10.9 Tools: Measuring Warehouse Performance

You measure product availability using a fill-rate metric; i.e., item fill rate, line fill rate, or order fill rate. Table 10-7 illustrates how you calculate these metrics for an order that consists of multiple lines. Please note that the customer has ordered different quantities for each line (i.e., a specific SKU). As a result, your choice of metric—item versus line fill rate—influences how you view service. Let's look at two scenarios. For Scenario A, the line fill rate is a respectable 90%. However, the item fill rate is 45%—a truly dismal service level. The math for Scenario B shows an item fill rate of 69% and a line fill rate of 40%. Although the item fill rate is better than the line fill rate, both are unacceptable. For both scenarios (A & B), the order fill rate is 0%; so is the perfect order rate. Your takeaway: You need to understand the nature of the metric, how it is calculated, and what the results are really telling you. This fact is true for all metrics, not just fill-rate measures. You can't afford to let poor use of metrics (either wrong metrics or wrong use of metrics) lull you into a false sense of high performance.

Increasingly, companies strive to achieve what is called the perfect order. Perfect orders are hassle free. The Supply Chain Council defines a perfect order as follows: "An order delivered to the right place, with the right product, at the right time, in the right condition, in the right package, in the right quantity, with the right documentation, to the right customer, with the correct invoice."1 Simply put, either everything was just right or nothing went wrong. The perfect order thus sets a very high performance bar. Consider how hard this is to achieve. Any kind of error busts a perfect order. Best-in-class performance is only about 90%. Nine out of ten imperfect orders fail due to one of the issues listed in Table 10-8.

The Grocery Manufacturers Association provides performance statistics for a few components of a perfect order (see Table 10-9). If we focus on just four issues—on-time delivery, orders shipped complete, orders shipped damage free, and orders shipped with the correct documentation—the average perfect order percentage is 84%. 2 Clearly, achieving the perfect order requires action beyond the warehouse, but as a warehouse manager you have a huge impact on this metric. Pursuing "perfection" can help you avoid complacency and drive improvement as you find and remove the root causes of perfect order failures.

One final thought on measurement: As you focus on productivity and perfection, don't forget your people. You need to stay focused on safety. You might consider the following motto, "Quality First, Safety Always." To emphasize safety, you'll want to measure injuries, lost-time injuries, and near misses. Some companies even add “safety” as a sixth “S” to their 5S initiatives–turning into a 6S program.

In addition to safety, consider tracking the number of innovation ideas suggested and implemented. No one is closer to the action than the people doing the work. They can help you improve operations if your invite them to do so. As you act on their suggestions, they will be more enthusiastic and engaged team members. The bottom line: You want your employees to feel both safe and valued. If you accomplish this, employee turnover will go down, along with recruiting and training costs.