What is a Supply Chain (SC)?

 A supply chain is the network of all the individuals,

organizations, resources, activities and technology
involved in the creation and sale of a product, from the
delivery of source materials from the supplier to the
manufacturer, through to its eventual delivery to the end
user.
What is Supply Chain Management?

 In simplest terms, supply chain management (SCM) is all

about managing the supply chain (a network of
organizations and the business processes for acquiring
the raw materials, transforming them into finished goods,
and distributing the products to the customers).
 The supply chain links many business entities, such as
supplier, manufacturer, transporter, distributor, retailer,
and the customers themselves; The main flows in:
product flow, information flow and money flow.
CRITICAL KEY PERFORMANCE
INDICATORS
 Perfect Order Measurement: ((total orders - error orders)
/ total orders) * 100
 Cash to Cash Cycle Time: materials payment date -
customer order payment date
 Customer Order Cycle Time: actual delivery date -
purchase order creation date
 Fill Rate: (1 - ((total items - shipped items) / total items))
* 100
Contd.
 Supply Chain Cycle Time: sum of the longest lead times
for each stage of the cycle
 Inventory Days of Supply: inventory on hand / average
daily usage
 Freight bill accuracy: (error-free freight bills / total freight
bills) * 100
 Freight cost per unit: total freight cost / number of items
 Inventory Turnover: cost of goods sold / average
inventory
Contd.
 Average Payment Period for Production Materials:
(Materials Payables/Total Cost of Materials) * Days in
Period On Time
 Days Sales Outstanding: (Receivables/Sales) * Days in
Period
 Shipping Rate: (Number of On Time Items / Total Items) *
100
Materials Management
 Materials Management is the planning,
directing, controlling and coordinating
those activities which are concerned with
materials and inventory requirements,
from the point of their inception to their
introduction into the manufacturing
process.
KPI’s
 Carrying Cost of Inventory:(C + T + I + W + (S - R1) + (O - R2))/
Average annual inventory costs where the individual components
are:
C= Capital
T= Taxes
I= Insurance
W= Warehouse costs
S= Scrap
O= Obsolescence costs
R= Recovery costs
Contd.
 Cycle Time: Dock-to-Stock: The dock-to-stock cycle time equals the
time, typically measured in hours, required to put away goods. The cycle
time begins when goods arrive from the supplier and ends when those
goods are put away in the warehouse and recorded in the inventory
management system.
 Demand Forecast Mean Absolute Percentage Error (MAPE):

Here A= Actual, F= Forecast, N= Number of observations, and the

vertical bars stand for absolute values.
Contd.
 Inventory Shrinkage: This rate is a percentage that represents how
much inventory your business lost due to damage, theft, errors, etc. The
lower your inventory shrinkage rate, the less inventory you lost.
Recorded Inventory = Inventory – Cost of Goods Sold

 Repeat Purchase Rate: The repeat purchase rate measures the

percentage of your customers who come back for another purchase.
 This can also be called your repeat customer rate, re-order rate, or even
customer retention rate.
 Rate: Repeat customers/ Total customers