1

The On-Floor Seminar Series Welcomes You to:

SESSION 208
WAREHOUSE PERFORMANCE WAREHOUSE PERFORMANCE
ASSESSMENT ASSESSMENT
& &
BENCHMARKING BENCHMARKING
John M. Hill Dr. Leon McGinnis
SINGLE SINGLE--FACTOR FACTOR
PRODUCTIVITY METRIC PRODUCTIVITY METRIC
COMPARISONS CAN BE COMPARISONS CAN BE
RISKY, BUT YOUVE RISKY, BUT YOUVE
GOT TO START GOT TO START
SOMEWHERE! SOMEWHERE!
PREMISE PREMISE PREMISE
n Order Fill Rates
n Order Cycle Times
n Lines and Orders/Hour
n Errors
n Inventory Accuracy
n Damage
n Cost/Order
n Cost as % of Sales
n Days on Hand
n Order Fill Rates
n Order Cycle Times
n Lines and Orders/Hour
n Errors
n Inventory Accuracy
n Damage
n Cost/Order
n Cost as % of Sales
n Days on Hand
THE PROCESS BEGINS WITH
BENCHMARKING
THE PROCESS BEGINS WITH THE PROCESS BEGINS WITH
BENCHMARKING BENCHMARKING
MEASURE ORDER
FULFILLMENT PERFORMANCE
MEASURE ORDER MEASURE ORDER
FULFILLMENT PERFORMANCE FULFILLMENT PERFORMANCE
On-Time Delivery
Orders On-Time
Total Orders Shipped
% % $
Orders Filled Complete
Total Orders Shipped
Order Fill Rate % % $
Error -Free Orders
Total Orders Shipped
Order Accuracy % % $
Error -Free Lines
Total Lines Shipped
Line Accuracy % % $
Actual Ship Date Minus
Customer Order Date
Order Cycle Time Hrs Hrs $
Perfect Deliveries
Total Orders Shipped
Perfect Order
Completion
% % $
MEASURE CALCULATION TODAY FUTURE VALUE
AUDIT INVENTORY
MANAGEMENT PERFORMANCE
AUDIT INVENTORY AUDIT INVENTORY
MANAGEMENT PERFORMANCE MANAGEMENT PERFORMANCE
Inventory Accuracy
Actual Qty per SKU
System Reported Qty
% % $
Total Damage $$$
Inventory Value (Cost)
Damaged Inventory % % $
Avg. Occupied Sq. Ft.
Total Storage Capacity
Storage Utilization % % $
Total Dock to Stock Hrs
Total Receipts
Dock to Stock Time Hrs Hrs $
Receipt Entry Time -
Physical Receipt Time
Inventory Visibility Hrs Hrs $
MEASURE CALCULATION TODAY FUTURE VALUE
Avg. Month Inventory $
Avg. Daily Sales/Month
Days On Hand Days Days
$
Orders per Hour
Orders Picked/Packed
Total Whse Labor Hrs
Total Warehouse Cost
Total Orders Shipped
Lines per Hour
Items per Hour
Cost per Order
Cost as % of Sales
Ord/Hr
$/Order
% %
$
$
$
$
$
Ord/Hr
Lines/Hr
Items/Hr Items/Hr
Lines/Hr
Lines Picked/Packed
Total Whse Labor Hrs
Items Picked/Packed
Total Whse Labor Hrs
Total Warehouse Cost
Total Revenue
$/Order
MEASURE CALCULATION TODAY FUTURE VALUE
ASSESS WAREHOUSE
PRODUCTIVITY
ASSESS WAREHOUSE ASSESS WAREHOUSE
PRODUCTIVITY PRODUCTIVITY
2
MEASURE CALCULATION TODAY FUTURE VALUE
On-Time Deliveries
On-Time Deliveries
Total Deliveries
% $ %
Damage % % $
Shipment Damage $
Total Shipment $
Frt. Bill Accuracy % % $
Billing Error $
Total Transport Costs
Assessorials $
Assessorial Costs
Total Transport Cost
% %
Demurrage $ % %
Demurrage Costs
Total Transport Cost
Missed Appointments
Total Appointments
Appointments $ % %
EVALUATE TRANSPORTATION
PERFORMANCE
EVALUATE TRANSPORTATION EVALUATE TRANSPORTATION
PERFORMANCE PERFORMANCE
TMS W/LMS MH ADC SCV AOM Fcast/Plan

