The supply chain metrics serve as the core foundation of any modern business. A dynamic ecosystem ensures that goods and services are consistently, smoothly, and efficiently delivered from suppliers to clients or customers. Your business will suffer if your supply chain is too fragmented or lacks structure and vision.
Hence, it is critical to optimize and track key supply chain KPIs with pinpoint accuracy. The metrics can also aid in the development of reasonable standards for a variety of critical processes and activities. Therefore, using the correct KPIs can help you run your business more efficiently, intelligently, and profitably.
This article will go through the most critical supply chain KPIs. It will also give you valuable insight into 20 essential parameters that you should monitor to enhance your logistics procedures.
What are Supply Chain Metrics?
Businesses define supply chain metrics using specific factors. Also, quantifying and defining supply chain performance is done with these factors. Consequently, using these figures, you can calculate inventory accuracy, turnover, and the inventory-to-sales ratio.
Supply chain performance indicators can be a valuable tool for tracking the success, evolution, growth, and sustainability of your company’s supply and fulfillment operations. As a result, you can improve the overall performance of your business.
Why is Supply Chain Metrics Important?
Supply chain-based metrics are critical to your company’s core logistics strategies. According to studies, the global supply chain analytics market will be worth $16.82 million by 2027.
Analytics for supply chain decision-making can assist businesses in increasing operational, tactical, and strategic efficiency. The top benefits and reasons why KPI tracking is so important in supply chain management are listed below.
A. Cohesion & Communication
Communication is essential for a successful supply chain. These metrics and KPIs enable centralized access to and insight into valuable data. They will also aid in the improvement of communication and collaboration. Also, they take care of the efficient management of your inventory as each product moves from your warehouse to its final destination.
The supply chain will run more smoothly, efficiently, and reliably once everyone involved understands their roles and has access to the metrics required to maximize their potential.
B. Insights & Focused Data
Because of the increasing number of platforms to analyze, fulfillment processes in the information age can be complicated. KPIs can also assist you in focusing on the most critical data. The metrics display what is truly important in a visually appealing and easily understandable format from a central location.
It can also help you manage your logistics operations more effectively and identify emerging issues such as inventory gaps, delivery bottlenecks, etc. As a result, you can detect hidden trends and prevent them from escalating into major problems.
C. Flexibility & Responsiveness
Key performance indicators (KPIs) for supply chain management are critical. Hence, they will provide you with all of the information you require to remain responsive and flexible at all times. In all situations, supply chain management necessitates complete flexibility. Therefore, you must immediately correct any problems that may arise in multi-stage supply chains.
Moreover, you can also make confident-in-the-moment decisions. Thanks to target data visualizations that are simple to analyze at a glance. It can also help you achieve greater business growth by meeting or exceeding your clients’ fulfillment expectations.
Top 20 Supply Chain Metrics
We’ll examine the top 20 supply-chain KPIs that can help your company, and you succeed in the future.
1. Cash-to-Cash Cycle
This crucial supply chain measure can assist you in determining how long it takes to turn your assets into cash flows. The three core ratios that comprise the cash-to-cash cycle KPI are the day’s inventory (DOI), days of payables (DOP), and days of receivables (DOR).
2. Accurate Freight Bills
Timely delivery of goods from supplier to warehouse or consumer is critical to your company’s success. Any inaccuracy that could lead to a loss of time or money is a waste of both. Billing accuracy is essential for profitability and fulfilling customer demands. Hence, tracking this metric will assist you in identifying negative trends and improving shipping accuracy. Ultimately, helping your business to grow.
3. Perfect Order Rate
It is an important KPI for supply chain companies that work in various industries. The perfect order rate is a metric that measures how well you deliver orders without any issues. For profitability and customer pleasure, billing accuracy is crucial. Hence, you can use this indicator to spot poor patterns, improve shipment accuracy, and help your business grow.
4. Days Sales Outstanding
Days Sales Outstanding (DSO) is a KPI that assesses your ability to collect revenue from clients fast. A low or healthy DSO means fewer number of days for firms to manage their receivables. On the other hand, a higher DSO indicates that the corporation sells its product on credit to its clients. It can also cause a reduction in cash flow and profitability. Also, you will be able to earn revenue more rapidly and efficiently due to this.
5. Turnover of Inventory
It aids firms in determining the frequency with which their merchandise is sold over time. For example, marketing and sales management, manufacturing planning, and process strategy are all predicted by this model. You can also compare your on-time shipping rates to others in your industry by calculating them.
6. Gross Margin Return on Investment (GMROI)
The ability to generate a positive return on investment is critical to the success of any business. The Gross Margin Return on Investment (GMROI) is a supply chain metric representing the gross profit per AED invested in average inventory. In this calculation, gross profits are divided by the average inventory investment. You can also monitor this KPI every month to see which items are performing well and which ones are worth investing in.
7. Warehousing Costs
A healthy supply chain requires a well-thought-out cost distribution strategy, adequate inventory space, and time management. For example, labor costs, warehouse rent, electricity bills, equipment prices, material costs, and expenditures linked to supply and order are just a few of the costs associated with warehouse management. It is also critical to be well-informed on the operations of your warehouse facility to keep expenses down.
