Question

Worksheet 3-1

• World Class WH 3
• WH & Distribution Science 15

1. Define the following terms:
   1. Competitive benchmarking
   2. External (or world class) benchmarking
   3. KPI

2. Explain/define the following types of benchmarks
   1. Shipping accuracy
   2. Inventory accuracy
   3. Inventory turns
   4. Order fill rate
   5. DC Productivity
   6. DC storage density
   7. Order cycle time
   8. Perfect order %
   1. Order picking accuracy
   10. Dock to Stock time
       
3. What is the general formula to calculate “efficiency” or “productivity”?

                                               

4. Warehouse costs are generally measured as a percentage of __________?
   
5. Warehouse productivity is generally measured per ______ _______ ?
   
6. How do you conduct a warehouse “gap analysis”?

7. Which generally has a more efficient (higher performance) warehouse, a union or non-union shop?
   
8. Do “economies of scale” make large warehouses more efficient than small warehouses?
   

Answer 1

I. Define the following terms:

a. Competitive benchmarking: It is the process of comparing a company 'x' with its competitors in the same market segment/industry/product category using common measurement tools or metrics.

b. External (or world class) benchmarking: It is the comparison of a company with other companies or external comparison in the market.

c. KPI: The abreviations KPI stands for Key Performance Indicator and is a type of performance measurement system used by organizations to measure their success to a particular function or business target. A KPI is measurable and can be assessed after a period of time used for assessment.

II. Explain/define the following types of benchmarks:

a. Shipping accuracy: It is the degree of agreement between the quantity and type of Stock Keeping Units or SKUs on an order form, picking docment or BOL and those actually present in a given load.

b. Inventory accuracy: It is the tallying of the physical count of inventory or stock with the quantity as mentioned in the stock register record.

c. Inventory turns: It is used to calculate the number of times inventory is sold or used in a specific period of time usually a year. It is useful in the calculation of excessive inventory.

d. Order fill rate: It is the percentage of consumption orders from stock available at any point of time. It is useful in ascertaining whether an inventory can meet demand.

e. DC Productivity: DC or Distribution Centre productivity is the cost effectiveness of the DC operations in a company which includes the functions of warehousing, logistics and supply chain.

f. DC Storage Density: It is the ratio of available storage area to the total warehouse space. It is a very important tool for calculating optimal storage capacity out of limited space resources and requiring necessary planning and organizing.

g. Order cycle time: It is the time period between two orders that are placed.

h. Perfect order %: It is a measure that truly captures what is the actual or real success rate of a business by assessing customer satisfaction.

i. Order picking accuracy: It is a performance indicator to assess the controls set in place to ensure that customers order are shipped accurately so that customers receive correct orders.

j. Dock to stock time: It is used to measure inbound stock deliveries times from receipt of goods (dock) to the processing of paperwork and entering into the inventory (stock).

III. What is the general formula to calculate “efficiency” or “productivity”?

It is calculated by dividing standard labour hours by the actual amount of time worked and multiplied by 100.

The closer the number to 100, the greater the efficiency or productivity of labour.

IV. Warehouse costs are generally measured as a percentage of __________?

Company sales.

V. Warehouse productivity is generally measured per ______ _______ ?

Fulfillment and order accuracy.

VI. How do you conduct a warehouse “gap analysis”?

a. Identify the current state of the warehouse

b. Identify the expected KPIs of the warehouse

c. Identify the current gaps or shortcomings in the warehouse vis-a-vis the identified KPIs.

d. Devise action plans to overcome the gaps and achieve the KPIs.

VII. Which generally has a more efficient (higher performance) warehouse, a union or non-union shop?

A non-union shop warehouse is at a higher efficiency because unions tend to delay decision making and implementation of policies and rules. Unions also expect more wages thus increasing labour costs and reducing overall profitability.

VIII. Do “economies of scale” make large warehouses more efficient than small warehouses?

Yes, because in the long run higher inventory means better storage density and higher order fulfillment percentages thereby increasing warehouse productivity and reducing gaps.