Warehouse Performance Measurement: A Case Study
307warehouse Performance Measurement A Case Studyilieş Liviubabeş B
Performance measurement, key indicators, logistics, warehouse management, and a case study of a Romanian company
The purpose of this article is to explore best practices in warehouse performance measurement that can lead to tangible improvements in operational efficiency. Warehouse performance measurement encompasses assessing the optimal use of storage space, customer relations activities, quality levels, asset utilization, and cost management. Understanding and implementing relevant performance indicators—how they are calculated, interpreted, and applied—is essential for warehouse managers aiming to elevate performance.
The article begins with a review of international literature to identify commonly used warehouse performance indicators. Then, it presents a case study of a small Romanian company, S.C. TUDOR S.R.L., illustrating how performance measurement tools can uncover operational problems and inform strategic solutions. The goal is to demonstrate that effective monitoring through key performance indicators (KPIs) enables proactive decision-making to optimize warehouse operations, reduce costs, and improve customer satisfaction.
Introduction
In an increasingly competitive global market, companies seek to gain advantages through cost reduction and efficiency improvements across their supply chain. Logistics costs, especially warehousing expenses, represent a significant portion of total supply chain costs. As reported in 2008, warehousing costs accounted for approximately 20% of total logistics costs in North America, and even higher proportions were observed in Europe. Improvements in warehouse management are thus crucial for enhancing overall competitiveness, especially in regions such as Romania, where economic conditions favor low-cost labor and strategic location advantages like the Constanța port.
Effective performance measurement enables firms to identify operational inefficiencies and implement targeted improvements. However, selecting appropriate indicators requires understanding both the relevant metrics at the international level and the specific context of each warehouse. This article emphasizes process mapping and the use of KPIs as tools for continuous performance enhancement.
Literature Review of Warehouse Performance Indicators
Performance measurement fundamentally involves quantifying the efficiency and effectiveness of operations, as defined by Neely et al. (1995). The primary goal is to identify deviations from standard performance and address underlying causes before issues escalate. Key reasons for measuring performance include continuous improvement, customer relationship management, process control, cost management, and quality assurance (Ackerman, 2003).
Performance indicators serve as the control mechanisms that compare actual process outcomes to pre-established standards or benchmarks. Within warehouse management, there exist numerous indicators, classified by authors such as Colson and Dorigo (2004), Krauth et al. (2005), and Hill (2007). For example, Colson and Dorigo devised a software tool to evaluate warehouses according to storage capacity, safety features, technological tools, and geographical considerations. Krauth et al. listed about 130 specific indicators, including storage utilization, dock performance, and handling equipment metrics. Hill categorized KPIs into order fulfillment, inventory management, and overall warehouse performance, with specific measures such as order accuracy, cycle time, and on-time deliveries.
Case Study of S.C. TUDOR S.R.L.
Company Overview
Founded in 1992 in Bistrița, Romania, S.C. TUDOR S.R.L. transitioned from a sporadic knitwear producer to a leading wholesale and retail distributor of stationery and office supplies. The company operates three shops and manages two warehouses—one rented, one owned—serving approximately 500 clients with a network of 30 suppliers. In 2008, the company’s turnover was nearly 4.85 million lei.
The company’s owned warehouse, located in Bistrița, covers 467 square meters and is strategically positioned near major truck routes and accessible parking. Its layout includes zones for different product categories, such as wrapping materials, paper supplies, and office equipment. Despite its small size, the warehouse’s management challenges provided a practical context for applying international best practices in performance measurement.
Warehouse Process Mapping
A detailed process map was developed to depict all operations within the warehouse, illustrating storage, receiving, handling, and dispatch activities. The warehouse comprises three zones: one with three storage rooms (for adhesives, paper, and archives), a central zone with additional storage, offices, and archives, and a third zone dedicated to specific product types and a showroom. The storage of approximately 1700 different products creates complex flow patterns and underlines the need for performance monitoring.
Application of Performance Indicators
The KPIs adopted from Hill (2007) were employed to evaluate performance across three categories: inventory management, warehouse performance, and order fulfillment. Data collection revealed several operational issues, including poor space utilization, excessive dock to stock times, low order picking rates, and high cycle times—highlighted by red performance indicator values. For example, space utilization was only 80%, and dock to stock time was 45 minutes, exceeding optimal thresholds.
