Between receiving inventory and getting orders delivered to your customers, what happens in your warehouse plays a crucial role in the efficiency of your operations. Good warehouse management should be a priority to ensure a seamless fulfillment process and swift deliveries. This will help you maintain warehouse productivity so that different warehousing processes are well-coordinated and functioning smoothly.

In this post, we take a closer look at warehouse productivity to understand how you can measure it and how to improve efficiency and productivity in your warehouse. We also show you some of the signs to look out for when your warehouse isn’t performing as it should. Let’s get started.

Measuring your warehouse productivity involves looking at how quickly and accurately different tasks are performed within your warehouse. Use the following points as guidelines on how to measure the productivity and efficiency of your warehouse.

Main KPIs

Closely monitoring your warehouse KPIs is the first step to measuring your warehouse productivity. You may be doing this already, but there are certain KPIs that are closely tied to productivity measurement. This includes metrics such as receiving efficiency, put-away cycle time, put-away accuracy, picking efficiency, and picking cycle time. These KPIs will tell you how efficient your warehouse operations are in terms of how you receive inventory, how you store them, and how you pick them.

On-time shipments

The number of orders you manage to deliver on time and in full is an important indicator of how efficient your warehouse operations are. To measure this, you’ll need to look at your OTIF metric. OTIF, or on-time in-full, is a KPI commonly used to measure delivery performance. However, it also gives you an idea of how your business is performing in the warehousing aspect.

In general, you can’t really deliver orders on time or in full unless things are functioning smoothly in your warehouse. If the picking or packing processes are moving slowly, this will undoubtedly delay the shipping process, which will ultimately affect deliveries. Similarly, if certain SKUs are out of stock or if pickers are unable to locate certain items, you could end up delivering orders with missing items.

As such, the number of on-time shipments can be used to understand what goes on in your warehouse. If you’re working with reliable carriers but your OTIF rate is still lower than expected, it could indicate something lacking in terms of warehouse productivity.

Operations audit

A proper audit of your warehousing operations is also an essential step to understanding productivity and efficiency. Conducting a thorough warehouse audit will help you collect reliable data about how different processes are functioning. This can then be used to assess how productive your operations are across those processes.

For example, data about the number of orders you managed to fulfill in a day can give you some idea of how efficiently your warehouse is fulfilling orders. Similarly, if your audit process reveals a high level of orders in exception status and out-of-stock orders, it could suggest that you’re not restocking inventory fast enough. You may also need to perform regular inventory audits to ensure that there are no discrepancies between your inventory records and your physical inventory counts.

Warehouse capacity used

Making good use of available space in your warehouse is another indicator of how efficiently your warehousing operations are running. With good warehouse inventory management, you can make the most of your warehouse capacity. This means that you’ve mapped your warehouse and created a strategic layout to ensure that you’re making full use of the working capacity in your warehouse. 

As such, if your peak warehouse capacity used is really high, this means that your warehouse is functioning efficiently. Ideally, businesses should aim for 100% usage, especially during peak season when there’s a higher demand for storage space. Unless the capacity is 100%, there’s room for improvement in this area.

So once you’ve measured your warehouse productivity, how do you know if it needs improvement? Check out the following key indicators of poor warehouse performance.

Inefficient receiving process

The performance of your receiving area affects the efficiency of your entire warehouse. Warehouse receiving is where inventory is unloaded, checked, and counted, so if you’re experiencing efficiencies at this stage, it means that your warehouse isn’t performing as it should. Issues at this stage results in inaccurate or lost inventory, which affects inventory counts.

Inefficient put-away process

Similarly, if it’s taking too long to get inventory into storage, this could also indicate poor warehouse performance. Inefficient warehouse put-away could be a result of several different factors. A lack of proper staffing and processes or poor warehouse layout that complicates the put-away process contributes to warehouse productivity issues.

Difficulty locating items

If your pickers are wasting too much time trying to locate items from their picking lists, it’s a clear sign that your warehouse isn’t performing as it should. This could either be because you’re not slotting and labeling racks properly or because you’re storing them in places where it’s hard to retrieve them. Either way, this significantly adds to picking duration, resulting in warehousing inefficiencies.

Low order accuracy rates

Constantly struggling with low order accuracy rates is also a sign that your warehouse performance isn’t up to par. A dip in this metric shows that your staff isn’t picking the right items, which could be a result of mislabeling items, storing items in the wrong location, or having an unorganized pick process.

High number of orders in exception

When a large number of orders are in exception status, it means that you’re constantly running out of stock. This can ultimately be traced back to inefficiencies in demand forecasting and restocking inventory, both of which can be tied to your warehouse performance. It means you’re not restocking fast enough and you’re not reordering enough to meet consumer demand.

Bottlenecks at any area

Any bottlenecks within your warehouse directly lead to disruptions in your inventory flow, thus affecting your overall warehouse performance, regardless of which area is experiencing that bottleneck (anything from receiving to packing and shipping to labeling). 

Even with good warehouse management strategies in place, businesses may still be negatively impacted by supply chain volatility. This has been particularly apparent in the past few years with unprecedented demand and supply chain bottlenecks (not to mention the recent labor shortages and economic recessions).

As a result of these factors, businesses have been left struggling to keep up and mitigate the bullwhip effect. Now that most businesses use a more demand-driven approach to managing their supply chain, the bullwhip effect has proven to be disastrous for many.

