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.
Today, we are going to take a closer look at supply chain metrics and why they matter for your business. You will find out why you need to add supply chain management software development to your business processes and what things you need to pay special attention to.
7 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 just choose, measure and employ the needed metrics to boost your business.
Most of the supply chain specialists say analytics is crucial to decrease costs. Here are some things you may consider for improving your supply chain efficiency:
Perfect Order Index
This metrics shows how flawless your process is. It is complex: POI includes the information about each component of the process multiplied by one another. For example, if there are 4 stages to evaluate, and each of them demonstrates impressive results of 98%, the entire process will have only a 92% rate.
Calculate the POI every 3 months, to measure your progress and improvement.
Supply Chain Cycle Time
In this case, you are going to measure how long it takes to complete the customer’s order from the very beginning until successful delivery. It is quite useful: SCC time demonstrates how flexible, simple and fast your processes are. It allows to discover potential issues at any stage and get rid of them in a timely manner.
C2C time is the time between you sending your money to a supplier and getting your revenue back from a customer. To calculate C2C time, you need to take into account days of inventory (DoI), days of payables (DoP) and receivables (DoR). Here’s the formula:
C2C = DoI + DoP – DoR
There is an opinion that the shorter C2C cycle is, the higher the revenue may be.
This type of metrics describes how satisfied customers’ demands are. This is actually a number of needs you can satisfy with your in-stock products.
The secret of positive fill rates lies in a complete understanding of your available inventory. The more precisely you and your team understand what you have in stock, the better you can organize the processes.
Freight Bill Accuracy
Your operations’ success depends on how well the products are shipped from a supplier to a warehouse, and from a warehouse to a customer. Thus, you need to make sure these processes are correct and effective.
How to calculate it? Freight bill accuracy is the ratio between the number of correct freight bills and the total number of bills.
In case if you need to find out how many times per year your entire inventory is sold, you need to measure inventory turnover. This is the time between getting the products from a supplier and selling the last of them.
Effective inventory turnover depends completely on your niche and market specifics. Some companies change their inventory more often, others are satisfied with low turnover.
However, a low inventory turnover may be a sign of weak and ineffective sales, so keep an eye on it.
There may be multiple reasons why your customers return your products, and you should be aware of every single one of them. Collect feedback and build a chart of return reasons to:
- Get a more detailed picture of your weaknesses;
- Analyze the quality of each stage of your process;
- Fix possible issues.
Although supply chain metrics open many attractive opportunities for those who measure them, 63% of companies don’t use any technology to keep an eye on the supply chain performance. This is another reason for you to follow our tips and start collecting information about your supply chain with certain sorts of metrics. This is your key to comprehensive operations’ analysis; this is your chance to cater to customers’ needs in a better way and multiply your revenue.
What do you think of metrics useful for the supply chain? Share your thoughts and experience.