Key performance indicators (KPIs) can make or break supply chain operations and it seems as though there are more to choose from every day. To show improvement in operations, many supply chain management specialists co implementing supply chain performance indicators or metrics as one of the simples and least time-consuming activities. The on time shipping rate is key to customer satisfaction. During this time cash is not available for other purposes. To cover this, we need the following KPI. Benchmark:Achieving TEI between 150 and 180 is the best practice in terms of balancing gross margin and inventory. In supply chain metrics, the GMROI offers a clear representation of the gross profit gained for every AED (or $, £, €, ₺) of the average investment made in your inventory: a calculation achieved by dividing the gross profit by the average inventory investment. ITR: COGs / [(Opening Stock-Closing Stock)/2]. By tracking, analyzing, and understanding this stream data on a regular basis, you will be able to prepare for, and avoid, any stock-based calamities in an emergency situation, saving your reputation and cash flow in the process. Cash to cash measures the amount of time operating capital is tied up. Every company today runs on data – the key to using your data is choosing the right metrics for visibility into your supply chain. Here is how freight bill accuracy is calculated: (error-free freight bills / total freight bills) * 100. There is a lot of metrics to keep track in the varies function, but a supply chain should focus the essential or real Key Performance Indicators (KPIs) which will display the most important headlines immediately. actual delivery date – purchase order creation date. Here are some of the key performance indicators that can be very useful for supply chain analytics: Inventory Turnover Inventory turnover is a KPI that measures how well an organization is able to move its inventory. Linking over 4000 businesses in the European motor industry and their global trading partners. TEI helps us to combine the gross margin and turnover. Measuring supply chain performance can be a complex endeavor, but it’s not an impossible one—and the process is greatly simplified once you’ve identified the key performance indicators that matter most to your business. Key performance indicators of supply chain management 1Dr.C.Thirumal Azhagan, 2Jayapriya.B 1Assistant Professor, 2Student Anna University, BIT Campus, Tiruchirappalli _____ Abstract - Supply chain management generates value for stakeholders, industry and customers interacting throughout the supply chain. The longer the average payment period the more efficient the business. Benchmark: For continuous SKUs, keeping IV between 60-70% will provide a good match of demand while 75-80% of IV can be more beneficial for fast-moving SKUs. The higher the perfect order rate, the better, because this KPI has a direct impact on your customer retention and loyalty levels. ITR helps us to measure the number of times we sell or turn our average inventory kept in the warehouse. Supply Chain Management KPI Reports in Excel . The 10 Essential SaaS Trends You Should Watch Out For In 2021, Top 10 Analytics And Business Intelligence Buzzwords For 2021, Top 10 IT & Technology Buzzwords You Won’t Be Able To Avoid In 2021. Supply Chain Key Performance Indicators or KPIs often cause confusion. It is in a company’s best interests to pay its suppliers slowly. KEY PERFORMANCE INDICATORS OF SUPPLY CHAIN MANAGEMENT 2. Manufacturing is an industry typified by countless unique processes and workflows. DOS is the most common KPI used by managers in measuring the efficiency in supply chain. Practically, not all SKUs or brands can be treated equally via aforementioned KPIs. DOS:  Average Inventory / Monthly Demand x 30. SCM seeks to minimize inventory days of supply in order to reduce the risks of excess and obsolete inventory. (Materials Payables/Total Cost of Materials) * Days in Period. By tracking these critical supply chain performance metrics in one initiative space, you will be able to implement initiatives that not only hold maximum value but will also ensure the smooth running and perpetual improvements of your supply chain processes, ensuring that every single cog in the wheel is turning to maximum efficiency - which of course, is priceless. Applying Pareto Principle will help easily categorize SKUs (e.g. A low days sales outstanding indicates a more efficient business. Specifically, they enable you to monitor how effectively your organization is achieving its target goals. The difference between Artificial Intelligence and Machine Learning, 5 tips to avoid the next supply chain disruption, Corona impact on Supply chains overview [updated], Prepare Your Supply Chain for Coronavirus, Distributed Ledger Technology for Supply chain management, Press release: Tradecloud launches Tradecloud One platform, 6 Top tips to achieve true supplier collaboration. (1 – ((total items – shipped items) / total items)) * 100. By drilling down into inventory management logistics, this particular KPI dashboard (which can also be used as an interactive dashboard) will help you deal with unexpected supply chain situations, enhance your stock buying practices, reduce operational as well as financial inefficiencies, significantly improve the accuracy of your and a great deal more. Odette International sets the standards for e-business communications, engineering data exchange and logistics management in the automotive industry. (Number of On Time Items / Total Items) * 100. © Tradecloud - #FocusOnExceptions #ZeroWaste, Artificial intelligence (AI) for supply chain management, – https://www.linkedin.com/pulse/12-key-metrics-supply-chain-management-mamta-sethi-. Thus, managers should also refer to the following KPI. Managing Partners: Martin Blumenau, Jakob Rehermann | Trade Register: Berlin-Charlottenburg HRB 144962 B | Tax Identification Number: DE 28 552 2148, News, Insights and Advice for Getting your Data in Shape, BI Blog | Data Visualization & Analytics Blog | datapine. The number of times that a company’s inventory cycles per year. DOS is the most common KPI used by managers in measuring the efficiency in supply chain. An updated version, entitled “Key Performance Indicators for Automotive Supply Chain Management” (LK03) is now available ready for use by