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KPIs for Supply Chain Management
KPIs ensure the visibility of business performance and combines objective quantitative and qualitative evaluation. When they are aligned with business goals, they show a path to sharpen the focus on improvement.
To measure the efficiency and cost of our supply chain, we should set up and regularly monitor KPIs that provide the visibility of functional activity as well as the individual supply chain components. The areas which should be measured as functional KPIs are mentioned below:
1. Time Cycle for Cash to Cash flow
This metric for the supply chain is very helpful to calculate the duration of the required time to turn our resources into cash flows. Its process is divided into three main ratios, such as inventory days, receivables days, and payable days.
The time cycle for cash to cash KPI portraits the period required in between the timeline when a business pays cash to its suppliers and the timeline when the cash is received from customers.
2. Order Rate Perfection
Getting insight is critical for supply chain KPIs to operating businesses in multiple sectors. The success rate of delivering orders depends on perfect order rate measurement. which ultimately helps us to find out such issues like damages, delays, inventory losses and inaccuracies.
3. Freight Bill Accuracy
Billing accuracy sometimes becomes critical to profitability as well as ensuring customer satisfaction. To spot detrimental trends and improve our overall shipping accuracy as well as business growth, these metrics are necessary to follow.
4. Outstanding of Days Sales
The day's sales outstanding KPI allows us to measure how quickly and smoothly the revenues are collected or generated from customers.
A low DSO number indicates that it’s taking fewer business days to collect the receivables accounts. On the other hand, the higher DSO level showcase that a company is providing its product on credit to the customers.
This takes more business days to collect the revenue. This process interrupts the cash flow and minimizes profits. So, this method enables us to collect revenue more efficiently.
5. Inventory Turnover
Inventory Turnover is one of the most helpful supply chain KPIs. It focuses on logistics KPIs which helps us to understand the countable time when the inventory has been sold entirely over an individual timeline.
This indicates the efficiency of process strategy, production planning and also increase abilities to ensure proper marketing and sales management.
6. Return on Investment
Every business needs to achieve the best return on its investment for each commercial activity. Return on investment provides a clear report of the profit measured in every currency and investment made in an inventory on average. The metrics are calculated by dividing the profit by the inventory investment on average.
7. Shipping on Time
An important indicator of the time period we intake to ship an order to a client, or customer. This KPI allows us to provide a more accurate shipping time to each product and allows us to optimize our shipping or delivery turnover reduced and boosts satisfaction in customers.
It may seem difficult to understand the measurement process. But the regularity in maintaining them can be proven profitable and useful information to maintain the whole process.