Warehouse management software has far reaching implications for managing supply chain and operations for businesses today than ever before. The growing push for improving operational efficiency, warehouse space utilisation and inventory carrying costs can have a significant impact on the bottom line for businesses.
Warehouse management software can help companies eliminate inefficiencies, improve accuracy, delivery and order tracking capabilities. It can help organisations forecast demands and improve logistics using technology driven warehousing. Here’s a look at some of the KPIs that can help retailers and companies with supply chain and warehousing: 

1. Inventory Carrying Costs

The inventory carrying costs are a good indicator for optimising the efficiency of an organisation. Typically, high inventory carrying costs can be costly for an organisation’s bottom line. Warehouses that have high inventory carrying costs indicate inefficient operations. A carrying cost of over 30% can be considered high for inventory.

This is how the inventory carrying costs are computed:

Carrying cost (%) = Inventory holding sum / Total value of inventory x 100

Inventory holding sum = inventory service + capital cost + storage space cost + inventory risk

Say, if your inventory cost is $1M. The Inventory service= $25,000, capital cost=$60,000 

Storage cost=$100,000 and inventory risk= $65,000

So, inventory carrying cost = ($25,000+ $60,000 + $100,000 + $65,000)/$1,000,000 X 100= 25%

A high inventory carrying cost results in upfront capital expenses for companies. Apart from that it also incurs high maintenance expenses, which results in increased expenses and cash flow problems. Most industries have an acceptable inventory carrying costs ranging from 15-30%. As retailers are adopting demand driven inventory models, they are looking at software solutions for forecasting customer orders and managing their supply chain.

2. Productivity & Turnover

Warehouse management requires tracking the space costs and making best use of available capital for companies.

Turnover = The Cost of Total Goods Sold During a Period / Average Inventory Value X 100

The turnover of items shows the consumption trends. A low turnover of items can indicate high warehouse maintenance expenses. At the same time, when turnover is very high, it can lead to shipping orders late for customers due to unavailability of items.

A good warehouse management software tracks and predicts the demand for the items. A survey by Peoplevox shows 34% of businesses have shipped an order late because they sold a product that was not in stock.

The warehouse management system needs to track the average time taken to dispatch and deliver customer orders too. Delay in delivery is akin to losing customers.

3. Item Accuracy

One of the most common problems faced by retailers is the difference between physical and online inventories. The warehouse with a realtime mapping of received items from purchases, shipped orders for customers and missing items leads to accurate costs.

Accuracy = Software Inventory / Physical Inventory) x 100

The top warehouse management systems automate the process of receiving and shipping orders with QR/Bar coded labels. Inventory accuracy of 100% is highly desirable for retailers. The warehouse management system can impose checks and balances with automation using RFIDs etc. to reduce thefts and missing items. 

4. Time for Receiving/Dispatching Items

The warehouse space management requires careful distribution of items. The racks and spaces which can be most easily accessed are occupied by frequently used items. Organisations track the total number of received in a given time period and also the dispatched goods in the same period.

These metrics are helpful in reducing the average time taken to deliver and receive items in the warehouse. Whether it is robots or humans, warehouse management systems are built to rearrange warehouses for efficiency. 

Average Time for Items = Total Time for Items(received or dispatched) / Total Time

The warehouse space and racks are redesigned for faster check ins and checkouts of items using algorithms and machine learning. The data is collected and patterns are analysed to improve the warehouse logistics dynamically.

5. Dispatch Accuracy & Returns Management

The dispatch of the right items to the right customers at the right time exemplifies sound supply chain management. When warehouses are managed using technology, your company can track the dispatch accuracy of orders shipped to customers and manage the returns from customers. The dispatch accuracy can increase costs for a company. If items are damaged or wrong items are shipped to the customers, it increases the complexities and costs for a business.

Dispatch Accuracy = (Total Number of Orders – Incorrect Item Returns)/total number of orders) x 100

Using automation for warehouse and inventory can improve dispatch accuracy for an organisation considerably. When the dispatch accuracy is high, it increases customer satisfaction, brand reputation and reduces expenses for companies.

6. Backorder Rate

The backorder rate is the measure of orders that could not be supplied by a company to its customers immediately. The backorder rate shows a lagging inventory system that is not keeping track of the customer orders and unable to predict the demand accurately. A sudden seasonal spike or changes in prevailing situations can trigger high backorder rates.

Backorder Rate = (Unfulfilled orders at the time of purchase) / (Total number of orders) X 100

An increasing backorder rate leads to customer dissatisfaction. Organisations tend to typically guard against backorder rates with proactive demand forecasting and warehouse analytics. A study revealed that 64% of retailers were challenged to adapt their supply chain for ecommerce.

7. Space Efficiency & Costs

Global retailers and businesses are looking at their warehouse space efficiencies. It is one of the ways technology is assisting companies to reduce their capital and operational expenses. The technology driven warehouses are space optimised, better equipped to deal with demand forecasting and lower carrying costs.