By analyzing these indicators, specific problems were identified: under-utilized space, slow inventory processing, low throughput, and delays in order fulfillment. These were linked to causes such as outdated warehouse layout, lack of barcode technology, unnegotiated supplier contracts, and inefficient workflow design.
Problems and Root Causes
| Category | Problems | Causes |
|---|---|---|
| Space | Underutilized area (only 59.83% occupied), excessive division of storage areas | Obsolete building layout, multiple intersecting flows, inefficient use of space |
| Inventory Management | High days on hand (41 days), long dock to stock times | Lack of barcode technology, unredeemed supplier contracts, no ABC analysis |
| Warehouse Performance | Low orders per hour, underperforming item throughput | Space fragmentation, absence of automation tools |
| Order Fulfillment | Lengthening order cycle times, late deliveries | Delayed deliveries from suppliers, insufficient internal flow efficiency |
Proposed Solutions
Space Optimization
Reorganization involves removing unnecessary partitions (e.g., archives, auxiliary halls) and relocating offices for direct access to storage zones. This reconfiguration can free approximately 55.83 square meters, improving storage capacity and movement efficiency. Establishing two main docks—one for receiving, one for dispatch—on opposite sides of the warehouse would facilitate faster flow, provided structural modifications are approved by construction specialists. Designing separate entry and exit points for each product category can minimize intersecting flows, reduce congestion, and improve operational speed.
Enhancing Inventory Management
Implementing portable barcode readers and barcode management software will significantly reduce dock-to-stock times (currently 45 minutes) and improve stock accuracy. Renegotiating supplier contracts and establishing an ABC inventory analysis will optimize stock levels, reducing days on hand and immobilized capital. Regular cycle counting and real-time stock updates can optimize storage positioning, ensuring fast-moving goods are placed near dispatch points.
Improving Warehouse Performance
Automation tools, including barcode technology, can enhance order picking and packing efficiencies, targeting the current low throughput of 4 orders/hour. Continuous performance monitoring of KPIs will enable management to track progress and identify new inefficiencies promptly. Staff training on new technology and workflow adjustments will further boost productivity.
Streamlining Order Fulfillment
Collaborative agreements with suppliers able to deliver faster, coupled with investment in transportation assets and hiring dedicated drivers, can halve order cycle times. Managing delivery schedules more proactively and aligning internal processes will increase the percentage of on-time deliveries and order accuracy, thus elevating overall customer satisfaction.
Conclusions
The integration of performance indicators and process mapping is critical for effective warehouse management. Process mapping provides a comprehensive overview of operations, while KPIs offer measurable benchmarks for performance assessment. Together, these tools enable managers to identify operational bottlenecks and implement targeted interventions. The case study demonstrates that even small warehouses benefit from systematic performance measurement, leading to improved space utilization, reduced cycle times, enhanced inventory control, and better customer service.
Applying these best practices can significantly reduce logistics costs, support competitiveness, and foster sustainable growth. Regular performance monitoring, combined with strategic layout redesign and technological upgrades, forms a robust framework for continuous improvement in warehouse operations.
References
- Ackerman, K. (2003). Why Audit Warehouses. Warehousing Forum, 18(9).
- Colson, G., & Dorigo, F. (2004). A Public Warehouse Selection Support System. European Journal of Operational Research, 153.
- Krauth, E., Moonen, H., Popova, V., & Schut, M. (2005). Performance Indicators in Logistics Service Provision and Warehouse Management. Available at: [URL]
- Hill, J. M. (2007). Warehouse Performance Measurement. Esync, Chicago.
- Neely, A. D., Gregory, M. J., & Platts, K. W. (1995). Performance Measurement System Design: A Literature Review and Research Agenda. International Journal of Operations & Production Management, 15(4).
- European Distribution Report (2008). Jones Lang LaSalle.
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- Cushman, W., & Wakefield (2008). European Logistics Report 2008.
- Jones Lang LaSalle (2008). European Logistics Report. Trend & Prospects October 2008.
- University of Oradea. (Year). Economic Science Series. (Details omitted for brevity.)