The supply chain is the backbone of any business, and the value of an efficient supply chain can be measured in the right KPIs. For the pharmaceutical, medtech, manufacturing and logistics industries, maintaining a strong supply chain is key to meeting the expectations of both partners and customers.
Businesses are increasingly feeling the strain of inefficient supply chains, whether it is due to increasing costs, a more competitive and global market or increased customer expectations. In addition to these challenges, the worsening geopolitical climate following on the back of the pandemic has made clear the benefits of an optimised supply chain.
What are supply chain KPIs?
A supply chain KPI, or key performance indicator is a specific metric established to quantify supply chain performance in a specific area. They measure performance over time and will vary between businesses, and even at a team level. Various KPIs can be used at all levels throughout an organisation to evaluate the performance of a specific process, partner, team or product.
The insights gained by these metrics allow businesses to reduce costs, generate more business and increase efficiencies across the supply chain.
Top KPIs to improve your supply chain
Strong data capture and real-time visibility are only useful when a team knows what key metrics to judge performance by. Here are some of the top supply chain management KPIs that can help run a more effective, efficient, and prosperous organisation.
Cash to cash cycle time
The cash to cash or C2C time cycle is a common and effective supply chain KPI. It visualises the period between the moment a payment is made to the suppliers and received from the customer.
The three core parameters of the C2C time cycle are DOI (days of inventory), DOP (days of payables) and DOR (days of receivables). While every business will have a different cash to cash cycle time based on the nature of its business, reducing this time will ensure that a business can run its operations with money spending less time tied up in other sources.
Inventory turnover
Inventory turnover is another critical supply chain KPI. It measures the time a business will take to sell or process its entire inventory. This is especially relevant for logistics, as it provides a business with insights into how efficiently it is fulfilling orders, gaining new sales and processing stock. A higher number here shows a faster turnover and is a great performance indicator in general.
Inventory days of supply
Similar to inventory turnover, inventory days of supply shows the number of days at set production levels it would take to run of stock. Traditionally, supply chain managers wanted to keep stock levels low to free up valuable warehouse space. But due to global supply chain challenges over the past two years, there has been a change in thinking. Either way, getting this number just right is key to ensuring enough stock to fulfil all planned orders and avoid any stock availability emergencies. Keeping this number lower will ensure less resources are tied up in higher than needed levels of inventory.
Costs as a percentage of sales
Costs as a percentage of sales is a straightforward metric that shows the amount of money tied up in the supply chain, including stock, processing and logistics as a percentage of total sales for the same period.
Having clear visualisation of this KPI will show where profits are being lost, and can help make key strategic decisions about suppliers, products or other factors.
Perfect order delivery rate
The perfect order delivery rate or perfect order rate is one of the most critical KPIs, as it assesses the overall performance of the supply chain. It does this by measuring the ability of the supply chain to complete orders without incidents. Reducing this number means there is less waste in damages, delays and inventory losses. It shows the ability of a supply chain to deliver results on time and on or under budget, ultimately helping customer satisfaction and retention.
How to create an effective supply chain KPI dashboard
The list of KPIs is long and varied, depending on the business, team level and overall goals, so it’s important to define the most valuable KPIs for your desired outcomes. At WrxFlo, we take the time to understand your needs and define the KPIs that will give you supply the biggest improvement. We then connect to all the systems and processes you need to monitor, store that data securely and create a dashboard that will give you that data, accessible anywhere in the world, in real-time.
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