8. Costs of Supply Chain
One of the main performance measures is supply chain expenses. They show the costs of supply chain management that are relevant. This cost might be tied to things like planning, managing people, sourcing, and delivery. Also, it will show how particular efficient areas of the business are. Cost-cutting is a common profit-generating tactic. Hence, it enables the organization to find areas where it can improve.
9. Time for Delivery
Customer service is the key to this supply chain KPI. It determines how long it takes from the time an order is dispatched to the time it is delivered to the customer’s door. It is essential that the order is prepared appropriately and should reach the destination within a reasonable amount of time. Therefore, you can offer special delivery services to reduce delivery times and increase customer satisfaction.
10. Return Reason
This supply chain metric provides valuable insight into what causes changes in customer orders and clients to cancel orders. For eCommerce businesses, this is critical information. It will also enable you to uncover your flaws and analyze the quality of your supply chain process. Also, it helps to make changes to improve your service. With this knowledge, you’ll have a better chance of lowering costs, increasing earnings, and enhancing cash flow.
11. Inventory to Sales Ratio
This ratio compares the amount of inventory available for sale to the amount that has been sold. This indicator will also tell you how your company manages unforeseen scenarios and help you alter the stock to maximize margins. Therefore, the ratio should not be too high, affecting inventory turnover rates, and it is essential to balance the two. A dashboard will also automatically update the data and allow you to monitor the performance in real-time.
12. Fill Rate
It will show you the number of orders completed in the first round. It has a direct relationship with brand reputation and customer happiness, essential drivers of commercial growth. The number of orders delivered, on which lines they were delivered, and which items were supplied for the first time can benchmark your fill rates. You may also boost your fill rate by rapidly identifying the fulfillment component in any fill rate variations you observe.
13. Pick & Pack Cycle Time
It breaks down your entire supply chain cycle into discrete lines, giving you a precise picture of its efficiency. The dashboard designs each KPI metric to measure the time it takes for an employee to pick up an item from the shelf and complete the packaging procedure.
You’ll be able to discover where there are delays or weak points in your supply chain once you’ve set your goals and started tracking your progress. As a result, you’ll be able to take focused activities to fix these issues, shortening your cycle time.
14. Freight Cost Per Unit
Freight cost per unit is a crucial supply chain metric for scaling firms. It will provide you with a thorough understanding of the economic viability of delivering your goods. This add-on for the supply chain metrics dashboard calculates freight costs based on the number of items transported. Processes that people can not conceive properly or take too long can lose you money, time, and client loyalty. Hence, this KPI will aid in the prevention of these issues.
15. Use of Packing Material
The utilization of packing materials is next on our essential supply chain KPIs list. Inefficient packaging can result in waste as well as a financial drain. Therefore, this supply chain-scannable KPI will enable you to confidently track how many packing materials are used for each line of your pick-and-pack operation. You will also save money and boost your brand’s reputation by assessing your packaging tactics before they become too convoluted.
16. Delivered On Time and In Full (OTIF)
It will provide you with all the details of your delivery performance over a set period. Meeting the expectations of your consumers and clients is critical to the success of your organization. Hence, OTIF is a crucial measure of supply chain operations efficiency that will assist you in completing your orders on time.
This KPI also focuses on whether the product was provided according to agreed-upon quality standards, fulfilled in the correct quantities, and dispatched to the agreed-upon destination to help you constantly improve your performance.
17. Supply Chain Costs vs. Sales
This metric evaluates the cost of your supply chain as a percentage of sales, and it will show you how much money you are spending on your income. This supply chain management indicator will also help you do a thorough spend analysis and discover areas where you can save money.
When you want to optimize your supply chain, your primary goal is to save costs. However, it would be best if you didn’t cut expenditures solely to lower the number of employees.
18. Inventory Velocity (IV)
Inventory velocity measures how much inventory is consumed in the coming quarter or timeframe. Divide the open stock by the projected sales for the next period to get the IV. This KPI will also assist you in optimizing inventory levels, better meeting consumer demand, and avoiding excessive stock holdings.
19. On-time Shipping
The KPI tool is an excellent indicator of how long it takes to ship a specific order to a customer or partner. This KPI will allow you to set a shipping standard for each product. As a result, you’ll be able to improve shipping and delivery, cut turnaround time, and boost customer satisfaction.
20. Days of Supply in Inventory
Inventory days are a helpful supply chain statistic, despite not being the most comprehensive or complete. If the companies cannot renew the stock, it will compute how long it will take to run out. In case of any emergency, you will be able to plan for and avoid stock-based problems. It will also protect your reputation as well as your income flow.
These supply chain-centric KPIs will help your business become more assertive, competent, and efficient. Making your supply chain seamless from beginning to end can help your company develop faster. Thinklytics will help you with the proficiently designed and developed supply chain KPI dashboards. For more details, connect with us at email@example.com.