Key performance indicators (KPIs) can help you understand the efficiency of your distribution centers. In this blog series, we’ll look at the core KPIs and key figures that are central to the process. To start, we’ll review the KPIs most often used by distribution professionals today.
KPIs vs. key figures
KPIs indicate the performance of a facility in respect to a process; they represent the relative efficiency of the process. Key figures, on the other hand, help clarify the volume and characteristics of the work. This might include orders received, line items received or back orders. While typically out of the hands of distribution center managers, key figures do provide an important perspective to the KPIs under review. Therefore, consider both sets of values as part of a proper performance improvement program. In today’s post, we’ll focus on the inbound process.
In our experience, few distribution centers have KPIs in place to track receiving. This is counter to what you would expect, as a correct initial receipt is a key component to reducing rework and errors further dowstrem in the process. Conisder that an error in the receiving process increases in cost to correct incrementally as it works downstream in the distribution processes. Let’s first identify key figures to track.
Key figures to track:
- Scheduled shipments – Number of shipments scheduled for a specific period.
- Shipments received – Number of individual deliveries/Shipments received.
- Lines received – Number of lines on purchase orders represented on shipments.
- Average lines per shipment – Shipments received/Lines received.
- Pallets received – Number of pallets created for lines received in the period.
- Units received – Track as pallets if receipts are stacked on pallets and handled as pallet loads for put away. Track as cartons if receipts are stacked on pallets and stocked as cartons. We recommend tracking as a single unit.
Key performance indicators to track:
Unloading times – The average time from gate-in to gate-out. Include load types to provide a proper metric for comparison.
Dock-to-stock time – Total time to move product through the receiving process so it is available for use. Typically represented as Turnaround time in hours/Minutes.
Use: Value is key to moving material through the distribution process and reducing inventory levels. A high number, especially exceeding four hours, means product is not available the same day it arrive. Dock-to-stock comparisons are possible against other distribution centers or peers.
On-time scheduled shipments – Represented as a percentage. If we track the number of scheduled receipts, it is an effective gauge of the reliability of transportation scheduling. Calculated by Percentage = Scheduled shipments (in period)/Scheduled shipments (in period that arrived on schedule).
Use: Reliability of carriers to arrive at appointed times. In high-volume DCs, this gauges to the effectiveness of planning resources based on appointment scheduling. This metric provides no value in a “first come first serve” environment.
Units handled per hour – In receiving, this shows the utilization of resources, not the performance of the receiving process. The value is calculated by taking the total resource hours associated with receiving divided by the number of units received (processed) for the same period. Note: a unit varies by distribution center. In pallet-based warehouses, it is the number of pallets; in carton-based warehouses, it is number of cartons.
Use: This KPI is not typically used to gauge performance against other distribution centers, but will provide an indicator to the effective use of resources over time.
Define the metrics to track
In our next blog post, we’ll focus on KPIs and key figures for material handling. Feel free to share your comments or questions.
Phillip Avelar is a Managing partner at Advanced Solutions, based in Chicago. He works with SAP enterprises to optimize their supply chains, increase productivity and challenges the status quo. He shares his passion for solving customers problems in his blog posts, industry articles and conference talks.