Is your supply chain strategy costing your business productivity and profit?
The movement of goods is essential for any business, but inefficiencies can lead to high costs, lost sales opportunities, and decreased customer satisfaction. You can learn how supply chain KPIs influence your operations by leveraging data-driven insights.
Real-time data analytics gives you a comprehensive image of your supply chain processes. And KPIs help you identify opportunities to streamline those processes, increase efficiency and optimize profits. These data-backed insights allow you to make informed decisions about supply chain operations.
This article will explore how supply chain KPIs can benefit your business processes.
The Importance of Key Performance Indicators in Supply Chain Management
Supply chain key performance indicators are metrics that business experts use to track the effectiveness and efficiency of the most crucial activities within a supply chain. These indicators gauge the health of the supply chain over time.
Some examples of supply chain metrics include on-time delivery, inventory velocity, inventory-to-sales ratio, fill rate, perfect order rate, and supply chain cycle time. They measure the success of activities like warehousing, manufacturing, order processing, transportation, procurement, and logistics.
The following are the importance of KPIs in supply chain management:
- Analyze Patterns Over Time: Logistics KPI helps you identify trends and patterns that might otherwise be hidden in the data. Tracking these indicators over time helps spot improvement areas and identify potential problems in the supply chain.
- Measure Progress: Transportation and warehouse management involves multiple logistics that require regular evaluation. Supply chain KPIs allow you to measure the progress of your operations and identify areas where changes are necessary. For instance, you can monitor warehouse management using storage costs and adherence to inbound schedules. To measure progress in transportation, you can evaluate freight costs, delivery reliability, and fleet utilization.
- Track Supply Chain Health: Your supply chain's health is mainly tested during disruptions. KPIs are useful in analyzing, controlling, and optimizing logistic processes in dire situations while meeting customer expectations.
- Make Adjustments: When a particular activity is not performing optimally, leading indicators act as a scorecard on what strategy adjustments to make to remain on track.
Main Ways in Which Supply Chain KPIs Impact Business Processes
Logistics KPIs impact business processes in many ways. This is because supply chain management involves converting raw materials to finished products and distributing these products to the end consumer. For business processes to be efficient, effective, and organized, logistics KPIs are vital in conveying value to customers and growing businesses.
Here are the five key ways supply chain metrics can impact your business processes.
1. Enhances Inventory Management and Control
One of the most important logistics KPIs is inventory management. It allows businesses to keep track of their inventory levels. Inventory KPIs such as inventory turnover and perfect order rate can help measure the efficiency of your inventory. Businesses can take greater control of their stock levels with these metrics.
This KPI also measures how regularly your inventory is sold and replaced in a given period. A high inventory velocity leads to higher turnover and greater efficiency.
The carrying cost of inventory is the sum of all expenses incurred while holding inventory, such as taxes and warehousing. It gives you control over inventory costs. Perfect order rate allows businesses to monitor the quality of their inventory and control when damage is on the rise. Inventory management KPI ensures the right amount of product is available to meet customer demand. Additionally, it increases forecast accuracy.
2. Streamlines Operations and Order Fulfillment
Order fulfillment is an important KPI logistics that allows you to measure the efficiency of the delivery process. Customer order cycle time, fill rate, and cash cycle time are among the most important metrics in streamlining delivery operations.
The order cycle time shows how long it takes to process an order from customer placement to product reception. It drives business performance through time delivery by streamlining production, inventory, and fulfillment operations.
The fill rate captures how well the actual delivery is made. It’s the ratio of total orders filled versus total orders requested. It measures how quickly you can fulfill a customer’s order. This metric provides insights into the success of the production centers in managing inbound inventories to meet customer delivery dates.
Cash cycle time is the time between order placement and payment. It helps track how fast you receive payments for their services.
3. Drives Cost Savings and Efficiency
Cost savings and efficiency are two of the most important roles of KPIs in the supply chain. They help businesses save labor costs, fuel, warehouse rent, and other logistics operations. For instance, you can monitor labor costs by analyzing productivity or cost-per-unit production to identify areas for process improvement.
KPIs also measure outbound supply chain performance, such as fuel consumption, vehicle miles, and delivery time. Surgere helps minimize costs and maximize efficiency.
4. Improves Customer Satisfaction and Service
Monitoring different supply chain metrics helps understand the current performance of various operations. When operations are not optimal, adjustments are made to improve customer service.
For example, on-time delivery rates let you know if you meet customer expectations. It measures the percentage of orders delivered when expected. When the supply chain cycle time is high, you can reduce its length by analyzing the KPIs to understand which process has the longest lead times.
5. Enables Data-Driven Decision Making
The value of tracking supply chain KPIs is not only to get an overview of business performance but also to make data-driven decisions for implementation throughout the supply chain. Supply chain visualization and data dashboards make data-driven decisions easier by providing a comprehensive view of the supply chain. KPIs such as inventory turnover rate, on-time delivery rates, and customer satisfaction ratings are useful in decision-making.
Develop and Deploy Solutions to Your Supply Chain Challenges
KPIs have the potential to revolutionize supply chain operations and business performance. They provide insight into areas that require improvement, enable better customer service, and identify areas for cost savings. A supply chain dashboard with KPIs is an effective way to measure, monitor, and control performance while getting ahead of the competition. It is efficient in visualizing and tracking supply chain operations.
At Surgere, we understand the importance of having real-time intelligence to drive better operational decisions. For this reason, we engineer, develop, and deploy solutions that give you insights to optimize your supply chain performance.
Our Interius™ Software Suite provides real-time visibility and actionable intelligence on a single platform, allowing you to make smarter decisions. Contact us today to drive your business performance. Let Surgere be your source of truth in supply chain solutions.