Supply Chain Strategy KPIs

Supply Chain Management KPIs

Supply Chain Management KPIs

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People often get confused between Supply chain strategy and supply chain operations. They think both are the same. However, in reality, the supply chain strategy is broader. It deals with the quality, cost, time, and delivery of the product. You may ask what the perfect supply chain strategy is. The answer is it does not exist.

An approach is ideal only when it meets the demand of your customers and helps you to reduce the cost of the supply chain and increase the profit. You cannot follow a single strategy for your all operations.

After considering all the supply chain strategy, you will have to pick one and apply it. After implementing the strategy, you will have to check if your supply chain strategy is working.

To measure the effectiveness of your procedure, you need easy, time-saving, and decision supporting key performance indicators (KPIs). It helps a company to point out in which part they need improvement

Some of the significant KPIs of supply chain strategy are:

1. Perfect order measurement

It calculates how many orders are error-free. When a company produces products or delivers the product, some of them may not meet the expectations of their customers. The product can be damaged, or it may arrive after the due date. Keeping the Perfect order rate high should be one of the primary goals of an organization.

Even if one doesn’t apply any other KPIs for their supply chain management, they should use this one. On-time delivery, in full delivery, damage-free delivery, these are the components of Perfect order. The on-time shipment has different meanings for the various participants of a supply chain.

For the producers, it means receiving raw materials from the suppliers; for others, it means delivering products to the end customers. On-time delivery helps to keep the customers satisfied by providing the product at the right time.

2. Fill rate

Fill rate shows the ability of an organization’s ability to fulfill the demand of a consumer or customer from available stocks of an inventory. Fill rate includes order fill, line fill, unit fill. Fill rate tracks the percentage of successful order fulfillment on the first attempt.

The main target of this KPIs is to make it easier to track all the functions of a company. One can choose any of the fill rates, or they can apply all of them. They have the option to choose according to their convenience.

3. Inventory turnover ratio and days of supply

The higher the inventory turnover ratio is, the more efficient the company is. It shows the ability of an organization to sell off its product and increase revenue. In supply chain management, the word “days of supply” is used quite frequently.

So what it means is how long it will take a company to sell out their available stock, assuming that the rate of near-future sale will be the same as the recent sales rate.

The managers need to calculate the Days of supply to predict the future demand of a particular product. The target of this KPI is to minimize the inventory days of supply to a certain level.

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