It’s crucial for businesses to maintain leaner supply chains to adapt quickly to any unexpected changes. Additionally, diversifying your product portfolio will help you maintain alternative revenue streams in case of supply chain disruptions affecting certain products. You’d also need to diversify your partner portfolio so a disruption affecting one partner doesn’t completely halt your supply chain. 

Another essential solution is distributing your inventory between multiple warehouses and fulfillment centers. That way, you can mitigate the impact of volatility by bringing inventory closer to your customers and ensuring that you have backup options in case one warehouse is highly affected.

Speaking of backups, businesses should also consider maintaining some safety stock to tide them over when volatility strikes. However, it’s important to maintain optimal inventory levels so the safety stock doesn’t become dead stock.

That’s where the right inventory management tools come in. These tools provide you with accurate demand predictions and inventory reorder notifications so you always restock on time and in the right quantities.

You’ve measured your warehouse productivity and noticed that it’s less than ideal. So what do you do next? Here are five actionable steps on improving your warehouse efficiency and productivity. 

1. Use up available space

When you make the most of your warehouse’s working space, you not only save on storage costs but improve your warehousing efficiency. To use up all the available space, you’d need to optimize your warehouse setup so that items are located strategically in areas where they’re easy to access and retrieve. 

As such, you’d also make use of warehouse racking systems that help you save on space while properly organizing your items so they’re easy to recognize. For example, taller racks allow you to make the most of vertical space in your warehouse. 

2. Keep organized

On that same note, it’s important to ensure that your warehousing efforts are properly organized for greater efficiency. This includes organizing your physical space so that you’re not only making the most of the available capacity but also streamlining movement and operations. 

For starters, slotting is an effective solution for warehouse organization as it involves organizing SKUs based on shared characteristics. This may include organizing items by product type, SKU number, or other key characteristics. For example, frozen items may be stored in the same section to ensure that the products are safely stored in optimal conditions, which helps to prevent damage and spoilage. 

Moreover, it makes it easier for workers to identify where to store the item during put-away and where to retrieve it during the picking process. This significantly boosts picking efficiency and accuracy, allowing you to fulfill orders more quickly without sacrificing order accuracy rates.

Additionally, you’d also want to make use of standardized bins so that your warehouse shelves are neatly organized. That way, the put-away process also gets sped up since workers won’t have to spend too much time locating the right racks for the right items. Similarly, pickers can quickly identify where each item is located and retrieve them in a timely manner.

Another important part of warehouse organization is real-time inventory management. When you have access to real-time inventory data, you can get accurate insights about lead times and inventory demand. This information can then be used to manage your supply chain workflows and ensure that everything flows seamlessly.

Plus, real-time inventory status updates will give you visibility into how much inventory is in different areas of the warehouse. This paints an accurate picture of your current inventory levels, allowing you to make timely inventory reorders so you can avoid stockouts and order exceptions that can delay your fulfillment process.

3. Quality training and cross-training

Employee training is an important investment as it can eventually contribute to better warehouse efficiency. Conduct regular warehouse inspections and then set up quality training sessions to address areas of inefficiencies. This will provide employees with the skills and knowledge they need to put their best foot forward and improve how they currently perform assigned tasks.

Cross-training is also crucial for boosting your warehouse productivity as it involves equipping your team to perform a wide variety of tasks. That way, you can allocate your workforce more efficiently even in case of unexpected time-offs. Moreover, cross-training helps you to avoid understaffing issues that can result in high employee turnover. 

4. Safety first

Accidents and safety risks are one of the main causes of inefficiencies inside a warehouse and can be extremely costly. Warehouse safety should be your number one priority to protect the welfare of your employees and prevent accidents that could result in unexpected delays and disruptions in your warehousing operations.

5. Software solutions

Investing in the right software is a vital step to improving your warehouse productivity. First of all, you’ll need a robust warehouse management system to automate various aspects of your warehousing operations while simultaneously improving accuracy. You also need a warehouse control system that allows you to seamlessly direct the flow of inventory in your warehouse and prevent bottlenecks.

Besides these two essentials, there are several other digital warehousing solutions that will help you improve efficiency and accuracy in your warehouse. For example, you can use pick-and-pack software to automate the process of picking and packing items to get them ready for shipment. This helps to significantly speed up the fulfillment process and improve overall efficiency.

ShipBob is a world-leading fulfillment service provider that constantly maintains a productive warehouse environment. Thanks to our proprietary software, we leverage automation to speed up various aspects of our warehousing activities across our fulfillment centers all across the globe. Our order management software integrates with your online store and sales channels, so orders are sent to our fulfillment centers as soon as they’re placed, automatically kickstarting the order fulfillment process.

ShipBob’s software generates efficient picking lists and then assigns professional pickers to retrieve the items. Once picked, packers prepare orders for shipment. We also use a range of automation tools to streamline the process, including finding the best carrier for each order and generating shipping labels for the package. 

For merchants who still want to continue in-house fulfillment, our Merchant Plus solution lets you enjoy all the benefits of the ShipBob warehouse management software from your own facility. Our WMS allows you to improve the efficiency of your in-house fulfillment operations by providing you with increased visibility and automation solutions.

Interested in implementing ShipBob’s Merchant Plus solution for your facility? Connect with our team to get started and increase productivity in your warehouse.

Below are answers to the most common questions about warehouse productivity.