Warehouse benchmarking study is a top tool for measuring performance
Study provides invaluable outlook for warehouses and distribution centres - by Toby Gooley
The explosive growth of e-commerce is making it harder and harder for distribution manager to provide efficient and timely processing, handling, fulfillment, and delivery of orders. A September 2018 CBRE report projects that US warehouses will need 452,000 more workers this year and next to handle soaring volumes of e-commerce shipments. Meanwhile, online buyers’ expectations for fast, low-cost, perfect service are raising the competitive bar. The need to measure performance both internally and against other companies will only grow.
This reality makes an annual benchmarking study conducted by the Warehousing Education and Research Council (WERC) all the more valuable. Now in its 15th year, the “DC Measures” study polls warehouses and DCs on their performance on 35 operational metrics, or key performance indicators (KPIs). The metrics are grouped into five sets: customer, operational, financial, capacity/quality, and employee/labor.
The study aims to identifywhich metrics are important to warehousing professionals as well as how performance against KPIs changes over time, according to researchers Dr. Karl Manrodt of Georgia College & State University,Dr. DonnieWilliams of the University of Arkansas, and WERC researcherand founder of the consulting firm TSquared Logistics Joseph Tillman.It also provides benchmarks that managers can use to evaluate their performance on everything from order-picking accuracy to capacity utilization, among many other metrics. The survey goes out to WERC members and readers of study co-sponsor DC Velocity magazine every January; the results are presented in a detailed report and at WERC’s annual conference. (The 2019 conference will be held in Columbus, Ohio, April 28 – May 1. For more information, click here.)
The primary report looks at performance metrics for all respondents. Those statistics are broken out into five classifications: “best-in-class,” “advantage,” “typical,” “disadvantage,” and “major opportunity,” allowing managers to see where their own facilities sit on the spectrum. (The median is also included in the report but is not assessed.) They also have the option of purchasing an interactive “comparison report” that lets them measure their own performance on KPIs to that of respondents within the same demographic, based on industry, type of customer served, type of picking operation, and other factors. “This will help to answer questions like where should we make improvements, and what specific activities should we be looking at” in order to make those improvements, Tillman explains.
The research team also takes a deep dive into the findings to uncover trends and explore whether they have an impact on warehouse performance. They sometimes turn up surprises. For example, this year, five of the top 10 performance metrics respondents said they use most often were related to labor. Just two years ago, four of those (contract employees as a percentage of total workforce; overtime hours as a percentage of total hours; part-time workforce to total workforce; and percentage of employees who are cross-trained) were ranked at the bottom of respondents’ lists.
Another surprise: Adoption rates for some efficiency-enhancing technologies has not grown as much as expected. For example, only 65 percent of respondents are currently using a warehouse management system (WMS), a long-established technology that’s generally considered to be a “must have.” Moreover, there was no statistically significant difference in performance between companies with and without a WMS. In the team’s estimation, this probably reflects current users’ failure to fully utilize the software’s capabilities, or possibly that they are overlaying the WMS on a manual system. There was, however, a correlation between newer technologies and better performance on relevant KPIs. “For example, if you’re looking at internal order cycle time, then RFID helps. If you’re looking at on-time receipt and putaway, then a pick-to light system might have an impact there,” Williams says.
The “DC Measures” study is anything but static. Research questions and topics change from year to year to reflect warehouse professionals’ current concerns. “At the heart of the research is a conversation between warehousing professionals and the researchers. We want to answer questions that are relevant and provide real benefits to the industry,” Manrodt says.
WERC’s 42nd Annual Conference for Logistics Professionals, April 28 – May 1, 2019, in Columbus, Ohio will host a complete presentation on the 2019 “DC Measures” study. In addition, the conference includes educational sessions, facility tours, networking opportunities, and the WERC Solutions Centre exhibition. For more information, go to www.werc.org/2019.