8 Supply Chain Metrics & KPIs You Need For A Successful Business
If you're running an eCommerce business, then you know that keeping track of your supply chain metrics is crucial to your success. After all, if your supply chain isn't humming along smoothly, it can be pretty difficult to make a profit. Here are eight key supply chain metrics that you need to be tracking. Don't let your business falter – make sure you're keeping an eye on these metrics!
What Are Supply Chain KPIs?
Before constructing your supply chain KPIs, you must first select the specific system performance necessary for tracking activities. Order correctness, inventory turnover, inventory-to-sales ratio, and inventory speed are among the indicators that offer helpful information.
In essence, these KPIs serve as a reference point for tracking your company's operational measures and determining how well it meets its goals. It also allows you to generate future estimates based on your current progress.
Your KPIs will make it simpler to monitor business choices connected to growth and business growth, as well as enhance your industry's order fulfillment and shipment operations or warehouse administration. They'll point out any flaws, enabling you to leverage your capabilities to improve your supply chain.
8 Supply Chain Metrics & KPIs
1. Perfect Order Index
This measure is straightforward to comprehend, yet it might be tough to manage regularly because it includes several variables linked to processing and fulfilling orders to clients. To put it another way, the perfect order rate is the proportion of orders that are supplied in whole, on time, without mishap, and with complete and precise paperwork. Since it directly affects customer experience, many firms see this as the most significant key supply chain performance indicator (KPI).
2. Cash-To-Cash Time
The cash-to-cash (C2C) cycle, also referred to as cash conversion, tracks how long it takes a corporation to transfer money to suppliers and receive money from consumers. One compound measurement is the C2C cycle, which comprises three supply chain measurement techniques: days of inventory, payables, and receivables.
C2C standards vary widely, but one research found that best-in-class organizations, irrespective of industry, get a cash conversion cycle of less than a month. Money tends to spend less time controlling others and more time in your main activities when the process is faster. In 75 percent of situations, a survey of over 22,000 publicly listed companies found a direct association between shortened C2C cycles and increased profits.
3. Perfect Order Rate
This metric is quite simple to understand, although it can be difficult to track on a routine basis simply because it incorporates a handful of variables related to processing and delivering orders to your customers. Briefly stated, the perfect order rate represents the percentage of orders delivered in full, on time, without incident, and with accurate and complete documentation. Many organizations see this as the most critical supply chain key performance indicator (KPI) because it directly impacts customer satisfaction.
4. Inventory Days Of Supply
Executives have traditionally shown a strong propensity for keeping inventory levels low. This indicates a trend toward lean implementation and the most efficient use of capital resources. If your cash is locked up in stock, resting on a warehouse shelf, it can't be used for anything else. There has been a change in mindset over the last 18 months, owing an insignificant portion to supply chain interruptions caused by the coronavirus epidemic.
However, a low score for this statistic is a clear sign that you're operating a lean business. To determine inventory levels of supply, multiply your stock on hand by your average everyday inventory utilization. As previously said, there may be valid economic reasons for keeping more significant stock levels, exceptionally if more supply chain disruptions are foreseen.
5. Fill Rate
The fill rate, also called the demand satisfaction rate, is the percentage of satisfied consumer demands without shipping delays or missed sales due to stock unavailability. Understanding your fill rate is crucial since it reflects the deals you can recoup or better customer service if your inventory management improves.
Accessibility to inventory data is one approach to strengthen. You and the company sales team will be better equipped to dispatch correct, complete, and timely purchases if you and your sales team better understand the current stock. This will improve the customer experience.
6. Inventory Turnover
Inventory turnover is strongly aligned to inventory days of supply as both indicators address whether the organization keeps more stock than it requires. Begin by calculating the cost of products sold during a specific period (e.g., a month, quarter, or year.) Then divide by your typical inventory level throughout the same period. In this scenario, a high number often indicates that you're handling inventories quickly and successfully.
7. On-Time Delivery
Faster delivery times are much more critical than ever in today's fast-paced world when almost every organization is trying to satisfy client demand despite supply-chain unpredictability. The ability to deliver things quickly is becoming a more crucial aspect of purchasing for both businesses and consumers. Customers will go to someone else if you can't supply what they want when they require it.
On-time delivery is often defined as the proportion of orders fulfilled on or before the scheduled delivery date. This has the advantage of being straightforward; you either fulfilled the order on time or didn't. The on-time delivery percentage is calculated by dividing the number of orders delivered on time by the total number of items guaranteed to consumers.
8. On-Time Shipment
This measure is highly similar to the on-time delivery metric with one minor exception. On-time shipping is a metric that gauges the proportion of orders delivered on time, as the names imply. Why is there a distinction? Because the disparity between delivery and on-time shipping suggests a transport and logistics issue. This may not be very important for businesses that operate in a tiny geographic area. On the other hand, transport and logistics are much more crucial than ever in an increasingly international economy.
Supply chain KPIs can assist you in assessing your company's financial health. They may also provide you with valuable information regarding your warehouse management, allowing you to make more informed choices faster.
The key to a successful eCommerce business is having an efficient supply chain. We've given you 8 metrics and KPIs for measuring your current success, so make sure you're tracking the right data points! If this sounds overwhelming or if it's not clear what these numbers are telling you, don't forget that Simplify Your eCommerce Logistics experts are always happy to help out with consulting services. So reach out today – knowledge truly is power when it comes to logistics in eCommerce!