12 Key Metrics For Supply Chain

Management
posted by

John Spacey, June 27, 2016

Supply Chain Management (SCM) requires management

of complex dependencies between teams, departments
and partner companies across international boundaries. It
is a natural area for metrics.
Supply Chain Metrics may include measurements for
procurement, production, transportation, inventory,
warehousing, material handling, packaging and customer
service. There are hundreds of metrics that can be used to
score Supply Chain Management performance. The
following are some of the most common.

1. Perfect Order Measurement

The percentage of orders that are error-free.

((total orders - error orders) / total orders) * 100
This is often broken down by stage:
Procurement

99.99% perfect

Production

99.12% perfect

Transportation

99.02% perfect

Warehousing

99.98% perfect

etc....

2. Cash to Cash Cycle Time

The number of days between paying for materials and
getting paid for product.
materials payment date - customer order payment date*

**

* typically averaged for all orders for a week, month, quarter

etc..
** many materials are usually required a weighted average
materials payment date can be calculated

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.

3. Customer Order Cycle Time

Measures how long it takes to deliver a customer order
after the purchase order (PO) is received.
actual delivery date - purchase order creation date

A variant of this is the promised customer order cycle

time:
requested delivery date - purchase order creation date

4.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.
(1 - ((total items - shipped items) / total items)) * 100
Fill rate can be important to customer satisfaction and has
implications for transportation efficiency.

5. Supply Chain Cycle Time

The time it would take to fill a customer order if
inventory levels were zero.
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.

6.Inventory Days of Supply

The number of days it would take to run out of supply if it
was not replenished.
inventory on 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.

7. 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.

8. 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.

9. Inventory Turnover
The number of times that a company's inventory cycles
per year.
cost of goods sold / average inventory
Another metric that indicates how much inventory is
sitting around. A higher inventory turnover indicates an
efficient supply chain.

10.Days Sales Outstanding

A measure of how quickly revenue can be collected from
customers.
(Receivables/Sales) * Days in Period
A low days sales outstanding indicates a more efficient
business.

11. 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.

12. 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.