Supply chain management is a complex process that can be difficult to track and measure. However, tracking it is essential to ensuring your company runs as efficiently as possible. Without tracking and measuring your supply chain key performance indicators (KPIs), you’re flying blind and could lose money without realizing it.
Whether you're a manufacturer, procurement expert, or packaging engineer, one of your most critical responsibilities is to track crucial supply chain performance metrics. KPIs provide an instant snapshot of how well your procedures are working. They provide insights into whether specific operations need to be adjusted or improved to ensure overall efficiency. This blog post will look at five crucial KPIs you can use to measure and analyze your supply chain performance.
The Importance of Key Performance Indicators in Supply Chain Management
Evaluating key performance indicators is critical to success in your organization. KPIs in supply chain management allow you to measure customer demand, your supply chain processes' effectiveness, and the company's overall health. These metrics offer a valuable scorecard you can use to measure progress, make adjustments, and maintain competitiveness. They aid in trend analysis and help you identify potential areas for improvement. For example, customer demand KPIs can be used to guarantee that customers’ orders are completed on time. Additionally, KPIs are useful in validating business models before they’re launched on a large scale.
Stay on Top of These 5 Key Supply Chain Metrics
Supply chain management KPIs are crucial tools that supply chain experts use to gauge performance and pinpoint opportunities for improvement. Below are the five main supply chain metrics you can use to stay ahead of the competition.
1. Planned vs. Actual Inventory
Inventory management is an integral part of supply chain management. The comparison between your planned and actual inventory can reveal the effectiveness of your inventory control. A company’s inventory management is often judged by how close actual inventory levels are to the planned levels.
At the beginning of a product’s life cycle, you should create estimates based on past performance, market forecasts, and customer demand. These planned levels provide a baseline for the inventory you will manage throughout the product life cycle. The aim is to maintain the planned inventory at the end of the cycle. However, inaccurate forecasts, damages, and changes in customer demand may lead to a deviation between planned and actual inventory levels.
Understanding the difference between these inventory levels is essential because it affects profitability, customer service, and other aspects of the business. Knowing the difference can help you make better stock-level decisions, allowing you to adjust your inventory management strategies. When these two levels match, you can have supply chain certainty.
2. Turn and Dwell Time
Turn and dwell time can be used to measure the efficiency of a supply chain. Dwell time refers to the amount of time a carrier waits before processing orders for pickup and delivery. It's a vital on-time delivery metric, reflecting the total time required to move freight from one point to another. High dwell times can lead to increased costs and shipping delays. It's important to track your turn and dwell time because it affects how shipments reach customers, impacting customer satisfaction and your business’s reputation.
3. Inventory Distribution
Inventory distribution measures how efficiently you handle raw materials and other items. It helps you monitor your stock levels in a particular warehouse and the speed at which distributors can replenish the inventory. Do you know the distribution of your stock throughout different locations? This helps you keep track of your stock levels and identify inefficiencies based on customer purchases. For example, distributors could track lead times and reorder points to reduce potential lags in replenishment.
You can use data-driven analytics to improve your inventory distribution. You can analyze sales data and use predictive analytics to forecast future demand and adjust your distribution across multiple locations. Data analytics provide all the inventory distribution information you need to track your supply chain performance.
4. Pick List
A pick list is an internal document containing a list of items for any given order. The pick list must accurately reflect the customer's order; otherwise, the company risks shipping the wrong items. This internal document helps keep track of stock keeping units (SKUs), which are codes that identify specific products and allow internal teams to track items from production to delivery.
5. Cycle Count
Companies use cycle counting as a check and balance to ensure that their physical inventory levels match their inventory records. This approach involves routine counting and documenting the adjustments for particular products. This supply chain management KPI is crucial because it helps businesses monitor their inventory accuracy and track losses. Cycle counts can provide a quick way to check for discrepancies. They also help identify supply chain management issues, such as customer returns or order fulfillment errors.
An error revealed by this metric may predict further errors for other items in the warehouse. Cycle counting is less disruptive than a comprehensive physical inventory count, which may require you to shut down production, shipping, or other business operations.
Gain Greater Insight Into Your Supply Chain Operations
Supply chain metrics can sometimes be challenging to track. However, tracking supply chain KPIs is essential to a smooth operation. The five KPIs discussed in this post are important metrics that will help you track and analyze your supply chain performance.
By tracking the right KPIs, you get insight into how well your business is performing and can identify areas for improvement. Doing so will allow you to better manage your customer demand, inventory levels, and distribution efficiency. Tracking the right KPIs leads to a better and more efficient operation that will help you remain competitive.
Don't let poor supply chain management hurt your bottom line. Surgere will help you develop and deploy solutions to your supply chain challenges. We leverage Internet of Things technology and blend tagging, and our software gives you real-time intelligence that drives better operational decisions. Contact us today to learn how we can help you optimize your supply chain operations.