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Supply Chain Metrics

Some key supply chain metrics that are commonly used to measure supply chain management performance include perfect order measurement, cash to cash cycle time, customer order cycle time, fill rate, supply chain cycle time, inventory days of supply, freight bill accuracy, freight cost per unit, inventory turnover, days sales outstanding, average payment period for production material, and on time shipping rate. These metrics measure aspects of procurement, production, transportation, inventory, warehousing, and customer service across the supply chain.

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120 views8 pages

Supply Chain Metrics

Some key supply chain metrics that are commonly used to measure supply chain management performance include perfect order measurement, cash to cash cycle time, customer order cycle time, fill rate, supply chain cycle time, inventory days of supply, freight bill accuracy, freight cost per unit, inventory turnover, days sales outstanding, average payment period for production material, and on time shipping rate. These metrics measure aspects of procurement, production, transportation, inventory, warehousing, and customer service across the supply chain.

Uploaded by

SHEETAL
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Supply chain metrics

 Supply Chain Metrics may


Perfect Order Management
include measurements for
procurement, production, Cash to Cash Cycle Time
transportation, inventory, Customer Order Cycle Time
warehousing, material
handling, packaging and Fill Rate
customer service. There are Supply Chain Cycle Time
hundreds of metrics that can be
used to score Supply Chain Inventory Days of Supply

Management performance. Freight Bill Accuracy


 Some of the common Supply
Freight Cost Per Unit
Chain Metrics are in the figure
Inventory Turnover

Days Sales Outstanding

Average Payment Period for Production Material

On Time Shipping Rate


Perfect Order Measurement
• Perfect Order Measurement
– The percentage of orders that are error-free.
((total orders - error orders) / total orders) * 100
Cash to Cash Cycle Time
 The number of days between paying for materials and getting paid for
product
 Cash to cash measures the amount of time operating capital is tied up.
During this time cash is not available for other purposes.
 A fast cash to cash indicates a lean and profitable supply chain

Customer Order Cycle Time


 Measures how long it takes to deliver a customer order after the
purchase order (PO) is received.
 A variant of requested delivery date and purchase order creation date is
the promised customer order cycle time
Fill rate
 The percentage of a customer's order that is filled on the first
shipment.
 This can be represented as the percentage of items, SKUs or order
value that is included with the first shipment.

FILL RATE %=(1 - ((total items - shipped items) / total items)) * 100

 Fill rate can be important to customer satisfaction and has


implications for transportation efficiency
Supply Chain Cycle Time
 The total time it would take to satisfy a customer order if all inventory
levels were 0.
 Sum of the longest lead times for each stage of the cycle
 Supply chain cycle time indicates the overall efficiency of the supply chain.
 Short cycles make for a more efficient and agile supply chain.
 Analysis of this critical metric can help recognize pain points or
competitive advantages.

Inventory Days of Supply


 The number of days it would take to run out of supply if it was not
replenished
 Inventory in hand / average daily usage
 SCM seeks to minimize inventory days of supply in order to reduce the
risks of excess and obsolete inventory.
 There are other financial benefits to minimizing this metric — excess
inventory tends to tie up operational cash flow
Freight bill accuracy
 The percentage of freight bills that are error-free
 (error-free freight bills / total freight bills) * 100
 Billing accuracy is key to profitability and customer satisfaction.

FREIGHT COST PER UNIT

 Usually measured as the cost of freight per item or SKU


 total freight cost / number of items
 SCM seeks to minimize freight cost per unit
DAYS SALES
Inventory Turnover OUTSTANDING
 The number of times that a company's  A measure of how quickly revenue can be
inventory cycles per year collected from customers
 Cost of goods sold / average inventory  (Receivables/Sales) * Days in Period
 Another metric that indicates how much  A low days sales outstanding indicates a more
inventory is sitting around. efficient business
 A higher inventory turnover indicates an
efficient supply chain
Average Payment Period for Production
Materials
 The average time from receipt of materials and payment for those
materials
 (Materials Payables/Total Cost of Materials) * Days in Period
 It is in a company's best interests to pay its suppliers slowly.
 The longer the average payment period the more efficient the business

On Time Shipping Rate


 The percentage of items, SKUs or order value that arrives on or before
the requested ship date
 (Number of On Time Items / Total Items) * 100
 The on time shipping rate is key to customer satisfaction.
 A high rate indicates an efficient supply chain

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