Supply chain involves a lot of moving parts. Thus, it’s easy to lose the sight of the details that matter to keep on track of your supply chain process and improve the parts that have room for improvement to gain more profit.
Below is a list of 8 top supply chain metrics that matter the most to maintain the health of your supply chain operations.
1. Perfect Order Measurement [ ((total orders – error orders) / total orders) * 100]
This is one of the most important supply chain metrics that will tell you about the health of your supply chain. The measurement is calculated with the accurate and completely filled and delivered orders within the promised time. Of course, there can be small mistakes that can occur here and there, but for the most part, your order fulfillment process should be flawless.
2. Cash to Cash Cycle Time [Materials payment date – Customer order payment date]
The time period between paying for materials and getting paid for your actual products is measured in Cash to Cash Cycle Time. The shorter the cycle, more efficient, lean and profitable your supply chain process will be, as between the material payment data and customer order payment date, cash won’t be available for other activities.
3. Customer Order Cycle Time [ Actual delivery date – Purchase order creation date]
Efficiency in delivery is one of the best ways to make your customers happy and also to measure the performance of your supply chain process. Customer order cycle time measures the time taken to deliver a customer order after the purchase order received.
4. Fill Rate [ (1 – ((total items – shipped items) / total items)) * 100]
This matrix calculates the percentage of single order filled on the first shipment. This is a solid supply chain metric that will help you identify defects in your transportation. The higher fill rate will not only boost the efficiency of your supply chain process but your customer satisfaction too.
5. Supply Chain Cycle Time [Sum of the longest lead times for each stage of the cycle]
Here the time that will take to fill an order when the inventory is zero is calculated. Analyzing this metric will help you identify your competitive advantages and weak points in your inventory refilling process which contributes to the overall efficiency of your supply chain.
6. Inventory Days of Supply [Inventory on hand / Average daily usage]
This is another metric that a matter the most in the supply chain as it gives you clear insight into your operational cash flow. Here the time period that would take to run out of supply if it is not restocked again is calculated. The shorter the time period better your operational cash flow will be, reducing risks of excess and obsolete inventory.
7. Days Sales Outstanding [(Receivables/Sales) * Days in Period]
Here how fast you can collect revenue from your customers will be calculated. Making this period shorter as much as possible will help you gain more business efficiency and a smoother cash flow.
8. Gross Margin Return on Investment (GMROI) [Gross Profit] / [(Opening Stock-Closing Stock) / 2] X 100]
The amount of gross profit earned for every investment made in inventory is calculated in GMROI. Tracking this metric regularly will help you get solid clues on which SKU or brand brings higher profit in your inventory.
Keeping a close watch on these important metrics will help you identify defects of your supply chain before it’s too late and cause a major damage to your business.