiences. Further, customers expect orders to be on their doorstep almost immediately, with little or no delivery costs and short wait times. And if this doesn’t happen, they could take their business somewhere else.

That’s why on-time shipping performance, or the calculation of the number of order lines shipped on or before the requested ship date versus the total number of order lines, is so important. You need to know if your warehouse employees are getting orders out on time and meeting or exceeding customer expectations. When you track shipping processes, you can identify problem areas. It could be a person who’s lagging or perhaps you can tweak processes and identify technology to make your shipping department more efficient.

On-Time Delivery

As important (if not more) as on-time shipping, is on-time delivery. And it’s a metric you must track. No one can deny the definite benefits that the on-time delivery brings about.”You have to deliver on your promise,” Clarus Marketing Group CEO Tom Caporaso said. “Regardless of all the benefits that might be in the program, you say it’s going to be there in two days, it’s got to be there in two days. You start to disappoint your consumers, they’re ultimately not going to retain.”

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But on-time delivery is more complex than it looks, with a number of layers to decipher, including:

Date of Delivery

Gary Marion posed an interesting scenario in a blog on The Balance.

“What if the customer expects delivery on February 15, but says it can take delivery two days early and one day late?  As long as you hit that four day window (count them again), are you 100% on-time?  Or are you penalized for not hitting the exact delivery date?”

Motion blur of a man moving boxes in a warehouse.

Number Of Line Items In One Order

Again there are a lot of variables to consider. For instance, if a customer orders 10 different items on one order, is it absolutely necessary to deliver all 10 items on time to be considered an on-time delivery? The answer should be yes on most occasions. Or, if you deliver nine out of 10 on time, is that 90 percent on-time delivery or zero percent?

Because there are many variables at play to measure on-time delivery, it’s key to make up-front agreements between you and your suppliers and your customers.

Related Article: 4 Concerns for Today’s Distribution Center

“It’s very important to define how to measure it before you both start measuring it,” Marion added. “Keep in mind such things as request date, original promise date, delivery date, dock date, ship date, revised promise date, and actual ship date.  All of these terms have a specific meaning – but they’re often used interchangeably.”

If on-time delivery requirements have been a point of confusion for your company, consider creating the following agreement contracts to ensure you and your suppliers are on the same page:

  • Another company-specific contract that describes what on-time delivery is and how it is measured.
  • Quality agreements
  • Terms and conditions
  • Master agreements
  • Supply agreements

Operational Productivity

Obviously the importance of measuring staff productivity is a no-brainer. If you don’t have a clue about staff performance, then you don’t really know your company. Staff discontent is detrimental to any business. Conversely, highly efficient workers are your organization’s best asset.

Your warehouse staff doesn’t perform all identical tasks each shift. However, they do perform a number of similar tasks over a period of time. To measure warehouse productivity, apply standard measurements that can be used for operations that occur in the warehouse, for example, perform physical inventory or place goods in picking area.

So What Do You Do With All the Data?

Each of these metrics can be valuable resources for the future success of your business. Once you collect the data, there are common practices to put in place to make sense of all the numbers:

  • Create clear goals: Distribution center goals can be set for each of the metrics mentioned above. Once you track each of them over time, you’ll be able to accurately see performance data and set clear goals for your employees and your company as a whole.
  • Define metrics: Once you have defined your goals, you can derive more specific metrics from each, helping you track your progress to success.
  • Get employees on board: Once you’ve defined key metrics, it’s important to get buy-in from your employees. They are the ones on the front lines, and metrics give them a clearer picture of what they’re aiming for each day, which helps them make better decisions. Employees can also provide solid insights to improve metrics along the way.
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Jay Schofield

Product Business Development Manager at System ID Barcode Solutions
Jay Schofield’s passion is numbers. For more than 10 years, he has been turning facts and figures into actionable business intelligence for System ID. When he’s not researching, analyzing, and planning for the “next big thing,” Jay can be spotted on the lake with family and friends.

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