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What metrics should you track to improve material handling operations?

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Material handling operations are essential for efficient and safe movement of goods and materials in manufacturing facilities. However, without proper tracking and analysis of key performance indicators (KPIs), you may not be able to optimize your processes, reduce costs, and improve quality. In this article, we will discuss what metrics you should track to improve material handling operations and how to use them to identify and solve problems.

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1 Cycle time

Cycle time is the time it takes to complete one cycle of a material handling operation, such as loading, unloading, transporting, or storing. It measures the productivity and speed of your material handling equipment and staff. You can track cycle time by using timers, sensors, barcode scanners, or other devices that record the start and end of each cycle. By comparing cycle time across different operations, locations, and shifts, you can identify bottlenecks, delays, and inefficiencies and take corrective actions to reduce cycle time and increase throughput.

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2 Utilization rate

Utilization rate is the percentage of time that your material handling equipment and staff are actually used for their intended purpose. It measures the availability and capacity of your resources and how well you are managing demand and supply. You can track utilization rate by dividing the actual usage time by the total available time for each resource. For example, if a forklift is used for 8 hours out of a 10-hour shift, its utilization rate is 80%. By monitoring utilization rate, you can optimize your resource allocation, scheduling, and maintenance and avoid underutilization or overutilization of your equipment and staff.

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Stuart Gardner

Director Operational Excellence ◆ $1.2B Under Transformation ◆ Reduced Lead Times > 50% ◆ Increased GM from single digit to over 40%
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In my experience, the utilization is best measured by not usage time, but time spent doing something useful. Imagine a powered industrial vehicle delivering a load of material to a location, then returning to its start point empty. A watchful eye would not that the useful time was only 50%, not 100% on the machine's hour meter. It is important and necessary to design material handling routes for the greater efficiency of moving material usefully.

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3 Inventory accuracy

Inventory accuracy is the degree of match between your physical inventory and your inventory records. It measures the quality and reliability of your inventory management and control systems. You can track inventory accuracy by conducting regular inventory audits, cycle counts, or physical counts and comparing the results with your inventory records. For example, if you have 100 units of a product in stock but your records show 120 units, your inventory accuracy is 83.3%. By improving inventory accuracy, you can reduce inventory errors, shrinkage, waste, and obsolescence and ensure that you have the right amount and type of inventory to meet customer demand.

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Alaa Jradi

Senior Warehouse Officer | Warehouse Management
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Facilitate physical inventory counting with barcode scanning: Barcode helps you track items among thousands of SKUs. You can create barcode labels with customized attributes, manage your barcode listing in one view, and get product information via scanning barcode. This helps your staff sort out, find locations, and count products more easily.

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Gregg Miner

Helping clients advance value delivery and advancing the understanding leans intent.
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If you count 120 and the system says 100 your accuracy is zero not 83.3%. You have zero accurate counts. The example would be the opposite if count 100 and system says 120? Am I therefore 120%? By this method I could have a system that has zero accuracy yet the average result is 100%. Absolutely wrong way to measure this.

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Stuart Gardner

Director Operational Excellence ◆ $1.2B Under Transformation ◆ Reduced Lead Times > 50% ◆ Increased GM from single digit to over 40%
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Inventory accuracy is physical count and accurate location. Taking a view that physical count and system count match or they don't will drive greater improvement. The same is true on location accuracy. The material must be in the correct location or it is not good. The driver for improved accuracy is hit or miss; it is an attribute, not a variable.

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4 Damage rate

Damage rate is the percentage of goods and materials that are damaged or lost during material handling operations. It measures the safety and quality of your material handling practices and equipment. You can track damage rate by recording the number and value of damaged or lost items and dividing them by the total number and value of items handled. For example, if you handle 1000 items worth $10,000 and 10 items worth $100 are damaged or lost, your damage rate is 1% by number and 1% by value. By reducing damage rate, you can lower your material handling costs, increase customer satisfaction, and protect your reputation.

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5 Customer service level

Customer service level is the percentage of customer orders that are fulfilled on time and in full. It measures the effectiveness and efficiency of your material handling operations in meeting customer expectations and requirements. You can track customer service level by recording the number and value of orders that are delivered on time and in full and dividing them by the total number and value of orders placed. For example, if you receive 100 orders worth $20,000 and 90 orders worth $18,000 are delivered on time and in full, your customer service level is 90% by number and 90% by value. By increasing customer service level, you can enhance customer loyalty, retention, and referrals and gain a competitive edge.

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Gregg Miner

Helping clients advance value delivery and advancing the understanding leans intent.
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Value is not important to the customer on time AND complete is based on quantity and timeliness. If either one is wrong it’s a zero. If I ship 90 out of 100 units it’s not 90% complete, it’s 0% complete. We should never inflate the metric to look good internally when the customer is disappointed and problems are not being solved.

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6 Cost per unit

Cost per unit is the total cost of material handling operations divided by the number of units handled. It measures the profitability and efficiency of your material handling processes and how well you are controlling your expenses. You can track cost per unit by adding up all the direct and indirect costs of material handling, such as labor, equipment, maintenance, utilities, and overhead, and dividing them by the number of units handled. For example, if your material handling costs are $5,000 and you handle 500 units, your cost per unit is $10. By lowering cost per unit, you can increase your profit margin, cash flow, and return on investment.

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Gregg Miner

Helping clients advance value delivery and advancing the understanding leans intent.
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I disagree as operators have zero input on cost they don’t determine pay scales or any other cost. The right metric is some type of units/labor hour. This can be improved and is a measure of productivity.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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Gregg Miner

Helping clients advance value delivery and advancing the understanding leans intent.
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I would also add distance traveled, OEE of any major equipment and cycle counting gross count accuracy. For accounting measuring net $ accuracy of inventory is needed for the balance sheet but for operations the accuracy has to be based on accurate counts/total counts doesn’t matter if the count is + or - it’s still wrong and therefore a defect in the process.

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What metrics should you track to improve material handling operations?

1

2

3

4

5

6

7

1 Cycle time

2 Utilization rate

3 Inventory accuracy

4 Damage rate

5 Customer service level

6 Cost per unit

7 Here’s what else to consider

Manufacturing Operations

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What metrics should you track to improve material handling operations?

1

2

3

4

5

6

7

1 Cycle time

2 Utilization rate

3 Inventory accuracy

4 Damage rate

5 Customer service level

6 Cost per unit

7 Here’s what else to consider

Manufacturing Operations

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