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Discussions about improving warehouse operations are nearly always about efficiency, and seldom relate to effectiveness. What's the difference? There is more than one definition, but my favorite is this: Efficiency is doing things right. Effectiveness is doing the right things.
Typical KPIs in warehouses are measures of efficiency such as units per hour (uph), percentage of overtime hours, claims, and warehouse damage costs. They tell us whether we are doing things right.
But what about effectiveness that relates to the WHY of warehousing? What caused your warehouse to exist in the first place? When was it established? What is its purpose? How well are you fulfilling that purpose?
A distribution center in Chicago that serves a national chain of hardware stores would not exist without its client. Determining effectiveness for this warehouse would measure how well it satisfies the needs of hardware store. KPIs are important, but the only one that really matters is the client's level of satisfaction. Customer satisfaction is a soft measurement, though, and not easily quantified.
Client feedback is essential. One logistics service provider assigned an employee to manage satisfaction surveys sent to each client every month. The survey form required written answers and the warehouse employee followed up with clients who didn't respond. If performance slipped, the warehouse knew about it and could take corrective action before the problem became critical.
Avoid becoming tangled up in KPIs of efficiency. Step back and ask yourself why your warehouse operation exists, and then determine what it takes to continue this existence. Answer the WHY! That is the true measure of effectiveness.
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