Kaizen is a Japanese word that literally translates to “continuous improvement.” Any type of organizational process can benefit from the Kaizen approach, which looks at standardized and systemized processes in a phased manner. By doing so, it identifies processes that need improvement and their implications, planning improvement steps, executing improvements, and finally reviewing their progress.
During peak season, many third-party logistics (3PL) warehouses have to look critically at their businesses and make lean performance improvements. With volumes significantly exceeding prior years, Kaizen in warehouses need to measure and act on key performance indicators (KPIs) to identify areas to drive efficiency. This can seem daunting for some, but establishing key baseline indicators allows you to identify low hanging fruit to optimize your business.
Identify the KPIs that you can track
Part of the Kaizen event is to standardize work through a phased approach. Any Google search can tell a warehouse to start tracking KPIs for warehouses like productivity by the user, volume movement in the warehouse operations, or even the profit and loss (P&L) for any section of the warehouse. The common issue with these metrics is that they are not always tangible or easy to measure without a robust business intelligence tool or without a warehouse management system (WMS) in place. For warehouses that do not have tools set up to automatically track and measure more complex metrics, standard KPI tracking can be more insightful than you may think. Here are some examples:
KPI |
Formula |
Potential Bottlenecks |
Tips to Improve |
|
On-Time Shipping Rate
|
Total # of Units On Time / Total Number of Units Shipped |
Inefficient pick processes or pick and pack practices with too many labor redundancies |
Implement a batch pick process
|
| Pick Speed | Pick Complete (Time Stamp) - Pick Start (Time stamp) |
Paper based process Warehouse layout/pick line route inefficiencies |
Setup pick bins with unique items Implement pick to bin processes to pick more with each warehouse pass |
| Order Accuracy | 100 - (total mispicks/ total orders) | No barcode scanning |
Implement mobile scanning, like SmartScan, to automate accuracy checks Implement pack stations to scan verify items through pack out |
| Receiving Efficiency | The time between inventory receipt & Inventory available for orders |
No systemized put away process Improper utilization of floor space/layout best practices |
Implement a dock-to-stock process utilizing a put away or automatic location suggestion |
| Return Rate | (Units returned / Units Sold) * 100 | Pack accuracy Damaged inventory |
Implement QA on inbound and at pack stations, depending on commodity Implement hold/quarantine locations in the warehouse for damaged inventory management Align with your customers on return policies |
The Amazon Effect has further raised expectations of on-time delivery, seamless return processing, and service quality. Recognizing the 5-10 key metrics to measure will drive business focus and help clearly find the areas with the biggest opportunities for improvement. In our industry today, most efficiencies are gained from insights and automation, so reviewing outdated or paper-based processes and considering smart investments in scalable technology can prove meaningful for growth-minded warehouse businesses.
The best part about the Kaizen aim is that it continues beyond your initial improvements. As a business’s needs grow, there are new areas for improvement and new solutions that need to be identified. Sometimes coming up with the solutions can be daunting, but thought leaders in your networks, as well as your WMS and technology partners can serve as advocates for you by sharing best practices and helping your business succeed.
To learn more about key KPIs to track during Peak Season, watch our webinar or request a demo!
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