Benchmark Operational Performance with WERC’s Latest DC Measures Study and Report

WERC Matters
Annual survey of key warehousing and distribution metrics helps facility managers, directors, supervisors and C-level bosses compare their operations against others to improve performance.
michael mikitka
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For 18 years, the Warehousing Education and Research Council (WERC) has conducted an annual benchmarking study of the key warehousing and distribution metrics used by operations professionals. Its objective? To eradicate bad warehousing practices by giving practitioners a tool to compare their own performance against others in the field and to chart their own course of improvement.

The most recent report, DC Measures 2021, is based on a survey conducted in January of this year. Participants submitted their actual levels of performance for 2020. Produced with support from Kenco, Yale Materials Handling, Optricity, and our research partner, DC Velocity, the study was again conducted and reported by:

  • Joe Tillman, Founder of TSquared Logistics
  • Karl Manrodt, PhD, Professor of Logistics and Director of the Master of Logistics and Supply Chain Management Online Program at Georgia College & State University
  • Donnie Williams, PhD, Clinical Assistant Professor and Executive Director of the Supply Chain Management Research Center at the University of Arkansas

The trio reviewed the data across multiple demographic areas, including industry, type of operation, customer, served, business strategy and company size. With the pandemic-related supply chain upheavals, the findings across the categories of customer, operational, financial, capacity/quality and employee/safety (plus perfect order and cash-to-cash cycle management) illustrate many of the challenges these operations faced.

To hear the research team discuss the DC Measures 2021 findings in an MHI cast podcast and during their WERCDX Conference presentation, visit werc.org/dcmeasures.

Report Highlights

The top four industries represented were wholesale/distributor (29%), third-party logistics (3PL) warehouses (23.9%), manufacturing (18.5%), and retail (15.8%). Companies of all sizes participated, distributed among annual sales of less than $100 million (29.6%), between $100 million and $1 billion (46.1%), and greater than $1 billion (24.3%).

The top four facility types represented include omni-channel (30%), regional (22%), centralized (15%) and wholesale (15%). Omni-channel saw a significant uptick, noted the researchers, likely due to the intense focus put on providing a more seamless, end-to-end customer experience in 2020. That is, using stores—in addition to distribution centers—as another source of order fulfillment for customers shopping via app or online for curbside pickup.

Among respondents, 73% are picking cases rather than pallets. With 2020’s e-commerce surge, this finding was not surprising and is expected to continue. Further, 49.8% of participants’ primary customers are either a retail firm or an end customer, with operations most likely to be providing replenishment to a distribution center or store, or direct-to-consumer. Therefore, it naturally follows that the top business and operations strategy is customer service (40.8%).

e commerce
NMEDIA/SHUTTERSTOCK.COM

Annually, the researchers rank the top 12 key operational metrics that are used most often by respondents. In the DC Measures 2021 study, they were dominated by a focus on capacity and customer:

  1. Average Warehouse Capacity Used—2020 Rank: 1
  2. Order-picking Accuracy (Percent by Order)—2020 Rank: 3
  3. Peak Warehouse Capacity Used—2020 Rank: 5
  4. On-time Shipments—2020 Rank: 7
  5. Percent of Orders with On-time Delivery—2020 Rank: 4

These findings suggest that with the shift to e-commerce shopping, space is at a premium and maximizing capacity utilization is critical. The researchers noted that this correlates with an increase in the number of 3PL survey respondents, as more retailers sought additional space and assistance to cope with 2020’s variable demand swings. As more supply chains are hamstrung by delays and shortages of key parts and components, capacity will likely remain strained as manufacturers must store almost-finished goods.

Within the top 12 metrics, five of them are customer focused, specifically those related to the perfect order index (POI), the measurement of the four primary components of a perfect order: delivered on-time, complete, damage free, and with correct documentation. This, again, is likely due to the uptick in e-commerce and need to meet heightened customer expectations in a competitive marketplace.

Measure and Compare

Annually, the benchmarking data is reported using a “quintile” format, which evaluates the data on a five-point maturity scale. This structure reflects the degree to which respondents have achieved “best practice” within a given metric. To be considered “Best-in-Class,” performance levels must fall within the top 20% of all respondents.

The latest findings show how challenging it is to maintain consistent performance year-over-year, and particularly during the disruptions of 2020. Best-in-Class operations only improved performance in four measures, maintained in 15, and declined in 17, while median performers improved in six, maintained in 11, and declined in 19.

Practitioners can use the findings in DC Measures 2021 to better understand which of the operational metrics will help their facility (or their 3PLs’ facilities) best meet the overarching goals of their organization. For those who have identified areas of improvement, but need additional guidance in implementing best practices, WERC offers two resources:

  • The Warehouse Manager’s Guide for Benchmarking, which explains benchmarking and its importance, how to choose the right metrics and analyze operational performance, and communication techniques to achieve the desired results.
  • Warehousing and Fulfillment Process Benchmark & Best Practices Guide, a comprehensive explanation of the qualitative warehousing best practices metrics explored in the annual DC Measures report using the same quintile format.

A complimentary copy of the highlights of the DC Measures 2021 report can be downloaded at werc.org/highlights. The full report is available at $175 for WERC members and $550 for non-members; survey respondents received the full report for free.

Want to participate in a future survey or learn more about the report? Contact me at mmikitka@werc.org or visit werc.org/dcmeasures.