Total Logistics Costs
Total Revenue COST % OF SALES

Total Logistics Costs
Total Orders COST PER ORDER

Lines Picked &Packed
Total Labor Hours
LINES / HOUR

Orders Picked &Packed
Total Labor Hours
ORDERS / HOUR

Receipt Data Entry-
Time of Physical Receipt VISIBILITY

Average Dock-To-Stock
Hours per Receipt DOCK-TO-STOCK

Avg. Inventory Sq. Ft.
Storage Capacity Sq. Ft.
STORAGE USAGE

Avg. Inventory Value

Avg. Daily Sales
DAYS ON HAND

Total Damage $
TotalInventory$ DAMAGE

Ship Date - (minus)
Customer Order Date CYCLE TIME

Error-Free Lines
Total Lines Shipped
LINE ACCURACY

Error-Free Orders
Total Orders Shipped
ORDER ACCURACY

Orders Filled Complete
Total Orders Shipped ORDER FILL RATE

Orders On-Time
Total Orders Shipped
ON-TIME
DELIVERY
ENABLINGTECHNOLOGY&SYSTEMS ENABLINGTECHNOLOGY&SYSTEMS ENABLINGTECHNOLOGY&SYSTEMS
METRICS METRICS
MATCH OPPORTUNITIES TO SOLUTIONS MATCH OPPORTUNITIES TO SOLUTIONS MATCH OPPORTUNITIES TO SOLUTIONS
QUANTIFY PERFORMANCE IMPROVEMENT POTENTIAL QUANTIFY PERFORMANCE IMPROVEMENT POTENTIAL QUANTIFY PERFORMANCE IMPROVEMENT POTENTIAL
$1.8 Million $1.8 Million Probable Cost Probable Cost
$2.4 Million $2.4 Million
Annual Savings Annual Savings
See above 2.7% 3.1%
Total Warehouse Costs /
Total Revenue
Cost % of Sales
See above $3.62 4.26
Total Warehouse Costs /
Total Orders
Cost per Order
See above 54/Hr 40/Hr
Total Lines Picked /
Total Whse . Labor Hrs
Lines per Hour
$864,000 20/Hr 15/Hr
Orders Picked & Packed /
Total Whse . Labor Hrs
Orders per Hour
$100,000 85% 78%
Avg. Inventory Sq. Ft. /
Storage Capacity Sq. Ft.
Storage Utilization
$1 Million 42 Days 50 Days
Avg. Inventory Value ($) /
Average Daily Sales $
Days on Hand
$100,000 .50% .75%
Total Damage $$$ /
Total Inventory Value
Damaged Inventory
See above 99% 96%
Actual Quantity by SKU/
Reported Qty. by SKU
Inventory Accuracy
$100,000 8 Hrs 12 Hrs
Actual Ship Date (minus)
Customer Order Date
Order Cycle Time
See above 98% 92%
Errorless Orders /
Total Orders Shipped
Order Accuracy
$250,000 95% 87%
Total Orders On Time /
Total Orders Shipped On-Time Delivery
Value Value Target Target Current Current Calculation Calculation Measure Measure
Logistics measures must be in harmony with
a company's overall business strategy. If
Amazon.com drove its logistics activities with
measures focused solely on reducing
delivery costs, it would cripple its ability to
serve customers. (Smart managers) are
fusing logistics plan(s) with their business
strategies, ensuring that what is measured in
the field is valued at the top of the
organization.
Logistics measures must be in harmony with
a company's overall business strategy. If
Amazon.com drove its logistics activities with
measures focused solely on reducing
delivery costs, it would cripple its ability to
serve customers. (Smart managers) are
fusing logistics plan(s) with their business
strategies, ensuring that what is measured in
the field is valued at the top of the
organization.
KEEPING METRICS IN PERSPECTIVE KEEPING METRICS IN PERSPECTIVE KEEPING METRICS IN PERSPECTIVE
Keeping Score: Measuring the Business Value of Logistics in the Supply Chain, CLM, 1999
Is it possible to assess the
system performance of a
warehouse, and compare
system performance
across warehouses, or
across time periods?
Is it possible to assess the
system performance of a
warehouse, and compare
system performance
across warehouses, or
across time periods?
THE GEORGIA TECH CHALLENGE THE GEORGIA TECH CHALLENGE THE GEORGIA TECH CHALLENGE
Ranking Rating
WHAT TO DO WITH ALL THOSE SINGLE WHAT TO DO WITH ALL THOSE SINGLE
FACTOR PRODUCTIVITY METRICS? FACTOR PRODUCTIVITY METRICS?
3
What we need is a
handicapping system
for warehouse
performance
What we need is a
handicapping system
for warehouse
performance
ONE
PERFORMANCE
INDEX
ONE
PERFORMANCE
INDEX
DATA ENVELOPMENT ANALYSIS DATA ENVELOPMENT ANALYSIS
Resources Resources Services Services
Activities Activities
Total Staffing Total Staffing
Equipment
Replacement
Cost
Equipment
Replacement
Cost
Warehouse area Warehouse area
Lines Shipped Lines Shipped
Storage Function Storage Function
Accumulation Accumulation
Resource/Input Resource/Input
P
r
o
d
u
c
t
i
o
n
/
O
u
t
p
u
t
P
r
o
d
u
c
t
i
o
n
/
O
u
t
p
u
t
