March 25, 2023
KPIs for Evaluating Supply Chain Performance
As a business owner, managing the supply chain at maximum efficiency is vital to the success of your operations. In order to maintain everything running smoothly, it is crucial to monitor every stage in the supply chain process. Key performance indicators (KPIs) are the data that will show how the business is operating.
Several metrics are used to measure supply chain efficiency, most of which are of general observance, but others are more specialized, depending on the requirements of every particular process. For example, some of the most common KPIs for inventory management involve warehouse metrics, transportation routes, and cost-benefit ratios, among others.
Here are some metrics to evaluate supply chain performance.
This KPI is most commonly used for assessing the overall performance of the supply chain. Order rate measures the process’s ability to fulfill orders without incidents or errors. For a company to complete an effective order rate, it should meet the following requirements:
The shipment left the warehouse on time
The order is property received
The shipment contains the correct quantity of items
No payment issues
Supply chain cycle time
Supply chain cycle time measures how long it will take to fulfill an order when it runs out of stock. Including inventory management, supply chain cycle time shows the total time it takes to produce, pack, and deliver products. Agile, flexible, and resilient supply chains will have shorter times. To address this KPI, the company should be able to track the following steps:
- When orders are received
- When the orders are processed and ready for delivery
- Date and time of shipping
- Date and time of receiving
Inventory turnover is a crucial supply chain KPI. Also known as inventory velocity, this metric shows how many times the whole inventory of a company is sold in a specific period. Higher numbers mean healthy sales and revenues.
Depending on the nature of the business, comparing this metric with direct competitors should give insights into the overall supply chain’s performance. To understand this KPI, the following data is required:
Cost of items sold
The ratio of how many times a stock is sold and replaced over a set period
Demand satisfaction rate
An essential supply chain KPI refers to the buyer’s demand filled by stock availability without lost sales or backorders. The demand satisfaction rate represents the demand that can be satisfied by inventory management improving. It is necessary to track each order including:
- Order date
- Delivery time
- The number of orders met in time
- Total number of orders received
At Last Mile Logistics, we have a team with a combined experience that will meet any requirements for your business. In addition, we will specially tailor an individualized solution to achieve your transportation goals. So please, call us regarding any concerns or if you have an RFP.