The supply chain is an essential component of your company’s success. The system is responsible for the efficient and seamless delivery of products or services you provide directly to your customers. And if any issue occurs due to poor supply chain management, it harms your entire business. Look closely at supply chain metrics and why they matter for your business.
You will discover why you need to add supply chain management software development to your business processes and what to pay special attention to.
20 Supply Chain Metrics to Keep an Eye on
Supply chain metrics measurement is the process of identifying the particular parameters that describe supply chain performance. By collecting and analyzing key metrics, you get valuable opportunities:
- Detecting all the inefficiencies and learning how to avoid them;
- Defining your strengths and highlighting them for your customers;
- Creating a business development plan based on those facts;
- Setting clear goals and achieving them.
And what is crucial, no investments are required. You choose, measure, and employ the needed metrics to boost your business. Most supply chain specialists say analytics is crucial to decrease costs. Here are some things you may consider for improving your supply chain efficiency:
Remember: You must always have data. This data aggregation service gives you unexplored access to data, improving your marketing potential. We will examine the top 20 Supply Chain metrics and their application.
Supply chain costs vs. sales
We’re also adding cost analysis related to sales to our supplier chain list. The indicator calculates your sales costs as a percentage of your sales and measures how much you spend compared to ‘everything.’ Using these Supply Chain metrics, your company can conduct an accurate spending analysis and create systems to help you achieve savings. Optimizing the supply chain means lowering costs as much as possible. Still, in this case, as I said earlier, it is vital to cut costs wherever this is practical rather than reduce the number.
Pick & pack cycle time
Using the supply-chain performance measurement, you can assess how efficiently the supply chain is divided and grouped by specific lines. Each metric within this metric aims to quantify how long it takes to take a product from its shelf until it gets packed. You will know the delays once you have set your targets and monitored your production process. You can therefore use targeted actions to fix the issue and decrease the time to market throughout the process.
Days sales outstanding (DSO)
Days Sales outstanding KPI measures the speed at which your organization collects and generates revenue. A low DSO number means the business has fewer days to pay the invoice. A higher DSO level demonstrates that a company is offering its goods to customers using a credit or taking longer to collect revenue in a tangible sense, which may affect cash flows and reduce profits. By often calculating this amount, you can increase the efficiency of the revenue and thus improve the bottom line.
Inventory to sales ratio
Inventory-to-sales ratio is an essential measurement for your manufacturing process. The metric measures inventory compared to real quantities for selling and is expressed in ratios. Such a metric can be helpful for companies that want to increase their profit margin and help you know what is going on in an unexpected situation when you need to adjust stock. To achieve healthy ratios, you must find ways to achieve them properly. If you want your ratio to be less than 10%, you must reduce the ratio.
The list of the supply chain metrics could hardly be full without the Delivery time metric. Delivery time is a KPI of the supplier chain that measures the time required to complete the delivery process at the customer. Orders must be correctly prepared, and the destination must arrive within an agreed period. And customer experience will affect the overall customer experience: nobody loves waiting for shipments for a month. It’s logical for suppliers to reduce the supply chain management KPI to ensure better information for the customer about the delivery of the goods or the product.
Our inventory cost lists are updated. The time and space allocated to your inventory are vital for maintaining healthy supply chains. While these costs differ from stockyard to stockyard, it’s crucial to measure this indicator periodically and evaluate it to identify potential and reduce unnecessary costs. Its operation consists of several expenses, including labor, warehouse lease, utility, equipment, material handling systems, supply orders, and storage costs.
Gross Margin Return on Investment (GMROI)
Regardless of service, product, and industry, every industry focuses on obtaining maximum return to investors (ROI) on all commercial activities. A consistent, solid ROI is essential for an effective eCommerce business strategy. The GMROI accurately represents a percentage gain for a single AED or an average dollar investment for each of your products. The calculated value is divided between the average profit and gross profits.
Supply chain costs
The cost indicator is an important indicator of supply chain performance which indicates relevant costs on supply chain management. Costs can be a plan or a team management plan and show how efficient the company is. Increasing profits for businesses is one of many effective strategies. It can determine the potential for improvement and minimize sales. Obviously, this must be evaluated before the cost cuts are implemented in a supply chain.
Reasons: Supply chains measure the factors that cause a return customer to return their orders – information that will ensure an effective eCommerce operation in the long run. Featuring a digestible pie diagram with a key showcasing the primary motivation of return – a measurable measure – your supply chain process can help identify your weaknesses and critical areas for improving performance — the quality and efficiency of your product.
One of the most valuable Supply Chain metrics is Cash-to-Cash Cycle which helps to determine how long it takes to convert resources into real cash flows. Working on three core ratios – day of inventory (DOI), day of payable (DOP), and day of receivable – the cash-to-cash time cycle KPI shows the duration needed between these times. This valuable supply chain measurement helps you take the correct steps to keep your business running at a lower cost of operation.
This valuable Supply Chainmetric helps to determine how long it takes to convert resources into real cash flows. Working on three core ratios – day of inventory (DOI), day of payable (DOP), and day of receivable – the cash-to-cash time cycle KPI shows the duration needed between these times. This valuable supply chain measurement helps you take the correct steps to keep your business running at a lower cost of operation.
Freight Bill Accuracy
Shipping and freighting your goods from supplier to warehouse to the consumers is essential for your entire business, and a failure can result in wasted time and money. Billing accuracy is crucial to profit and customer satisfaction; tracking this metric can help spot negative trends, improve shipment accuracy, and ultimately increase business growth. How can freight bills be accurately calculated?
Inventory Days of Supply
Though not the most comprehensive or panoramic of Supply chain metrics, Inventory Days of Supply is handy since it gives you a reasonably accurate estimate of the time needed for your stock to run out without replenishment. Daily, you can monitor stream data, analyze stock-based issues and prevent stock-based problems, which helps save your reputation and generate profits.
Next on this list is the fill rate. This key metric can indicate the percentage of your customers’ orders fulfilled for the first time. The fill rate in the supply chain is an essential indicator of product quality and customer satisfaction. Line or online orders or individual item deliveries determine your supply-to-demand rate.
Perfect Order Rate
It is a key supply chain KPI for businesses across many industries. Perfect Order Rates measure your success in providing timely and incidentless order fulfillment and help you resolve problems affecting your order. As a result, the more perfection you get, the more you will have to improve your customer retention and retention rates.
Inventory velocity (IV)
The Inventory velocity or IV is a crucial supply chain graphical measure providing an overview of how much inventory will be used over the next quarter or year. This KPI will help you optimize your inventory to meet customer demand.
The on-time shipping is significant to the delivery timeline for a product or service; it is an excellent indicator of when to send an order to a client or partner to determine the best delivery time for your product.
Nevertheless, each logistic business is unique and may require establishing the specific supply chain metrics for their software. We offer the best solution and an experienced development team if you need to customize your supply chain platforms.