What are the most important Supply Chain KPIs?

Supply Chain Optimization

Nobody can deny that the supply chain is the backbone of every business today, and most supply chain teams use Supply Chain KPI to measure their performance. In other words, it’s about a dynamic ecosystem that ensures that goods or services are delivered smoothly, effectively, and consistently from supplier to customer.

When the supply chain is inefficient, ineffective, or disorganized, it can substantially impede our ability to convey value to customers and grow our business. As a result, it’s vital to keep track of and optimize essential supply chain metrics.

There are numerous methods to assess and measure the success of a company’s supply chain management. A company’s performance measurement criteria are often determined by the type of industry in which it operates, so that they cover the most important aspects of the organization’s performance.

KPI (Key performance indicators) for Business

KPIs are a set of quantitative measures that may be used to assess business performance over time. They enable us to track the efficiency with which the organization achieves its objectives.

What is a Supply Chain KPI?

KPIs for supply chain management are measurements that supply chain experts can use to track the efficiency of various supply chain activities. These measurements are used to assess the efficiency and cost of the supply chain. It is necessary to track KPIs to enable cross-functional activity and insight into each component of the supply chain.

KPIs are very critical in measuring success in the following supply chain activities: order processing, inventory management, procurement and supplier management, manufacturing, warehousing, transportation, logistics, and so on.

The idea of raising the standard and setting a higher standard is often used when KPI performance is consistently met or exceeded. KPIs are therefore the most significant part of any business improvement strategy.

List of the kpi’s supply chain

  • On-time delivery: The complexity of estimating arrival times increases as the number of shipments and destinations you serve increase. The importance of OTD lies in the fact that your products are part of other organizations’ supply chain. There can be a hiccup at any point along the supply chain, causing hiccups further down the road.
  • Inventory to Sales Ratio: One of the most important instruments in your supply chain is inventory. It’s imperative to track our inventory-to-sales ratio, one of the main metrics in the supply chain. In this metric, the amount of available inventory is compared to the amount of inventory that is sold. This will make it easier for you to manage your goods and assure high margins, as well as let you know whether your company is capable of handling unexpected scenarios.
  • Purchase Order Tracking: You must track the status of your orders on the supply chain KPI dashboard of your real-time visibility platform. The set of indicators you use here will give you the clearest picture of any potential flaws within your supply chain. Your inventory needs will be better estimated, and your safety stock lowered with real-time visibility. Cheaper inventory levels result in lower carrying costs and a lower danger of obsolete stock. By having real-time visibility, you can better estimate your inventory needs and minimize safety stock. A reduced inventory level means lower carrying costs and a lower risk of items being obsolete.
  • Carrying Cost of Inventory: The carrying cost of inventory is a more critical benchmark for supply chain as a KPI. Carrying costs are usually 20-30% of the whole cost of inventory but will vary together with your industry and business size. A KPI that uses carrying costs of inventory is a much more credible benchmark in supply chain. Carrying costs range between 20-30% of the whole cost of inventory, depending on your industry and the size of your business.
  • Day’s Sales of Inventory: The DSI measures how long it takes for your business to sell its inventory on average. Knowing this metric can be very useful when trying to figure out how efficient your sales are. If your DSI is high, you may not be managing your inventory properly, or perhaps these inventory items are hard to sell.
  • Supply Chain Costs: Supply chain management expenses are one of the most significant performance indicators in the supply chain. The costs can cover things like planning, team management, sourcing, and delivery, and they indicate the efficiency of the different components of the organization. Cutting costs is one of the most commonly used tactics for increasing profits in every organization. By doing so, the corporation can determine if there is room for improvement without increasing sales. When you divide your overall freight expenditures by the number of products you’ve sent in a given time, you’ll get an accurate picture of how well you’re managing these costs.
  • Supplier On-time Delivery: Delivery time is a supply chain KPI that measures the time it takes for an order to reach the customer after it has been dispatched. The order must be properly placed, and the destination must be reached within a reasonable time frame. Your suppliers must be as least as efficient as you are if you want to meet your supply chain’s key performance indicators.

Do not forget to ask about our Managed Supply Chain Optimization services. We will assist your organization in creating a sustainable supply chain system that is more resilient to unexpected disruptions and successful in the business world.

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