Executive Briefings

Four Steps to Align Qualitative and Quantitative Metrics in the Warehouse

Analyst Insight: After 13 years of conducting the Warehousing Education and Research Council’s (WERC) annual DC Measures Study of key warehousing and distribution performance metrics, a pronounced gap remains between "Best-in-Class" and "Major Opportunity" facilities within several key performance indicators. To close that gap by 2020, Major Opportunity warehouses must understand both qualitative and quantitative metrics as they relate to performance improvement. In other words, move beyond the numbers and focus on their processes. –Karl Manrodt, Georgia College & State University; Joseph Tillman, APQC; Steve Murray, Warehousing Education and Research Council; and Michael Mikitka, WERC

Four Steps to Align Qualitative and Quantitative Metrics in the Warehouse

How do Best-in-Class warehousing and distribution facilities achieve quality and continually improve upon it? They tirelessly, and repeatedly, follow a four-step path to successful benchmarking. Major Opportunity facilities — and everyone in between — can learn a lot from both their metrics and the processes that yield those results. The steps include:

Step 1: Plan

Set benchmarking priorities that align with corporate’s values and future vision. Then, identify the key processes that make the largest positive impact on the firm and its customers.

Step 2: Measure

Collect the data from front-line operational workers and the managerial level. While not every metric matters to every warehouse, the five most popular metrics tracked by survey respondents are: on-time shipments; average warehouse capacity used; order picking accuracy (percent by order); dock-to-stock cycle time (in hours); and internal order cycle time (in hours).

Step 3: Compare

Research what Best-in-Class operations have done, process-wise, as a guideline to achieve similar performance results. Identify gaps and determine why they exist. Although doing so might seem overwhelming, recommendations from resources such as WERC’s recently updated Warehousing and Fulfillment Process Benchmark & Best Practices Guide can be helpful.

The Best Practices Guide provides a list of key qualitative benchmarks parsing them into eight separate chapters — one for each primary functional area within a warehouse: receiving & inspection; material handling & putaway; slotting; storage & inventory control; picking & packing; load consolidation & shipping; shipment documentation; and warehouse management system.

The publication guides the evaluation of internal practices against five sample process benchmarks (poor, inadequate, common, good and best). It also includes a self-assessment exercise and guidance in performing a quantitative benchmarking of a facility’s performance against the industry averages published in the most recent DC Measures Study.

Based on such a comparison, as well as a better understanding of how Best-in-Class operations conduct these tasks, it’s time to develop an improvement strategy based on the priorities identified in the planning phase (Step 1). Set both near- and long-term goals to measure and mark improvements.

Step 4: Act

Implement Best-in-Class practices to improve processes and close the gaps, focusing on metrics with the most value to an operation in terms of supporting the corporate mission, vision, values, and long-term goals. Assess yourself regularly against those targets and adjust accordingly. If near-term goals are being surpassed monthly, the bar was set too low. Then, after a year, circle back and repeat the four steps. Consider an independent, third-party review and assessment for an outsider’s impartial perspective on internal processes and their alignment to Best-in-Class facilities’ performance.

The Outlook

By 2020, the performance gap between the best and the rest won’t close without a conscious effort to improve the processes taking place within operations. Best-in-Class warehouses understand which processes have the greatest impact on corporate goals, and focus tirelessly on improvements in those areas.

How do Best-in-Class warehousing and distribution facilities achieve quality and continually improve upon it? They tirelessly, and repeatedly, follow a four-step path to successful benchmarking. Major Opportunity facilities — and everyone in between — can learn a lot from both their metrics and the processes that yield those results. The steps include:

Step 1: Plan

Set benchmarking priorities that align with corporate’s values and future vision. Then, identify the key processes that make the largest positive impact on the firm and its customers.

Step 2: Measure

Collect the data from front-line operational workers and the managerial level. While not every metric matters to every warehouse, the five most popular metrics tracked by survey respondents are: on-time shipments; average warehouse capacity used; order picking accuracy (percent by order); dock-to-stock cycle time (in hours); and internal order cycle time (in hours).

Step 3: Compare

Research what Best-in-Class operations have done, process-wise, as a guideline to achieve similar performance results. Identify gaps and determine why they exist. Although doing so might seem overwhelming, recommendations from resources such as WERC’s recently updated Warehousing and Fulfillment Process Benchmark & Best Practices Guide can be helpful.

The Best Practices Guide provides a list of key qualitative benchmarks parsing them into eight separate chapters — one for each primary functional area within a warehouse: receiving & inspection; material handling & putaway; slotting; storage & inventory control; picking & packing; load consolidation & shipping; shipment documentation; and warehouse management system.

The publication guides the evaluation of internal practices against five sample process benchmarks (poor, inadequate, common, good and best). It also includes a self-assessment exercise and guidance in performing a quantitative benchmarking of a facility’s performance against the industry averages published in the most recent DC Measures Study.

Based on such a comparison, as well as a better understanding of how Best-in-Class operations conduct these tasks, it’s time to develop an improvement strategy based on the priorities identified in the planning phase (Step 1). Set both near- and long-term goals to measure and mark improvements.

Step 4: Act

Implement Best-in-Class practices to improve processes and close the gaps, focusing on metrics with the most value to an operation in terms of supporting the corporate mission, vision, values, and long-term goals. Assess yourself regularly against those targets and adjust accordingly. If near-term goals are being surpassed monthly, the bar was set too low. Then, after a year, circle back and repeat the four steps. Consider an independent, third-party review and assessment for an outsider’s impartial perspective on internal processes and their alignment to Best-in-Class facilities’ performance.

The Outlook

By 2020, the performance gap between the best and the rest won’t close without a conscious effort to improve the processes taking place within operations. Best-in-Class warehouses understand which processes have the greatest impact on corporate goals, and focus tirelessly on improvements in those areas.

Four Steps to Align Qualitative and Quantitative Metrics in the Warehouse