With the advancements of technology continuing to grow, learning how to leverage supply chain metrics and KPIs can drastically improve your business. These metrics can be crucial in analyzing where your business is lacking and what measures need to be taken to strengthen it. These metrics are specifically curated for your business and your needs. Here are the top seven supply chain metrics that can help your business grow.
What Are Supply Chain Metrics?
Prior to diving into the best supply chain metrics, let’s review what exactly a supply chain metric is. This metric is defined by specific parameters used to collect, quantify, and analyze supply chain performance.
Each metric focuses on one aspect of the business to highlight the supply chain’s production within this specific sector. By doing this, business owners are able to quickly see where their supply chain is struggling or succeeding.
Why Are Supply Chain Metrics Important?
These metrics are an important tool that can help you analyze where your business is and compare it to your goals. Moreover, these metrics can be a great way to establish benchmarks within each of your supply chain’s procedures. It allows you to see if there are any bottlenecks and where there is a lag. Lastly, they help you manage your business more objectively and efficiently.
What Are Supply Chain Management Dashboards?
A supply chain dashboard is a platform that reports your business supply chain procedure. This dashboard allows you to closely look at your supply chains key performance indicators (KPIs) and see the areas of improvement. They can track anything from inventory levels to warehouse operations on a single interface.
How Much Do Supply Chain Dashboards Cost?
Dashboards can fluctuate in pricing depending on how in depth the interface is. Majority of these dashboards cost around $100 per month which can change based on the size of your company. However, most, if not all, of these supply chain dashboards provide a free trial period. Moreover, if this expense is not within your spending budget, there are templates online that are free for those who wish to create their own dashboards.
Top 7 Supply Chain KPIs You Need for a Successful Business
Now understanding the basics of supply chain management KPIs, here are some of the top seven metrics that can make your business even more successful.
Perfect Order
If you decide to look at only one metric, this is the key supply chain metric you should be analyzing. The ‘perfect order’ breaks down your fulfillment process and grants you insight into several different aspects of this procedure. This includes on-time delivery, in-full delivery, damage-free delivery, and accurate documentation.
- On-time delivery: Percentage of deliveries completed on-time
- In-full delivery: Percentage of sale deliveries made correctly (i.e. the correct address)
- Damage-free delivery: Calculates the number of sales delivered in perfect condition
- Accurate documentation: Percentage of deliveries delivered with accurate documentation (such as packing lists, labels, invoices, etc.)
In short, the perfect order metric determines your customer satisfaction rate due to tracking your deliveries. How to calculate this KPI is by taking the total number of orders and subtracting it by the number of errors. Once you do that, divide it by the number of total orders and multiply by 100 to get your business’ overall perfect order percentage.
Cash-to-Cash Time Cycle
The cash-to-cash time cycle showcases the number of days it takes for the raw materials you purchased to be sold off. It has three main components of the metric: the days of inventory (DOI), days of payables (DOP), and days of receivables (DOR). These three steps break down where your inventory may be held up prior to receiving your customer’s payment.
How you can calculate your business’ cash-to-cash time cycle is by taking the materials’ payment data and subtracting it by the customer order payment date. A low value is a great sign showing your business is highly profitable. In essence, the shorter the duration, the healthier your company’s operations are.
Freight Bill Accuracy
Shipping your items from the supplier to the customer is a crucial step in customer satisfaction. This metric shows where there is a hold up or an area of improvement within this process. Whether that be the shipper, the warehouse operations, or the carrier, this metric tracks any errors. How this KPI is calculated is by taking the number of error free freight bills and dividing it by the total freight bills. After this, multiply it by 100 to see what percentage of freight bills are accurate in your business.
Days Sales Outstanding (DSO)
Days Sales Outstanding shows how long it takes for your business to collect and generate revenue from your customers. How this metric is calculated is by taking the accounts receivables and dividing it by the sales. After this is completed, multiply the number by days in period.
A low DSO shows that your business is great at collecting the accounts receivables from customers and is a sign of good financial health. However, a high DSO signals the company is struggling to collect these receivables which impacts the business’ cash flow.
Supply Chain Costs
Supply chain costs metric is exactly what it sounds like. This metric showcases all the costs and fees associated with supply chain management such as planning, sourcing, and delivery costs. Moreover, this metric can show where the majority of your funds are going towards within the supply chain process and whether these are crucial components. It is really important to evaluate whether cost reduction in the supply chain will have a positive or negative impact on the process as a whole.
Fill Rate
The fill rate shows you the percentage of customers’ orders that are successfully fulfilled. Not only does the fill rate help you understand the whole process of successful shipments but it also breaks down each of these steps:
- Order fill: Percentage of orders successfully completed on the first shipment
- Line fill: Percentage of order lines successfully delivered on the first shipment
- Unit fill: Percentage of items successfully delivered on the first shipment
This is one of the most popular metrics since it correlates with customers’ perception of the brand as well as satisfaction levels. Moreover, you can benchmark these rates to ensure these orders are delivered successfully the first time around.
Delivery On Time and In Full (OTIF)
Delivery on time and in full (OTIF) gives you a visual understanding of what percentage of your deliveries are accurate and on-time. It includes factors such as whether the product was delivered in good condition, whether the quantities of it were correct, as well as other key factors. If these average rates are on the lower end, this metric will pinpoint which step is lowering your delivery on time and in full performance.
Pick and Pack Cycle Time
The pick and pack cycle time is an overview of your entire supply chain. Essentially this metric analyzes how efficient your supply chain is overall. This is because it tracks the amount of time it takes from the employee picking the item off of the shelf to the item being delivered to the customer. Moreover, you can set up specific parameters within the pick and pack cycle time to customize this metric to your business needs.
Use Supply Chain KPIs To Enhance Your Business Today
Being a business owner, you are faced with specific challenges within the supply chain. In order to enhance your overall supply chain, you need to understand where it is lacking and what areas you need to improve upon. Supply chain metrics can directly pinpoint where these areas of weakness and opportunities are allowing you to run your business more efficiently.
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