Modern businesses have a supply chain as their backbone. It is a dynamic ecosystem that ensures consistent, smooth, and efficient delivery of goods or services from suppliers to clients or customers.
Commercial growth will be affected if your supply chain lacks structure and vision or is too fragmented. It is crucial to optimize and monitor relevant supply chain metrics with pinpoint accuracy.
Supply chain metrics can help you establish solid benchmarks for many essential processes and activities. You can make your business more efficient, intelligent, and ultimately more profitable by using the right KPIs.
This post will discuss essential supply chain KPIs. It will also provide essential insight into 20 key metrics that you need to track in order to improve logistics processes. With the help of modern KPI Software, we will show you how to maximize these supply chain performance metrics to create professional supply chains dashboards.
What are Supply Chain Metrics?
Specific parameters are established to define supply chain metrics. These parameters are used for quantifying and defining supply chains performance. These metrics can be used in inventory accuracy and turnover metrics as well as the inventory-to-sales ratio.
Supply chain performance metrics can be a valuable tool for monitoring the success, evolution, growth, development, and sustainability of your company’s supply and fulfillment efforts. You can identify inefficiencies in your supply chain by collecting, curating, and analyzing key supply chain metrics (SCM).
This will allow you to capitalize on your strengths, as well as establish goals that will assist your supply chain with its success. There are many KPI examples that you can choose from for your optimization and assessment. We have chosen a list that will allow you to identify bottlenecks and ensure sustainable growth.
Also read: 13 Types of Supply Chain Management Tools
Top 20 Supply Chain Metrics
We’ll be looking at the top 20 supply-chain metrics that will help your business and you achieve a bright future.
1. Cash-to-cash Cycle
This invaluable supply chain metric can help you determine the time it takes to convert your resources into cash flows. The cash-to-cash cycle KPI is a combination of three core ratios: the day’s inventory (DOI), days of payables(DOP), and days of receivables (DOR). This visualizes the time it takes for a business to pay cash to its suppliers and receive cash from customers. This invaluable supply chain metric will allow you to take the right steps to ensure your business can operate with less money.
2. Accuracy of Freight Bills
It is crucial to your operation’s success that your goods are shipped from supplier to warehouse, warehouse, or consumer. Any error that could result in your investment is lost time and money.
To be profitable and satisfy customers, billing accuracy is crucial. Tracking this metric will help spot negative trends, improve shipping accuracy, and ultimately help your business grow. Here’s how freight bill accuracy can be calculated:
3. Perfect Order Rate
This is a critical KPI for supply chain businesses that operate in many sectors. The perfect order rate is a measure of how successful you are at delivering orders without any incidents. This will help you to address issues such as delays, inaccuracies, and inventory loss. Because this KPI directly impacts customer retention and loyalty, the higher the ideal order rate is, the better.
4. Days Sales Outstanding (DSO).
KPI Days Sales Outstanding (DSO) measures your ability to quickly collect revenue from customers.
A low or healthy DSO number simply means that it takes businesses less time to collect their accounts receivables. Higher DSO levels indicate that the company is selling customers its product on credit. This can slow down cash flow and reduce profits. This will allow you to generate revenue more quickly and efficiently which will increase your bottom line.
5. Inventory Turnover
The logistics KPI is one of the most useful supply chain KPIs. It helps businesses understand how often their inventory has been sold within a given time frame. This is a great indicator of production planning, process strategy, and fulfillment capabilities, as well as marketing and sales management. You can calculate your on-time shipping rates and compare them to others in your industry. This will allow you to make a clear management report practice and identify areas for improvement.
6. Gross Margin Return on Investment (GMROI).
No matter what service, product, or sector, every business strives for the highest return on investment (ROI), for each commercial activity that it undertakes. A solid ROI is essential for eCommerce success.
The GMROI is a supply chain indicator that shows the gross profit for every AED (or $PS, EUR, or L) of your average inventory investment. This calculation is done by dividing the gross profits by the average inventory investment. This KPI can be tracked on a monthly basis to quickly get an overview of which items are performing well and which ones are worth investing in.
Also read: 9 Technology to Make Smart Warehouse
7. Warehousing Costs
The warehousing cost is another important supply chain metric (SCM metric ) that we continue to add to our list. A healthy supply chain requires a well-planned cost distribution system and efficient management of inventory space and time. Although these costs can vary from one warehouse to the next, it is important to keep an eye on this indicator and to review it frequently to identify potential savings and reduce unnecessary costs.
Management of a warehouse facility involves many costs including labor costs, warehouse rent, utility bills, equipment costs, and material costs, as well as information-handling system costs and costs related to supplies and ordering.
To keep costs down, it is important to be well-informed about the operations of your warehouse facility. This will allow you to cut unnecessary costs, implement steps to improve operations efficiency, and adjust them as needed. A professional online reporting tool can also help you to collect your data on a regular basis. You will be able to rely on your reports and make quicker, more accurate business decisions.