For One Input, One Output For One Input, One Output
PRODUCTION FUNCTION THEORY PRODUCTION FUNCTION THEORY
Resource/Input Resource/Input
P
r
o
d
u
c
t
i
o
n
/
O
u
t
p
u
t
P
r
o
d
u
c
t
i
o
n
/
O
u
t
p
u
t
O O
B B
A A
System efficiency
of warehouse B is
the ratio
OA
OB
System efficiency
of warehouse B is
the ratio
OA
OB
SYSTEM EFFICIENCY CONCEPT SYSTEM EFFICIENCY CONCEPT
DEA is a mathematical
technique that does this
same kind of analysis,
but with multiple inputs
and multiple outputs.
DEA is a mathematical
technique that does this
same kind of analysis,
but with multiple inputs
and multiple outputs.
DATA ENVELOPMENT ANALYSIS DATA ENVELOPMENT ANALYSIS
Html
documents
Solver
Database
At your site At your site
Georgia Tech Server Georgia Tech Server
Over the Internet Over the Internet
WEB WEB--BASED TOOL BASED TOOL
4
Results to Date Results to Date
OVER 150 QUALIFIED USERS OVER 150 QUALIFIED USERS
5
Retail Retail
30% 30%
Wholesale Wholesale
22% 22%
Manufacturing Manufacturing
33% 33%
Distribution Distribution
15% 15%
USER PROFILE USER PROFILE OUTPUT SEGMENTATION OUTPUT SEGMENTATION
Broken Case: 49
Full Case: 32
Pallet: 13
Mix: 65
Total: 159
Broken Case: 49
Full Case: 32
Pallet: 13
Mix: 65
Total: 159
Input Efficiency Compared Within
(49/49)
Input Efficiency Compared Within
(49/49)
0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 1.0
0 0
10 10
20 20
F
r
e
q
u
e
n
c
y
F
r
e
q
u
e
n
c
y
BROKEN CASE BROKEN CASE
Lines/Labor hour(Broken Case) Lines/Labor hour(Broken Case)
0 0
5 5
10 10
15 15
20 20
25 25
0
.0
0
.0
1
0
.0
1
0
.0
2
0
.0
2
0
.0
3
0
.0
3
0
.0
4
0
.0
4
0
.0
5
0
.0
5
0
.0
6
0
.0
6
0
.0
7
0
.0
7
0
.0
8
0
.0
8
0
.0
9
0
.0
9
0
.0
1
0
0
.0
1
0
0
.0
M
o
re
M
o
re
F
r
e
q
u
e
n
c
y
F
r
e
q
u
e
n
c
y
Ave = 17
SD = 27
Ave = 17
SD = 27
Pick Rates Pick Rates
BROKEN CASE PICKING BROKEN CASE PICKING
0.1 0.1 0.2 0.2 0.3 0.3 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 1.0
0 0
1 1
2 2
3 3
4 4
5 5
6 6
7 7
8 8
F
r
e
q
u
e
n
c
y
F
r
e
q
u
e
n
c
y
Input Efficiency Compared Within
(32/32)
Input Efficiency Compared Within
(32/32)
FULL CASE FULL CASE
0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.7 0.8 0.8 0.9 0.9 1.0 1.0
0 0
5 5
10 10
F
r
e
q
u
e
n
c
y
F
r
e
q
u
e
n
c
y
Input Efficiency Compared within
(13/13)
Input Efficiency Compared within
(13/13)
PALLET PALLET
6
0.15 0.15 0.25 0.25 0.35 0.35 0.45 0.45 0.55 0.55 0.65 0.65 0.75 0.75 0.85 0.85 0.95 0.95 1.05 1.05
0 0
10 10
20 20
F
r
e
q
u
e
n
c
y
F
r
e
q
u
e
n
c
y
Input Efficiency Compared Within
(65/65)
Input Efficiency Compared Within
(65/65)
MIXED MIXED
No matter how we segment the data,
a very large proportion of
warehouses are operating at or
below 50% system efficiency. While
this may reflect industry or business
differences, it still represents a very
significant opportunity for
improvement.
No matter how we segment the data,
a very large proportion of
warehouses are operating at or
below 50% system efficiency. While
this may reflect industry or business
differences, it still represents a very
significant opportunity for
improvement.
RESULTS & CONCLUSIONS RESULTS & CONCLUSIONS
The opportunity for improvement
seems largest for the segment of
warehouses doing predominantly full
case picking. In that segment, a
smaller proportion of the warehouses
are "efficient' than in any other
segment, and a larger proportion are
operating below 50% efficiency.
The opportunity for improvement
seems largest for the segment of
warehouses doing predominantly full
case picking. In that segment, a
smaller proportion of the warehouses
are "efficient' than in any other
segment, and a larger proportion are
operating below 50% efficiency.
RESULTS & CONCLUSIONS RESULTS & CONCLUSIONS WHERE DO WE GO FROM HERE? WHERE DO WE GO FROM HERE?
Interpret the system efficiency score
Enhance the ability to benchmark for
technology, practice, & requirements
Interpret the system efficiency score
Enhance the ability to benchmark for
technology, practice, & requirements
THE BENCHMARKING TOOL, v2.0 THE BENCHMARKING TOOL, v2.0
6426731 6426731 6426731 6426731
Components of (In)Efficiency Components of (In)Efficiency
7
Marker
Analysis
Marker
Analysis
VERSION 2.0 VERSION 2.0
Performance Marker Attribute Performance Marker Attribute
D
E
A

