Live Webinar: Secrets to Building a Successful B2B2C Growth Flywheel
Save your spot now

Supply Chain KPIS

Supply chain KPIs are the critical metrics that provide insights into the efficiency, effectiveness, and overall health of a supply chain.

From procurement to production, distribution to customer satisfaction, these KPIs are essential for gauging the performance of various components of the supply chain network.

By closely monitoring these indicators, businesses can identify bottlenecks, optimize operations, improve delivery times, and reduce costs, all while enhancing customer satisfaction.

In this glossary, we will explore the core supply chain KPIs that are crucial for maintaining a resilient, responsive, and competitive supply chain in today’s complex and dynamic business environment.

What are the key KPIs for supply chain management?

Effective supply chain management is crucial for maintaining efficient operations and meeting customer demands. Key Performance Indicators (KPIs) provide valuable metrics to assess the health and efficiency of the supply chain processes.  

Here are several essential KPIs:  

1. Inventory turnover

Measures how frequently inventory is sold and replaced over a specific period. A high turnover rate indicates efficient inventory management and healthy product demand.

2. Order accuracy rate

Assesses the accuracy of order fulfillment. This KPI helps in understanding how often orders are shipped without errors, directly impacting customer satisfaction.

3. Supply chain cycle time

The total time taken from the initiation of a purchase order to the delivery of the product to the customer. Shorter cycle times generally indicate more efficient supply chain operations.

4. Freight cost per unit

Measures the shipping cost per unit, which helps in evaluating the cost-effectiveness of the transportation process within the supply chain.

5. On-time delivery rate

Tracks the percentage of orders delivered on the promised delivery date. This is a critical metric for customer satisfaction and retention.

6. Cash-to-cash cycle time

Measures the time between when a business pays for its inventory and when it receives payment from customers. Shortening this cycle can improve a company’s liquidity.

7. Supplier defect rate

Monitors the percentage of materials received from suppliers that are defective. This KPI is vital for quality control and overall supply chain efficiency.

Boost Sales Performance by 94% with Our Gamified Commission Management Software  

Where can businesses find resources to understand supply chain KPIs?

To gain a deeper understanding of supply chain KPIs, businesses can access various resources:

 

1. Professional associations

Organizations such as the Council of Supply Chain Management Professionals (CSCMP) and the Institute for Supply Management (ISM) offer resources, professional development, and networking opportunities.

2. Educational courses and webinars

Many universities and online platforms offer courses specifically focused on supply chain management, which cover KPIs and how to use them effectively.

3. Books and industry publications

There are numerous books dedicated to the intricacies of supply chain management that discuss various KPIs, such as "Supply Chain Metrics that Matter" by Lora M. Cecere.

4. Consultants and industry experts

Hiring or consulting with experts who specialize in supply chain management can provide tailored advice and insights based on the latest industry practices.

5. Software vendors

Many supply chain management software solutions include analytic tools that help track and understand these KPIs. Providers often offer training and support to maximize the benefits of their tools.

Who should be in charge of tracking supply chain KPIs?

The responsibility for monitoring supply chain KPIs typically resides with:

  • Supply chain manager: Oversees all aspects of the supply chain operations and is primarily responsible for KPI tracking and improvement strategies.
  • Logistics coordinators: Manage the day-to-day operations and may track specific logistics-related KPIs like freight costs and delivery times.
  • Quality assurance teams: Focus on KPIs related to product quality and supplier performance.
  • C-Level Executives (CFO, COO): In larger organizations, these roles may oversee strategic KPI analysis and alignment with business objectives.

When should a business review its supply chain KPIs?

Businesses should review their supply chain KPIs at regular intervals to ensure continuous improvement:

 

  • Daily/weekly: Monitor operational KPIs such as on-time delivery and inventory levels to address immediate issues.
  • Monthly/quarterly: Strategic reviews of KPIs like freight cost per unit and cash-to-cash cycle time help in long-term planning and operational adjustments.
  • Annually: Comprehensive analysis to align supply chain performance with broader business goals and to prepare for future challenges.

Why are supply chain KPIs crucial for inventory management?

Supply chain KPIs play a vital role in effective inventory management:

  • Optimizing inventory levels: KPIs such as inventory turnover inform businesses how well they are managing inventory, helping prevent overstocking and stockouts.
  • Cost reduction: Efficient inventory management driven by KPI insights can significantly reduce holding costs and lost sales, improving profitability.
  • Quality control: Monitoring supplier defect rates helps maintain the quality of inventory, reducing the costs and logistics associated with handling returns.

How do supply chain KPIs impact customer satisfaction?

Supply chain KPIs have a direct impact on customer satisfaction in several ways:

  • Reliability: On-time delivery rates and order accuracy are critical for meeting customer expectations and building trust.
  • Speed: Efficient supply chains with short cycle times ensure quick order fulfillment, enhancing customer satisfaction and competitiveness.
  • Quality: Low supplier defect rates ensure high-quality products reach the customer, reducing returns and increasing customer loyalty.
  • Transparency: Advanced supply chain systems can provide customers with real-time tracking updates, improving communication and satisfaction.

Employee pulse surveys:

These are short surveys that can be sent frequently to check what your employees think about an issue quickly. The survey comprises fewer questions (not more than 10) to get the information quickly. These can be administered at regular intervals (monthly/weekly/quarterly).

One-on-one meetings:

Having periodic, hour-long meetings for an informal chat with every team member is an excellent way to get a true sense of what’s happening with them. Since it is a safe and private conversation, it helps you get better details about an issue.

eNPS:

eNPS (employee Net Promoter score) is one of the simplest yet effective ways to assess your employee's opinion of your company. It includes one intriguing question that gauges loyalty. An example of eNPS questions include: How likely are you to recommend our company to others? Employees respond to the eNPS survey on a scale of 1-10, where 10 denotes they are ‘highly likely’ to recommend the company and 1 signifies they are ‘highly unlikely’ to recommend it.

Based on the responses, employees can be placed in three different categories:

  • Promoters
    Employees who have responded positively or agreed.
  • Detractors
    Employees who have reacted negatively or disagreed.
  • Passives
    Employees who have stayed neutral with their responses.

Similar Blogs

Quick Links

Top Articles
Glossaries