8. Costs of Supply Chain
Supply chain costs are one of the key performance indicators. They show relevant costs associated with supply chain management. This cost can be related to planning, managing people, sourcing, delivery, etc., and will indicate how efficient certain parts of the company are. A business’s profit is critical. One strategy that is frequently used is to reduce costs. This allows the company to identify areas for improvement and not have to increase sales.
It is important to assess the impact that cost reductions will have on all aspects of the supply chain. If your transportation costs are high, and you choose to increase the speed and weight of trucks, it could lead to accidents that can have potentially disastrous consequences for your business. It is important to remember that cutting costs in one part of your supply chain can lead to higher costs in the next.
This is why careful analysis is necessary. To determine if your supply chain KPI is stable and healthy, you can compare yourself to other competitors or make adjustments to remain competitive. We recommend that you consult our financial graphs guide to learn more about the costs and financial side of your business.
9. Supply Chain Costs vs. Sales
We continue our list of supply chain metrics and KPIs with additional cost analysis that is connected to sales. This indicator calculates your supply chain cost as a percentage of sales. It will provide you with an indication of how much money you are spending relative. This supply chain management indicator will allow you to do a good spend analysis and identify potential savings opportunities.
Optimizing your supply chain means reducing costs wherever possible. However, it is important that you do not cut costs just to reduce numbers. It is very simple. If you reduce costs in one part of your supply chain and then increase them in another, the entire process will be useless.
You can compare your business to other businesses and research industry benchmarks to determine if you are able to successfully compare your sales with your costs. This will allow you to determine if your percentage is too low, or too high. It is important to compare your data against the industry averages.
10. On-time Shipping
The KPI tool is a great indicator of the time it takes to ship a certain type of order to a customer, client, or partner This KPI will enable you to establish a benchmark shipping date for each product. In turn, this will help you optimize shipping and delivery, reduce turnover time, and increase customer satisfaction.
11. Delivery time
The KPI of supply chain delivery time focuses on improving customer service. It measures how long it takes from the moment an order is shipped until the delivery arrives at the customers’ door. It is important that the order be properly prepared and that the destination is reached within a reasonable amount of time. The general service and impression that you leave on your customers may be compromised. No one wants to wait 9 months for their goods to arrive.
It is sensible to decrease this supply chain management KPI, and give clients more precise information about when the products or goods will be delivered. It is better to say that delivery will take 4-5 business days than 1-5 business days. It is also a good idea to indicate the delivery time.
To reduce delivery times and increase customer satisfaction, you can offer special delivery services. You can also include supply delivery metrics to your performance dashboard focusing on the supply chain and monitoring it closely. For a more detailed look at a supply-chain KPI dashboard, please see the bottom.
12. Return Reason
The return reason supply chain metric provides valuable insight into what causes customers and clients to cancel orders. This is a vital piece of information for eCommerce businesses. The data is presented in a simple pie chart format, with a key that highlights the main reasons for return. This will allow you to identify your weaknesses, assess the quality of your supply chain process, as well as make improvements that will improve your service. This level of insight will increase your chances of reducing returns, increasing profits, and improving cash flow.
13. Inventory To Sales Ratio
The inventory to sales ratio is a key supply chain indicator. It is vital to monitor this metric as inventory is an important tool in your supply chain. This ratio measures the inventory available for sale in relation to the actual amount that has been sold. This metric will allow you to adjust the stock to maximize margins, and it will also tell you how your company handles unexpected situations.
The main point here is that you must know how to properly balance the ratio to maintain a healthy level. The ratio should not be too high as it can affect inventory turnover rates. It is important to balance the two. A dashboard maker will help you create an interactive inventory KPI. This will automatically update the data and allow you to monitor the performance in real-time. You will also be able to adjust your future strategies to ensure the optimal ratio for your business.
14. Inventory Velocity (IV)
The inventory velocity is a key supply chain KPI. It shows how much inventory is expected to be consumed in the next quarter or period.
The IV is calculated by dividing the open stock by the forecast sales for the next period. This KPI will help you optimize inventory levels, meet consumer demand better, and avoid stock holdings that are too high.
15. Inventory Days of Supply
Although this is not the most comprehensive or complete supply chain measurement, inventory days are particularly useful. It will calculate how long it will take to run out of stock if it isn’t replenished. This stream data can be tracked, analyzed, and understood on a regular basis. You will be able to prepare for and avoid stock-based disasters in an emergency situation. This will save your reputation and cash flow.
16. Pick & pack cycle time
This supply chain performance measurement gives you an exact gauge of how efficient or inefficient your entire supply chain cycle is, breaking it down into specific lines. Each KPI metric is intended to quantify the time taken from the moment an employee picks up an item off the shelf until the packaging process is completed.
