KEY PERFORMANCE INDICATORS

(KPIs)

Key Performance Indicators

Key Performance Indicators (KPIs) are list of measures that a
companys managers have identified as the most important
variables reflecting operational or organisational performance
The type of KPIs used will differ from one organisation to
another

Key Performance Indicators

KPIs are used to assess the current state of the business

KPIs are used to assist in prescribing a course of action to
improve performance
KPIs help an organisation measure progress being made towards
achieving certain goals

Examples of KPIs used in Warehouse Operations

A company has a Regional Distribution Centre which it uses as a
base for storing and distributing its range of products
The products are imported from various overseas factories and
shipped to the Regional Distribution Centre
The goods are then despatched to customers located in the
region

Examples of KPIs used in Warehouse Operations

Inbound KPIs
1 Inbound documentation accuracy
Export documents are sent from the supplier to the consignee.
These documents have to be presented to customs officials before
the goods can be released
The KPI is used to measure the percentage of accurate documents
received from suppliers

Inbound KPIs
1 Inbound documentation accuracy
Number of correctly completed shipping documents received per week
Number of shipping documents received per week

Inbound KPIs
Likely consequences of low performance

Delays in clearing goods

Demurrage charges
Liner detention charges
Lost sales

Possible cause
Supplier not familiar with document requirements
Supplier fills in wrong quantity, product description, value
Problem with clearing agent at origin

Inbound KPIs
2 Inbound documentation arrival time
The supplier should send the export documents to the consignee so
that they arrive ahead of the goods arriving at the port of
destination. This will enable the goods to be cleared promptly
The KPI is used to measure percentage of documents arriving on
time

Inbound KPIs
2 Inbound documentation arrival time

Number of documents arrived on time per week

Number of shipping documents expected per week

Inbound KPIs
Likely consequences of low performance

Delays in clearing goods

Demurrage charges
Liner detention charges
Lost sales

Possible cause
Supplier or clearing agent at origin not sending documents on time
Courier company not delivering documents on time

Inbound KPIs
3 Inbound Clearance Time
A period of time is required to clear the consignment at the port
of destination
The KPI is used to measure the percentage of consignments cleared
on time

Inbound KPIs
3 Inbound Clearance Time
Number of containers cleared on time per week
Number of containers arrived per week

Inbound KPIs
Likely consequences of low performance

Delays in clearing goods

Demurrage charges
Liner detention charges
Lost sales

Possible cause
Failure of internal or external clearing personnel

Inbound KPIs
4 Containers subject to demurrage
Upon arrival at the port of origin the containers are allowed a short
period of free time in the port whilst they are being cleared by
customs
The KPI is used to measure the percentage of containers incurring
demurrage charges

Inbound KPIs
4 Containers subject to demurrage
Number of containers subject to demurrage per month
Number of containers arrived per month

Inbound KPIs
Likely consequences of low performance
Demurrage charges
Liner detention charges
Lost sales

Possible cause
Failure of internal or external clearing personnel to act promptly
Inaccurate documents received from supplier
Documents received late from supplier

Inbound KPIs
5 Inbound containers cleared
Generally a company dealing with a 3PL would have an agreement on
how many containers it expected to be cleared during a particular
period (day / week)
The KPI is used to measure the percentage of containers cleared
versus expectations

Inbound KPIs
5 Inbound containers cleared

Number of containers cleared per week

Number of containers scheduled to be cleared per week

Inbound KPIs
Likely consequences of low performance
Demurrage charges
Liner detention charges
Lost sales

Possible cause

Failure of internal or external clearing personnel to act promptly

Inaccurate documents received from supplier
Documents received late from supplier
Inefficiencies in unloading containers at warehouse

Inbound KPIs
6 Inbound damaged goods
It is not unusual for some goods to arrive damaged when they are
inspected upon receipt
The KPI is used to measure the percentage of damaged goods
received

Inbound KPIs
6 Inbound damaged goods

Number of units received damaged per week

Number of units received per week

Inbound KPIs
Likely consequences of low performance
Out of stock items
Insurance claims
Cost of repacking or disposal

Possible cause
If limited to a specific supplier, the problem may be the fault of the
supplier
If across a wide range of suppliers the problem may relate to, for
example, customs inspection procedures

Warehouse KPIs
7 Inventory accuracy
Maintaining accurate inventory records is important in order to
maintain customer service levels, safeguard against losses and
minimise finance costs
The KPI is used to measure the accuracy of physical inventory in
comparison to computer / book records

Warehouse KPIs
7 Inventory accuracy

Number of units present in the warehouse at a specific time

Number of units specified on inventory records at a specific time

Warehouse KPIs
Likely consequences of low performance
Out of stock items
Write off costs

Possible cause

Theft
Errors in order picking
Errors in data input
IT issues

Warehouse KPIs
8 Space occupied
It is important to ensure warehouses are being utilised effectively
The KPI is used to measure the percentage of the warehouse being occupied
by goods

Warehouse KPIs
8 Space occupied

Number of locations in the warehouse occupied at a specific time

Total number of locations in the warehouse

Warehouse KPIs
Likely consequences of low performance
High storage costs per unit