The warehouse space is organised to cut down on storing items that move slowly. Fast moving items are tracked and spaced for quicker checkouts leading to improved space utilisation. There is a case for moving towards the smaller warehouses for achieving higher efficiency, delivery accuracy and productivity for organisations. 

Space Efficiency = (Used Space in the Warehouse)/(Total Space in the Warehouse) X 100

Say, If you have 450,000 cubic feet of product in your 1,485,000 cubic foot warehouse, you have 30.30% utilization. Space utilisation of less than 50% at all times is a clear indication of unnecessary maintenance and service costs that companies can do away with.

Kreyon Systems has great expertise in warehouse management software. The solutions are geared for improved  productivity, inventory accuracy, regulatory compliance and reliability. If you need any assistance or have queries for us, please get in touch.

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Kreyon’s Logistics Software: Billing, Invoicing and Accounting

Kreyon’s Logistics Software helps businesses manage their billing, invoicing and accounting in an integrated system. You can optimise your delivery channels, inventory, supply chain, warehouse operations, freight and order visibility with Logistics software.

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Has your organisation ever faced crisis due to inadequate availability of critical items? Or excess quantity of items which are unutilised & lead to occupancy of space, leading to damage & loss. Is your stock up-to-date to meet the varying demands in the internet driven consumer age? If you are feeling overwhelmed with day to day complexity of your inventory, then it may be time to consider a Warehouse Management System.  Here is a quick look at the best practices implemented by the top enterprises around the globe to manage their warehouses

1. Utilisation of Warehouse Space :

Storing excess items, which move slowly and occupy space for a long time results in roadblocks. The warehouse space is critical to operations & inventory management. Space management & organisation so that there is always space for incoming products is crucial. Organisation of the inventory also ensures that fastest moving items are accessible easily and slow moving items are not in excess quantity.

2. Consumption trends & Demand forecasting :

We live in times where the demand of items can be unpredictable. There are times when there is high demand of commodities & other days when it is low. It is important to know which items are likely to be consumed faster so that there is always adequate supply of the stock. Oil & Gas industries among many other benefit from consumption trends of their items, which helps them maintain optimum inventory to support business operations.

3. Use RFID/Barcode systems to tag incoming items :

Use of RFID & Barcode tags for the assets & their components can help to track them better. The incoming items are tagged appropriately with relevant information. The information on the tags can be integrated to a central system for realtime inventory status of the items. Use of scanners, smart phone devices can be done to check the location of the items precisely. The RFID tags can improve inventory accuracy & warehouse productivity for day to day operations.

4. Theft Control Systems to reduce Loss :

When items are received, proper tagging of items eliminates the chances of theft. Without a proper theft control system, the missing assets are hard to track. With tagged items, their GPS locations can be tracked online and also an anti theft system has alarms to prevent theft.  The movement of items can be tracked with realtime alerts & messages.

5. Analytics for Insights and Actions :

Analytics of pricing trends for consumable items help an organisation to plan, budget & allocate their inventory resources with greater certainty. The pricing analytics also help in figuring out any discrepancy or deviations. It helps in improving the estimation for operational expenses. The procurement cost variations, counterfeit products & other such parameters can be driven proactively with warehouse analytics.

6. Simplify Operations :

All redundant processes for warehouse can be automated. The movement of stock, receiving goods, allocation of items, payments, return of counterfeit products can be streamlined for better results. Elimination of manual work & introducing advanced tools for automation leads to increase in efficiency, higher accuracy & improved performance.

7. Paperless Working :

The RF tags help in reducing data entry efforts. With these tags the information of assets is stored automatically & doesn’t need to be entered manually. This reduces time, manual efforts, eliminates paper work & increases transparency.

8. Integrated Operations :

Manage disparate processes, systems & stakeholders with international best practices to enhance your operations. Proactively communicate with all stakeholders including Vendors. Vendors receive notifications for replacement of counterfeit product, or any other discrepancy when items are received in an organisation. The other stakeholders are also interconnected to the system leading to consistency and attainment of organisational goals.

9. Mobility Support :

With mobility support, you can access the realtime information of your items on any mobile device. When the quantity of a critical item falls below the specified level, an alert message can be sent to the required authorities. The location, realtime status of all critical assets can also be accessed anytime anywhere on your device.

10. Global Edge :

With the rise of technology businesses find competition from various places in the world. There are many products in the market out there competing for quality, delivery & customer services. Keeping costs down, schedules optimised is a way to ensure that you are ahead of the competition. Streamlining processes with warehouse automation saves you time & money to gain the competitive advantage in the global market.

Warehouse Management System gives an organisation agility to make decisions on the go with data driven insights, plan and optimise its resources. It helps in visibility of real time information, location of products & considerable reduction in losses. Kreyon Systems is a leading software company for warehousing & inventory solutions equipped with latest technology. If you need any assistance, please contact us.

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