Once you have established your goals and begun tracking your supply chain progress, you will be able to see where there are delays or weak points in your supply chain. This will allow you to take targeted actions to address these issues, reducing your cycle time.
17. Fill rate
Fill rate is the next supply chain management metric. This important metric is an essential addition to any supply chain KPI dashboard. It will provide you with a clear indication of how many orders were fulfilled successfully the first time (or the first shipment).
Fill rate is one of the most important metrics to evaluate supply chain performance. It directly links to brand reputation and customer satisfaction levels, which are significant drivers of commercial growth. Your fill rates can be benchmarked based on how many orders were delivered, which lines were delivered and what items were delivered the first time. You can quickly identify the fulfillment factor in any discrepancies you find in your fill rates and increase your fill rate.
18. Delivered on time and in full (OTIF)
OTIF is a powerful supply chain KPI example. It will provide you with a comprehensive view of your delivery performance within a given timeframe. Your business’s success depends on meeting your customers’ and clients’ expectations. OTIF is a key indicator of supply chain efficiency and will help you ensure that your orders are completed on time.
This KPI helps you to consistently improve your performance by focusing on factors like whether the product was delivered according to agreed quality standards, fulfilled in the correct quantities, and shipped to the agreed destination. This metric can be used to identify the reasons your OTIF rates are low and help you make strategic decisions about how to improve your internal strategy or find reliable suppliers.
19. Freight cost per unit
Supply chain management metrics are crucial for sustainable improvement. Freight cost per unit is one example. Freight cost per unit is a key supply chain indicator for scaling businesses. It will give you a solid insight into the economic viability of shipping your products.
This supply chain metrics dashboard add-on will calculate your freight costs divided by how many units you have shipped. This metric can be calculated using any unit relevant to your business. Poorly planned or long-winded processes can cost you money, time, and customer loyalty. This KPI will help to avoid these problems.
20. Use of packing material
Next on our list of key supply chain KPIs are the use of packaging materials. Inefficient packing can not only cause waste but also eat into your budget. This KPI scannable to the supply chain will allow you to confidently track how many packing materials are being used for each line of your pick and pack process.
You can keep track of your packaging usage by setting a benchmark (in this case, 300g) and prevent any problems from getting out of hand. You will save money and improve your brand’s reputation by reviewing your packaging strategies before they become too complicated.
Why are Supply Chain Metrics Important
After we have covered the examples of supply chain key performance indicators and the dashboards that bring these to life, let’s reflect on the question Why are supply chain metrics so important.
For many reasons, supply chain-based metrics are essential to your company’s core fulfillment strategy and logistics strategy. Studies show that by 2027, the global supply chain analytics market will be worth $16.82 million. Analytics for supply chain decision-making can help businesses improve their operational, tactical, and strategic efficiency.
These are the top benefits and reasons KPI tracking is so crucial in supply chain management.
Communication & cohesion
Communication is the key to a productive supply chain. Communication is key to a successful supply chain. Once everyone involved has a better understanding of their roles and has access to the metrics necessary to maximize their potential, the supply chain will run more smoothly, be more efficient, and be more reliable.
These metrics and KPIs provide unified access and insight into valuable data. They will help improve communication and collaboration and ensure that your inventory is economically managed while each product moves from your warehouse to its destination without any problems.
Supply chain insights & focused data
Fulfillment processes in the information age can be complicated because of the increasing number of platforms and sources to analyze. When managing busy supply chains, wading through a growing amount of data can quickly become a difficult task. KPIs can help you focus on the data that is important.
Supply chain-based metrics show what is really important from one central location in a visually appealing format that can be easily understood. Supply chain-style metrics can help you manage your logistics operations more effectively and identify rising issues such as inventory gaps, shortages, bottlenecks in delivery processes, etc. You can spot hidden trends and prevent them from becoming major problems.
Flexibility and responsiveness
KPI performance indicators for supply chain management are crucial. They will provide you with all the information you need to be responsive and flexible at all times. Supply chain management requires 100% flexibility in all situations. You must be able immediately to correct any problems that may arise in supply chains with many stages.
As customer requirements change and the business landscape changes, it is important to ensure that your supply chain is strong. Supply chain-focused metrics give you the intelligence and confidence to make strategic changes to your processes, based on the environment around you. You can also confidently make in-the-moment decisions thanks to target data visualizations that you can easily analyze at a glance. Supply chain-based metrics can help you achieve greater business growth by meeting or exceeding your clients’ fulfillment expectations.
You will be able to make accurate projections and make informed decisions under pressure. This will allow you to optimize your supply chain to ensure consistent success in a highly competitive market. This will allow you to maximize your growth and profitability.
These essential KPIs that are supply chain-centric will help your company grow stronger, smarter, and more efficient. You can accelerate your business’s growth by making your supply chain seamless from start to finish. It all starts with the right insight.