P
e
r
f
o
r
m
a
n
c
e

S
c
o
r
e
D
E
A

P
e
r
f
o
r
m
a
n
c
e

S
c
o
r
e
MARKER ANALYSIS MARKER ANALYSIS
Performance Marker Practice Performance Marker Practice
D
E
A

P
e
r
f
o
r
m
a
n
c
e

S
c
o
r
e
D
E
A

P
e
r
f
o
r
m
a
n
c
e

S
c
o
r
e
MARKER ANALYSIS MARKER ANALYSIS
Industry
Total # SKUs
SKU turnover
Pick seasonality
Pick variability
Planning lead time
Value adding activities
Cube/order
Weight/order
Space utilization
Industry
Total # SKUs
SKU turnover
Pick seasonality
Pick variability
Planning lead time
Value adding activities
Cube/order
Weight/order
Space utilization
Response time
Rush orders
Multi -floor?
Total # of suppliers
WMS?
Compliant shipping?
Velocity-based slotting?
Pick-to-light?
RF dispatching?
other...
Response time
Rush orders
Multi -floor?
Total # of suppliers
WMS?
Compliant shipping?
Velocity-based slotting?
Pick-to-light?
RF dispatching?
other...
VERSION 2.0 MARKERS VERSION 2.0 MARKERS
Participate in the study, learn about your
own system performance, and work
with us to improve the practice of
warehousing.
Participate in the study, learn about your
own system performance, and work
with us to improve the practice of
warehousing.
On-Line at:
www.isye.gatech.edu/ideas
On-Line at:
www.isye.gatech.edu/ideas
GETTING STARTED GETTING STARTED
Thanks for coming Thanks for coming
Questions? Questions?