Blogs, Data, Data, E-fulfillment
Turnover rate, one of the most important KPIs within logistics
6 December, 2018
5min. reading time
In this period full of holidays, specific product groups are more popular than others. Think of sweets and toys, for example. In many households, these goods end up underneath the Christmas tree this month. It is possible that your customers trade within these categories, which resulted in you rearranging your warehouse. But what underlies this rearrangement? Why is it important to know that a radio-controlled car gets demanded more than a microwave in December? And if you look at your own situation, can you base this on figures?
Logistics KPI: turnover rate
This is where the concept of turnover rate comes into play. Just a quick reminder: the turnover rate of stock is the number of times your stock is replaced by the same products. In other words: how often is this stock traded in and out every year? You can determine the turnover rate on your total warehouse, but also on customer or customer item level. Products with a high turnover rate, or fast moving goods, are replaced more often than articles with a low turnover rate, slow moving goods. In the before mentioned example, the R/C car is the fast moving good and the microwave the slow moving good. How do you determine which articles belong to which category?
Calculating the turnover rate for logistics service providers
The turnover rate, also known as the circulation frequency, is a pretty straightforward KPI. For trading companies, it requires quite a bit of math, but fortunately for logistics service providers it does not. The only thing you need to know is when the goods came in and when they moved out again. The difference in days is the turnover rate, which is therefore expressed in days.
In many cases the average turnover rate is calculated over a period of one year. But when taking the holidays example in mind, insights about a certain period can also be very important. And this is exactly where it gets tough. Switching between customers, articles and periods make it a labor-intensive task. But this is certainly not a reason to ignore this task.
Why is this important for you?
A study that Boltrics has commissioned revealed the 6 most important KPIs for logistics service providers. The turnover rate was one of them. You may wonder why. Firstly, the efficiency of your warehouse. If fast moving goods are stored in the back (far away from the docks) of the warehouse and the slow moving goods in the front, this efficiency reduces extremely. (Un)loaders and order pickers have to make considerably more meters in a work day, which costs unnecessary time and energy.
Secondly, insight into the turnover rate is important for business insights in general. Do you get a new customer that is similar to an existing one? Based on the turnover rate, you can make substantiated tariff agreements during negotiations. Even if your occupancy rate threatens to go to a maximum, you can determine whether this will be a problem or not, based on the turnover rate.
With data from the past you are confident in your decisions, because you can make well-considered choices. How will you set up your warehouse and which pick strategy do you apply? But also: who are your best customers or which trends showed last year? Data related to the turnover rate offers a lot of insights from which you can learn. But where do you retrieve this data from and how do you carry out the analysis?
Get insight into the turnover rate
You can find a lot of relevant information in your own administration. But if one colleague keeps track in his personal Excel overview and the other has a paper file in his chest of drawers, data is quickly fragmented. As a result, sources that you want to consult are rarely complete. And if they are, then it is quite a challenge to compare the correct data with each other. Especially if you want to do this for your entire warehouse, specific customers and customer articles. Then it becomes an error-prone and time-consuming task.
Store data centrally and analyze with Power BI
To avoid fragmentation of data, you can use an organization-wide system in which all employees consult the same data. This way you keep data together and create an overall picture of the activities in your organization. For the analysis part, there is Power BI. This analysis tool explains sources in clear dashboards and reports, so that you get insight at a glance. No more complicated calculations. You click on what you want to see and voilà: Power BI does the rest. In combination with our solution, where we have delivered logistical KPIs for your pre-programmed dashboards (including the turnover rate), you have always the correct information at hand. Making an informed decision is done in no time.