OEMs and Suppliers. Supply Chain KPIs are Essential – The Right Ones! It should not be difficult to determine which KPIs to capture, nonetheless, every industries and environment is unique, it is […] The literature on supply chain management is wide … „The information on this page WILL help you get it right.” Many people get confused about KPIs or Key Performance Indicators in Logistics and Supply Chain operations. DOS: … Concerning the continual growth, evolution, development, and success of your company’s supply, fulfillment, and delivery efforts, supply chain performance metrics are the most invaluable tools available at your fingertips. ((total orders – error orders) / total orders) * 100. That is done through continuous measuring and monitoring their supply chain Key Performance Indicators (KPIs). The supply chain is essentially the backbone of any business: a living ecosystem that ensures the smooth, efficient, and consistent delivery of a product or service from a supplier to customer. One of our most powerful business dashboards, the supply chain dashboard boasts a digestible, functional, and visual representation of all key areas of supply chain performance, from inventory accuracy and turnover to the inventory-to-sales ratio. Supply chain metrics are defined by establishing specific parameters which are used in quantifying and defining supply chain performance. With all the systems and softwares created to facilitate logistics management, ... metrics related to your supply chain. Distributors & manufacturers that keep an eye on the these 4 key performance indicators will reduce inventory levels 1. It is calculated by dividing gross profit by the average inventory investment. Supply chain cycle time indicates the overall efficiency of the supply chain. Benchmark:There is no specific benchmark for ITR. What is a Supply Chain (SC)? The Perfect Order Measure calculates the error-free rate of each stage of a Purchase Order (error in order forecasting for procurement, error in warehouse pickup process, error in invoicing and error in shipping orders etc.). Omnichannel supply chains help businesses sell products through all possible sales channels. Tracking IV on a monthly basis will provide significant clues in terms of aligning inventory level to the optimal level for matching supply-demand, and preventing excessive stock in the warehouse. A higher inventory turnover indicates an efficient supply chain. IV is the percentage of inventory we are projecting to be consumed within the next period. It is calculated by dividing the average inventory on hand (as value) by the average monthly demand (as value) and then multiplying it by thirty, when measuring on a monthly basis. Remember: Today, access to your metrics 24/7/365 is really important, what online data analysis tools can guarantee and ensure that your chances of long-term success increase. By calculating this often, you'll be able to collect revenue faster and more efficiently, which will help boost your bottom line in the long run. This can be represented as the percentage of items, SKUs or order value that is included with the first shipment. Shipping and freighting your items from supplier to warehouse or warehouse to the consumer is vital to the success of your entire operation, and any issue or error can prove harmful with time and investments being wasted. Calculated by dividing the opening stock by the sales forecast for the following period, the IV is a KPI that will help you optimize your inventory levels, give you a greater chance of meeting consumer demand, and prevent you from wasting money on excess levels of stock. 7 Magazine Issues per year of Supply Chain Management Review magazine. Choosing the Right Key Performance Indicators (KPIs) to Monitor your Supply Chain Performance ... explains how digital technologies and cognitive analytics can help you optimize inventory performance. Most organizations are ignoring the importance of analyzing their KPIs, and they stop at measuring and reporting them. Benchmarking Success can also provide a process for the effective deployment of … turnaround time, receiving time, and shipping time to the customer, (and I bet you could think of more “times” to measure!). Unlike traditional software, implementation times, subscription costs and supplier onboarding is fast and simple. Above are just some examples of what kind of key performance indicators you can set to improve efficiency in your supply chain’s management. By tracking this KPI on a monthly basis, you’ll quickly gain an insight into which items in your inventory are poor performers and which are worth investing in more - gold dust in terms of business-based information. IV: Opening Stock / Next Month’s Sales Forecast. It is a well-known fact that, “ people behave based o. Billing accuracy is critical to profitability as well as customer satisfaction, so tracking this particular metric will help you spot detrimental trends, improve your overall shipping accuracy, and ultimately, help your business grow. Benchmark: Achieving GMROI between 200 and 225 is the best practice by means of generating gross profit from the inventory hold for the related SKUs or brands. The return reason supply chain metric offers an astute insight into the various motives causing your customers and clients to return their orders – a piece of information that is priceless to the ongoing success of an eCommerce business. To make rapid decisions in today’s fast-acting environment, we need smart, time-saving, easy to interpret and most importantly decision-supporting key performance indicators (or even better Actionable Insights). A key performance indicator is a value that measures how effectively a department or business achieves its objectives. In the example below, we have collected data focusing on inventory metrics: Inventory-to-Sales ratio, which you can combine with the Inventory Turnover, and clearly see the financial stability of your business. Here are some thoughts to help you with KPIs ( Key Performance Indicators ) in your Supply Chain and Logistics operations. It helps the managers to understand how well the inventory on hand matched the demand. Another metric that indicates how much inventory is sitting around. The shorter the conversion cycle the better, and this invaluable supply chain metric will help you take the right measures