Do you know the warehouse supply chain formulas that can help you optimize inventory and increase efficiency in your business? Knowing these formulas is essential for managing a successful warehouse operation—optimizing current processes or finding ways to reduce costs. In this post, we will discuss nine standard warehousing metrics used to measure operational effectiveness and pinpoint areas of improvement in the warehouse supply chain process. You'll learn how each formula helps achieve optimal productivity, accuracy, cost-savings, and customer service so you can make informed decisions about your business's supply chain success.
9 Key Warehouse And Supply Chain Formulas
Some of the top Supply Chain Equations/ Logistics Formulas are:
Inventory accuracy is used to calculate inventory accuracy. It works by counting the items in stock and comparing that number to what's in your database. Benchmarking and monitoring inventory accuracy can ensure that you're bookkeeping and data management practices are in good working order.
Formula: (number of items counted) / (number of books counted)
Storage Utilization Rate
The storage utilization rate reflects how effectively you use the available space in your warehouse or distribution center. Operations with suboptimal storage utilization have several options for reclaiming lost space.
(Inventory cube) / (inventory cube) / (inventory cube) / (total warehouse cube)
Your utilization rate is likely low, ranging between 22 and 27 percent. This is due to the need to keep enough space around the inventory for machinery and personnel to operate. A systems integrator can assist you in determining the best level of utilization for you.
Inventory Days Of Supply
Inventory days of supply (IDS) is a metric that measures how much inventory you have on hand in your operation to cover a set number of days of projected use. It varies significantly across industries, product lines, business models, and warehousing strategies.
Formula: (value of finished goods on hand) / (total annual COGS / 365)
Total Order Cycle Time
Total order cycle time is the average time that elapses between when a customer places an order and when the order is shipped. Because the velocity and efficiency with which orders move through the fulfillment process affect profitability and customer service, most order fulfillment operations must monitor and improve total order cycle time.
Formula: (customer time order - time order placed) / (total number of orders shipped)
Internal Order Cycle Time
Internal order cycle time is the average time between when a customer order is released into the warehouse for processing and when the order is shipped.
(time order shipped minus time order received) / (number of orders shipped)
Perfect Order Percentage
The perfect order percentage is the percentage of orders that arrive on time, complete, undamaged, and with proper documentation.
(% orders received on time) X (% orders shipped complete) X (percentage of orders shipped without damage) X (percentage of orders with proper documentation)
Related: Reorder Point Formula Calculator: How to Guide
On-Time Shipping Percentage
The percentage of orders shipped on time from an order fulfillment operation is measured as on-time shipping.
(Number of orders delivered on time) / (number of orders shipped)
Order Fill Rate
The order fill rate is the proportion of orders filled to the total number.
(total orders filled per customer request) / (complete orders filled)
Line-Item Fill Rate
Line item fill rate, like order fill rate, is another way for an operation to measure overall efficiency and identify areas for improvement. It represents a percentage of order lines filled to the total number of lines.
(Total order lines filled) / (total order lines filled)
Understanding warehouse supply chain formulas is essential for improving productivity and boosting customer satisfaction. Keeping track of these nine metrics can provide an understanding of the success (or struggles) your business is experiencing, allowing you to pinpoint areas that need improvement. Correct information helps those operating warehouses make intelligent decisions on where to save or invest money to see better results. Now that you have a firm grasp on everything from basic inventory accuracy calculations to cycle count optimizations, it's time to take actionable steps toward creating an effective warehousing operation. Why not consider outsourcing your supply chain to get the most out of your warehouse operations? In addition, consider utilizing a cutting-edge 3PL management system such as Conveyr-Your new all-in-one 3PL Management. We build the tools 3PLs use to compete and succeed in today's fast-paced market. With our proprietary platform and real-time analytics technology, we identify opportunities to create new value and increase efficiencies while decreasing overall costs. Start achieving your goals with confidence today!
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