In any business, the importance of data is paramount. That's why business leaders, analysts, and demand planners consistently rely on supply chain planning KPIs to improve and evaluate their organization's operations and order fulfillment processing.
Although most businesses understand the value of running an insightful, data-driven enterprise, the sheer number of key performance indicators of supply chain planning make a sizable difference in turning your organization's overall performance into profits.
This guide provides a comprehensive insight into the most valuable KPIs so you can efficiently and quickly improve and assess your supply chain operations.
Importance of Supply Chain Planning KPIs
The latest research indicates that data-driven organizations eventually perform better in the long run, as decision-makers can make more informed decisions, factoring in actual facts rather than guesswork.
The key performance indicators can enable you to access a clear picture of your business and anticipate pain points or areas for improvement to make the necessary adjustments to finetune your business. Let's explore some of the key importance of KPIs for every business:
- Recognize the strengths and weaknesses of your supply chain operations
- Unlocks real-time monitoring of performance and the ability to make quick changes
- With the help of clear and concise data, it provides improved decision-making
- Increases the efficiency of inventory by reducing waste
- resources and capital
- It helps you to enhance customer satisfaction through faster and more effective order fulfillment
- Allows you to locate bottlenecks and ways to improve your overall supply chain process
Value-adding KPIs in Supply Chain Management
On-time delivery
The complexity of evaluating arrival times soars as the number of shipments and destinations you cater to increases. The essential importance of OTD lies in the fact that your products and services are part of other companies' supply chains. There can be a little speed bump at any point throughout the supply chain planning process, causing disruptions down the road.
Purchase order tracking
You should always track the status of your orders on the supply chain planning KPIs dashboard of your real-time supply chain management software. The set of instructions you use will give you the complete picture of any potential issues within your supply chain. Your inventory requirements will be better estimated, and your safety stock will be fully optimized and reduced. Streamlined inventory levels result in lower carrying costs and even lower risk of excess stock.
Inventory to sales ratio
One of the most crucial parts of your supply chain is your inventory. It's vital to track your inventory-to-sales ratio, one of the key supply chain metrics. In this metric, the number of available inventory is compared with the number of inventory actually sold. This will simplify handling your products, ensure higher margins, and let you know if your business can manage unforeseen situations.
Inventory carrying cost
The inventory carrying cost is an essential supply chain optimization strategy benchmark. Carrying costs are usually 20-30% of the entire inventory cost but will differ with your industry and business size. A supply chain management KPI utilizing inventory carrying costs is a more credible and accurate benchmark in every business. The visibility of inventory carrying costs is also a key evaluator when considering your company's decision-making process.
Fill rate
The fill rate metric lets you determine the percentage of product orders fulfilled anytime without going to backorders and stockouts. The outcomes can help you evaluate how effectively your business is fulfilling customer orders, which can be considered when figuring out your overall customer experience and business health. Applying this metric, you can calculate future inventory needs and asses how to reorganize your inventory to manage and handle orders better.
Using this metric, you can determine future inventory needs and assess how to reorganize your inventory to manage orders better.
Backorders
A lot of people look at backorders simply as late orders. However, the backorders are orders that cannot be fulfilled when placed, whether because of inadequate inventory, shipping issues, or other usual supply chain problems. To improve your forecast accuracy, you can implement these critical supply chain planning KPIs into your systems to have a clearer image of your operational processing.
Supply chain cycle time
The supply chain cycle time measures the length of time between placing an order for supplies or raw materials and the delivery of the final product to the end customer. This metric is valuable in assessing how efficiently your business manages its supply chain from beginning to end.
Supply chain costs
Determining your end-to-end supply chain costs is the precursor to locating your ROI. These costs can majorly affect your business, putting a sizable amount of impact on gross margin return on investment. Applying the overall supply chain costs can help you zero in on the difficulties and potential areas for improvement. You can also utilize supply chain costs to evaluate your profit rate against the amount of sales you facilitate.
Cost of quality
The cost of quality plays a pivotal role in performance tracking in the supply chain. Ultimately, every business thrives to deliver excellent quality products to its customers for repeat business. That is why evaluating the cost of quality in every business is extremely important.
Inch-perfect Your Supply Chain with Avercast
Maintaining supply chain planning KPIs is cardinal in this fast-paced business ecosystem. But adapting to modern ways and technological advancements is also essential. Avercast, a division of TransImpact, provides cutting-edge supply chain management solutions that deliver comprehensive visibility across the entire supply chain. Our pioneering technology and years of experience enable you to achieve maximum cost savings and enhanced inventory optimization for your business. To explore more about our progressive solutions, schedule a demo or talk with an expert.
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