Warehouse key performance indicators: More quality with the right KPIs in e-commerce

Warehouse metrics still play a subordinate role for many e-commerce companies. But with the right KPIs, online retailers can accurately measure the quality of their warehousing, reduce storage costs and thus improve their logistics. If you are active in e-commerce yourself, you should therefore know certain warehouse key figures.

What are warehouse ratios?

Warehouse performance indicators, or warehouse ratios, are measures that you can use to check the profitability of your warehousing in the course of controlling. These KPIs include the type, quantity, location and storage duration of your goods.

Based on these KPIs, you can then derive appropriate measures to improve logistical processes or minimise waste of goods, time and labour.

To evaluate the profitability of your warehousing, current values are usually compared with the values of the previous period or industry-standard figures, so-called benchmarks.

Warehouse ratios also important in e-commerce

For most online retailers, the fulfilment warehouse is a central component of their business. This is because it is directly related to the deliveries ordered and thus also to customer satisfaction.

While online shop and marketing activities are often optimised down to the smallest detail, there is still room for improvement in the warehouse area. This is also due to the lack of measurement of warehouse key figures.

Yet the evaluation of warehouse ratios enables online retailers to save money and improve logistics. And this in turn has an impact on customer satisfaction. Because if the processes run optimally, orders also reach the customer faster.

The most important warehouse key figures in e-commerce

Basically, there are a lot of warehouse metrics that you can measure. But not every one is necessarily relevant for you. For certain key figures, it depends on your industry or the size of your warehouse, for example, so that a measurement makes sense.

However, measuring the following five warehouse key performance indicators (KPIs) is always recommended if you want to improve your warehouse logistics in e-commerce.

Warehouse stock as a KPI in e-commerce

The stock level indicates the quantity you have of certain goods at time X. This gives you precise information on sales. This gives you precise information on sales and thus also on the turnover of the product. In addition, you also know whether you need to produce or order more.

Finding the optimal stock level

The evaluation of this key figure also helps you to find out the optimal stock level of your products. This reflects the exact amount of stock your company needs to meet regular demand without creating out-of-stock situations.

So, in concrete terms, it’s about achieving maximum profitability with minimum inventory costs. After all, depending on your shape and packaging, storage procedure, stocking and demand, only certain stock levels are possible or practical.

For example, are the products packed in cardboard boxes and placed on the shelf or are the parts individually stored in a storage box or on a pallet? The size of the individual products also plays a role, of course. Large goods logically consume more space than small parts. Small parts such as screws, for example, are in turn needed more often than large machines.

Order accuracy as a KPI in e-commerce

Order accuracy plays an enormously important role in e-commerce. About one third of returned orders can be traced back to the delivery of wrong or damaged items. That’s quite a lot when you consider that errors in the so-called picking process lead to costs in returns, lost sales and dissatisfied customers.

The evaluation of this warehouse key figure therefore shows you whether or where you need to improve. A process-optimised warehouse structure or the use of technical aids such as bar scanners can be an enormous help in this case to increase order accuracy.

Inventory turnover as a KPI in e-commerce

The inventory turnover ratio tells you how often a product is sold and restocked on average within a certain period of time (usually 1 year).

It helps you to optimise stock limits and warehousing. If, for example, you notice that individual products are in the warehouse for a whole year or longer, this is an indication that capital is being tied up unnecessarily. Then you should consider adjusting stocks or removing individual products from the warehouse.

Stock duration as a KPI in e-commerce

Closely linked to the turnover rate is the storage period. This key figure indicates how much time your products spend in the warehouse on average. The higher this figure is – that is, the longer your goods spend in the warehouse – the more need there is for action. This is because when products are stored for a long time, capital is tied up, making your company less liquid.

Pick and pack time as a KPI in e-commerce

Pick and pack time tells you how efficiently your picking and shipping process is running. Conversely, long pick and pack times mean a long delivery time for the customer, for example because employees are not working productively enough or because different picking methods make for less efficiency. Ideally, your pick and pack times should be short so that the product reaches the customer quickly.

Conclusion

Tracking warehouse metrics in e-commerce has a direct impact on your business. In concrete terms, it helps you:

• Adjust faulty processes
• Make optimal use of storage space
• Optimise inventory planning
• Align warehouse processes with each other
• Tie up less capital

Take advantage of the optimisation potential in your warehouse and improve not only your warehouse logistics, but also your customer satisfaction.