to ensure that you can run your business with less money tied up in operations. The metrics can be utilized in the inventory accuracy and turnover metrics, to the inventory-to-sales ratio. KPIs are used at multiple levels throughout the organization to evaluate just how successful a person, team, or business unit is in reaching its specified targets. - Wael Safwat, SCMAO. However, organizations who are product leaders in the market are likely to satisfy with ITR of 3-4 while operational excellence oriented organizations, such as low-cost airlines or wholesalers aim at achieving 8-9 ITR. People love to use buzzwords in the tech industry, so check out our list of the top 10 technology buzzwords that you won’t be able to avoid in 2021. The average time from receipt of materials and payment for those materials. A variant of this is the promised customer order cycle time: requested delivery date – purchase order creation date. Recent studies suggest that 79% of companies with high-performing supply chains earn a revenue growth greater than the average within their sector. Categorization can be based on monthly sales volume, margin percentage or the number of exists from the warehouse. The number of days between paying for materials and getting paid for product. Keep in mind that when it comes onto key performance indicators they all vary. Cost reduction is still … Sum of the longest lead times for each stage of the cycle. It's the supply chains that are competing." This is exactly what the logistics key performance indicators are fo. The KPI’s can be represented as a table ( see Level 1 Metrics) or by contribution to shareholder value. For clarity, in measuring supply chain performance, we should be focusing on: inventory, working capital, and time. The percentage of a customer’s order that is filled on the first shipment. Here is a summary of our top 10 supply chain KPIs we discussed in detail: If you want to track and visualize your supply chain metrics and KPIs with ease, you can try our KPI software for a free 14-day trial! Presented in a digestible pie chart-style format with a key showcasing the primary reasons for return, you will be able to assess your areas of weakness, analyze the quality of critical areas of your supply chain process, and make the kind of improvements that will enhance not only your reputation but your overall level of service significantly. You can explore our supply chain management dashboard in greater detail here. Every business, regardless of service, product, or sector strives to achieve the best return on investment (ROI) for each and every commercial activity it undertakes. Top 6 Supply Chain KPIs: Keep Your Dashboards Simple . Cost-effectiveness key performance indicators Cost-effectiveness KPIs are another important group of indicators that help measure the performance of any supply chain organization. For more data-driven wisdom, check out these great dashboard designs that you can get inspiration from. The next KPI of this particular dashboard is the Carrying Cost of Inventory, followed by Inventory Accuracy and Out Of Stock Items. Essentially, a low, or healthy, DSO number means that it takes a business fewer days to collect its accounts receivable. By gaining this level of insight, you stand an excellent chance at decreasing returns, boosting profits, and improving cash flow as a result. If you continue to use this site we will assume that you are happy with it. Companion Digital Editions. A high rate indicates an efficient supply chain. If you’ve ever seen the flight deck of a modern airliner, you know even with the large multi-function displays located in front of the pilots, that there are still many other gauges and instruments seemingly demanding attention—enough to make you wonder how the crew can possibly monitor them all. The percentage of freight bills that are error-free. A logic behind TEI is to keep high ITR for SKUs or brands generating low margins and to satisfy with medium- or low-level ITR for SKUs or brands generating high margins. Others Metrics for your supply chain : On-time delivery (DOT = Delivery on time). Lead Time for customer and supplier deliveries. The goal in this example is to avoid wasting money, retain customers, and define the stability of a business. Short cycles make for a more efficient and agile supply chain. Thanks to modern data visualization tools you can create stunning supply chain management dashboards with all your needed KPIs with a few clicks. Analysis of this critical metric can help recognize pain points or competitive advantages. Whilst having IV less than 60% indicates excessive stock, IV over 80% is risky in terms of being out of stock as it calls for Kanban-Pull system. And if your supply chain is inefficient, ineffective, or fragmented, it could seriously hinder your commercial prospects. The percentage of items, SKUs or order value that arrives on or before the requested ship date. By calculating your on-time shipping rate and comparing it to other competitors within your industry, you will be able to create a clear management reporting practice, see where you stand, and take the appropriate action to improve it over time - this will result in a boost in brand authority as well as an increased bottom line - so it’s important. Some KPIs work better for specific supply chains or industries, while some may be applicable across the board. We have collected the most important supply chain metrics for you. (error-free freight bills / total freight bills) * 100. A measure of how quickly revenue can be collected from customers. Which ones to use?… How many to use?Sadly, it’s not such an easy question to answer.Of course, they need to be SMART—Specific, Measurable, Achievable, Relevant, and Time-phased—but this may too rudimentary a set of rules to ensure KPIs are useful. The time it would take to fill a customer order if inventory levels were zero. Billing accuracy is key to profitability and customer satisfaction. The perfect order rate measures the success of your ability to deliver orders incident-free, which will ultimately help you iron out issues such as inaccuracies, damages, delays, and inventory losses. Key performance indicators (KPIs) are a set of quantitative metrics that can help you gauge your business’ performance over time. 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