Business success is a multi-factorial process, depends mainly on your supply chain.
Business with a high-performing supply chain has a great impact on their business revenue and growth.
70% of industry professionals predict that the supply chain will be a key driver of better customer service before the end of 2020. (Accenture, 2018)
And in this article you will know how and why.
Importance of high-performing supply chain
The goal of a well-managed supply chain at any organization is to achieve higher profits and better customer experience that leads to customer satisfaction.
Which reflects an important core of any business, representing the supply chain system.
So, take your time to design and choose the different phases of your business supply chain very well.
But how?
KPIs to evaluate supply chains
As we mentioned, the aim of any supply chain is to achieve higher profits and customer satisfaction!
How could we measure these parameters?
1. Perfect order or Service Rate
One of the most important factors, perfect ordering or providing your service on-time, damage free with professional documentation will end up with customer satisfaction.
This step needs a cycle management to detect the timing and details of each order.
2. Cash to Cash Cycle Time
It means the number of days or duration from paying to your raw materials to collect money after selling your final product.
3. Fill Rate
Fill rate is a crucial step to measure customers’ satisfaction.
It represents the number of orders that are successfully completed without second, third or another shipment.
It could be calculated by the formula: ((Total Number of Items – Number of Shipped Items) / Total Number of Items) * 100
4. Customer Order Cycle Time
Another insight that detects your supply chain responsiveness is the customer order cycle time, which indicates the period of time between order placement day by the consumer to the delivery day.
And could be calculated by the formula: Actual Delivery Date – Purchase Order Creation Date
5. Inventory Days of Supply
The number of days your inventory can sustain without restocking again is called “Inventory Days of Supply”
What is the importance of this KPI?
It helps you detect and track the amount of stock and goods in your warehouse.
6. Inventory Turnover
Another important KPI that enables you tracking and measuring the efficiency of your production processes, operations of sales, and the efficiency of your order fulfillment.
Inventory Days of Supply could be calculated by the formula:
Inventory Turnover Ratio = Cost of Goods Sold / {(Opening Stock – Closing Stock) / 2}
7. On-time Delivery
Delivering your product at the right detected timing is a very critical point, resulting in customer satisfaction.
So, you have to develop a well-managed process from the first step of ordering to the delivery point.
Conclusion:
Supply chain KPIs enable you to track, evaluate, and control your process from collecting the raw materials to stocking and delivering your product or service at the right time with the highest quality.
So, make sure to apply these KPIs on fixed intervals and to make decisions based on the results and statistical data you obtain.
And always remember that poor supply chains mean a low-performing business with an unsatisfying revenue.
