How to Measure Warehouse Performance

Warehouse Performance, Cost & Value Measures

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If the goals of a project are not set high enough, since the definition of world-class performance is improving over time, at the completion of the project the operation will not be improved relative to world-class performance. Another use for the gap chart is in comparing operations in a potential benchmarking partnership. For the partnership to work effectively, the partners should not have overlapping, but offsetting strengths and weaknesses. If the strengths and weaknesses overlap, little learning can take place. Finally, the gap analysis can also be used in justifying capital expenditures for new information and/or material handling systems. Since the chart quantifies the gap relative toworld-class metrics, we can compute the annual $ benefit (cost savings, cost avoidance, and/or revenue increases) of closing the gap in each performance area. The estimated annual benefit in relation to corporate payback goals suggests an appropriate investment available to close the gap. 6. Performance Based Warehousing I have been fortunate to influence the supply chains and warehouse operations of hundreds of companies. The client who has probably gone the furthest with warehouse performance measurement is Caterpillar. They recently blended our RightChain™ Metrics methodology with their Caterpillar Production System precepts and developed perhaps the world’s most advanced and comprehensive warehouse performance management system. In addition to the global daily updates of each of the key indicators in each of the Caterpillar DCs, a balanced presentation of the indicators is presented on scoreboards throughout each DC, and it is used as the basis for each day’s and each shift’s discussion of challenges and opportunities for improvement.

© Dr. Ed Frazelle, Author, World Class Warehousing | ALL RIGHTS RESERVED