Possible cause

Inventory levels not meeting required levels

Seasonal downturn
Warehouse designed to accommodate growth
Improvements made in inventory management

Warehouse KPIs
9 Damages
In any high volume warehouse it is highly likely that a certain level
of damages will be experienced
The KPI is used to measure the level of damages in the warehouse
as a percentage of the volume handled

Warehouse KPIs
9 Damages
Number of units damaged per week
Number of units throughput per week

Warehouse KPIs
Likely consequences of low performance
Out of stock items
Write off costs
Disposal costs

Possible cause
Poor handling by order pickers
Poor handling by fork lift truck drivers

Warehouse KPIs
10 Cases ordered versus cases picked
Ideally the number of cases picked to meet order received from customers
should be the same
The KPI is used to measure the percentage of cases picked versus the
number of cases ordered

Warehouse KPIs
10 Cases ordered versus cases picked
Number of cases picked for customers orders received during a specific period
Total number of cases ordered by customers during a specific period

Warehouse KPIs
Likely consequences of low performance
Decline in customer satisfaction
Increase in customer claims
Cost of redeliveries

Possible cause

Inventory records not accurate

Insufficient stock in warehouse
Inaccurate picking by warehouse operatives
Possible case of theft

Warehouse KPIs
11 Order Receipt / Order Assembly Times
Customers are generally advised that their orders will be delivered
within a specific time of placing the order. Hence it is important
that the order is picked at the warehouse within agreed time
parameters

The KPI is used to measure the percentage of orders picked on

time

Warehouse KPIs
11 Order Receipt / Order Assembly Times
Number of orders assembled on time during a specific period
Number of orders received during a specific period

Warehouse KPIs
Likely consequences of low performance
Lost sales due to delay in despatching goods

Possible cause
Insufficient warehouse operatives
Low productivity
Inappropriate shift timings

Outbound KPIs
12 Export documents prepared on time
Export documents need to be prepared and made available to the
consignee in order that the goods can be customs cleared on receipt
The KPI is used to measure the percentage of export documents
prepared on time

Outbound KPIs
12 Export documents prepared on time
Number of export documents prepared on time per week
Number of shipping documents to be prepared per week

Outbound KPIs
Likely consequences of low performance
Decline is customer satisfaction
Lost sales as customer receives goods late

Possible cause
Failure with internal or external clearing personnel

Outbound KPIs
13 Goods despatched on time
Goods need to be despatched on time to meet customers delivery
expectations
The KPI measures the percentage of goods despatched on time

Outbound KPIs
13 Goods despatched on time
Number of consignments despatched on time per week
Number of consignments due to be despatched per week

Outbound KPIs
Likely consequences of low performance
Decline in customer satisfaction
Lost sales as customer receives goods late

Possible cause
Orders not assembled on time
Carrier not available on time
Export documentation not available on time (road transport)

Outbound KPIs
14 Goods arrived at customer on time
Customers expect to receive their goods on a certain day in order
that they can plan to receive them
The KPI is used to measure the percentage of consignments
delivered to the customer on time

Outbound KPIs
14 Goods arrived at customer on time
Number of consignments delivered on time per week
Number of consignments due to be delivered per week

Outbound KPIs
Likely consequences of low performance
Decline in customer satisfaction
Lost sales as customer receives goods late
Goods may be returned

Possible cause
Goods despatched late
Problem with carrier
Problem with customs clearance on export

Outbound KPIs
15 Shortages / Damages on arrival at destination
Customers not only expect their goods to arrive on time but they
expect them to be of the right quantity and in good condition
The KPI issued to measure the percentage of goods delivered short
or damaged

Outbound KPIs
15 Shortages / Damages on arrival at destination

Number of units delivered short or damaged per week

Total number of units despatched per week

Outbound KPIs
Likely consequences of low performance

Decline in customer satisfaction

Lost sales
Cost of returns
Redelivery costs

Possible cause

Poor stacking
Inappropriate packaging material
Insecure mode of transport
Poor handling during customs inspection

Summary
When a company contracts out its logistics requirements, KPIs
are usually written into the contract
These are mutually agreed and if the service provider fails, the
service provider may face financial penalties.
The service provider may insert clauses to protect itself against
unusual circumstances. For example, there may be a target to
despatch a particular number of loads in a week. However, the
service provider might state that these despatches would be
limited to a particular number per day

Summary
KPIs should be used to identify problems areas in the business
The problem areas should then be addressed to ensure
improvement in performance

When KPI targets are consistently met, the target can be raised
to encourage continual improvement
Too many KPIs or over complicated KPIs can be counter
productive and not reflect the true state of the business

Summary
Agree how often the KPIs will be published and who will receive
copies
It is important that the calculation of the KPI is clear
Usually in percentage terms
Time period covered

Ensure those people reading the KPIs fully understand what

they are measuring
Some software packages offer real time KPI monitoring on your
desktop

KPI Example
Cases ordered by customers
Total cases delivered
Product lines ordered
Product lines out of stock

KPI Percentage of lines delivered versus lines ordered

40/50
KPI =80%
KPI Percentage of cases delivered versus cases ordered
99,000/ 100,000
KPI =99%

100,000
99,000
50
10