Warehouses are the backbone of supply chains, especially for industries like batch manufacturing, food co-packing, pharmaceuticals, and chemicals. With rising customer expectations, increasing regulatory requirements, and ongoing supply chain disruptions, efficiency is more critical than ever.

To stay competitive, businesses need real-time visibility into warehouse operations, allowing them to track performance, identify inefficiencies, and make data-driven decisions. This is where key performance indicators (KPIs) become essential.

By measuring the right KPIs, warehouses can:

1. Inventory Accuracy

Inventory accuracy measures how closely recorded stock levels match the actual physical inventory in the warehouse. This KPI helps businesses assess the reliability of their warehouse management system (WMS) and inventory tracking processes. Inaccurate inventory records can lead to stock discrepancies, shipping delays, and operational inefficiencies.

Why It Matters

• Prevents stockouts and overstocking, reducing carrying costs
• Ensures accurate order fulfillment, improving customer satisfaction
• Minimizes disruptions in production and supply chain management

How to Measure

Inventory Accuracy (%) = (Physical Count / System Recorded Inventory) × 100

Best Practices for Improvement

• Implement barcode and RFID tracking for real-time inventory updates
• Conduct cycle counts regularly instead of relying solely on annual stocktakes
• Integrate an ERP system to automate inventory management
• Train employees on proper inventory tracking procedures

2. Order Picking Accuracy

Order picking accuracy measures the percentage of orders picked correctly without errors before they are packed and shipped. It is a key indicator of warehouse efficiency and directly impacts customer satisfaction. Errors in order picking can lead to product returns, additional labor costs, and lost revenue.

Why It Matters

• Reduces order returns and associated costs
• Enhances operational efficiency by minimizing rework and repacking
• Strengthens customer trust by ensuring accurate and timely deliveries

How to Measure

Order Picking Accuracy (%) = (Total Orders – Incorrect Orders) / Total Orders × 100

Best Practices for Improvement

• Use pick-to-light or voice-picking systems to minimize human errors
• Optimize warehouse layout to reduce unnecessary movement during picking
• Train employees on accurate picking techniques and quality checks
• Implement automation tools like robotic picking systems I came back to two o’clock on the doors. From that place. And as long as I entered out a meeting by 2 I just entered the meeting like that after the meeting, I said okay.

3. Order Cycle Time

Order cycle time measures the total time taken from receiving an order to shipping it. A shorter cycle time means faster fulfillment, which is crucial for maintaining high customer satisfaction and reducing storage costs. Inefficient order cycle times can indicate bottlenecks in warehouse operations, from picking and packing to dispatching.

Why It Matters

• Improves customer satisfaction by reducing lead times
• Increases warehouse throughput and overall efficiency
• Helps businesses identify and eliminate bottlenecks in fulfillment workflows

How to Measure

Order Cycle Time = Order Shipped Date – Order Received Date

Best Practices for Improvement

• Automate order processing with advanced WMS and ERP systems
• Streamline picking, packing, and shipping workflows
• Use just-in-time (JIT) inventory strategies to minimize delays
• Reduce manual handling by integrating conveyor and sorting systems

4. Warehouse Capacity Utilization

Warehouse capacity utilization measures how efficiently available storage space is used. High utilization indicates effective space management, while low utilization suggests wasted resources. Poor warehouse layout and inefficient slotting can reduce capacity utilization and slow down operations.

Why It Matters

• Reduces storage costs by maximizing available space
• Improves workflow efficiency by organizing inventory strategically
• Helps prevent overcrowding, which can lead to increased picking errors

How to Measure

Capacity Utilization (%) = (Total Space Used / Total Available Space) × 100

Best Practices for Improvement

• Implement vertical racking and high-density storage solutions
• Use slotting optimization software to allocate space more efficiently
• Conduct periodic audits to identify underutilized areas
• Optimize bin locations for frequently picked items

5. Dock-to-Stock Time

Dock-to-stock time measures the duration between when goods arrive at the warehouse and when they are available for order fulfillment. A longer dock-to-stock time can cause inventory delays and impact customer orders. Efficient receiving and stocking processes can significantly reduce this metric.

Why It Matters

• Ensures faster product availability for order fulfillment
• Reduces carrying costs and warehouse congestion
• Improves supply chain efficiency by minimizing stock delays

How to Measure

Dock-to-Stock Time = Time Goods Available in System – Time Goods Received

Best Practices for Improvement

• Automate receiving with barcode and RFID scanning
• Implement real-time inventory updates for better visibility
• Use cross-docking to reduce warehouse storage time
• Optimize labor allocation for faster unloading and stocking

6. Order Fill Rate

Order fill rate measures the percentage of customer orders fulfilled from available stock without requiring backorders. A high fill rate indicates strong inventory planning, while a low fill rate suggests inventory shortages or poor demand forecasting.

Why It Matters

• Prevents lost sales due to stock unavailability
• Enhances customer trust by ensuring timely deliveries
• Reduces reliance on backorders, improving supply chain reliability

How to Measure

Order Fill Rate (%) = (Orders Fulfilled Completely / Total Orders) × 100

Best Practices for Improvement

• Maintain optimal inventory levels based on demand forecasts
• Improve supplier lead times and strengthen vendor relationships
• Use safety stock strategies to prevent shortages

7. On-Time Shipping Rate

On-time shipping rate tracks the percentage of orders shipped by or before their promised date. It is a key metric for customer satisfaction and supply chain efficiency. Late shipments can result in canceled orders and reputational damage.

Why It Matters

• Enhances customer satisfaction by meeting delivery expectations
• Reduces penalties associated with missed shipping deadlines
• Improves warehouse scheduling and logistics planning

How to Measure

On-Time Shipping Rate (%) = (Total Orders Shipped On Time / Total Orders) × 100

Best Practices for Improvement

• Use real-time tracking and transportation management systems
• Automate packing and labeling to reduce delays
• Optimize warehouse scheduling to prioritize urgent shipments

8. Labor Productivity

Labor productivity measures the efficiency of warehouse staff in performing tasks such as picking, packing, and stocking. It helps businesses assess workforce effectiveness and identify opportunities for training or automation.

Why It Matters

• Reduces operational costs by improving workforce efficiency
• Enhances overall warehouse throughput
• Helps balance labor costs with automation investments

How to Measure

Labor Productivity = Total Orders Processed / Total Labor Hours

Best Practices for Improvement

• Introduce labor management systems to track efficiency
• Optimize workflows with better warehouse layouts and automation
• Provide continuous training to improve worker performance

Optimize your Warehouse with Mar-Kov

Tracking KPIs is essential, but real efficiency comes from acting on the insights they provide. To reduce errors, improve accuracy, and streamline operations, warehouses need more than just data—they need automation, integration, and real-time tracking.

Mar-Kov’s ERP help businesses:

• Improve inventory accuracy with automated tracking
• Reduce order errors through automated workflows
• Optimize warehouse space with smart slotting tools
• Boost labor productivity with real-time performance tracking

Future-proof your warehouse operations today. Contact Mar-Kov to see how our industry-leading ERP solutions can help you cut costs, increase efficiency, and drive profitability. Schedule a demo today to take the next step in your warehouse optimization.

Want insider tips from industry leaders? Listen to the latest episode of the Better Batch Podcast, where Adrian Betts, Founder of Xpandur LLC, shares expert strategies on optimizing warehouse operations and boosting efficiency. Tune in now.

About the Author

Peter Suddard has worked with batch process manufacturers for years, helping them scale and improve their business.