Supply chain managers find it difficult to choose suitable measures for their particular company or product. To avoid getting lost in a sea of data, it's crucial for managers to have clear performance details. As companies grow into various regions and alliances become a survival requirement, effective managers need to assess supply chain efficiency and recognise the advantages, drawbacks and limitations of supply chain use.Supply Chain Metrics may include production, manufacturing, shipping, distribution, warehousing , material handling, packaging, and customer service initiatives. There are hundreds of metrics which can be used to rate success in Supply Chain Management.
Supply Chain metrics value depends on our supply chain goals, and how they support your business strategy. If we define the supply chain as the core set of processes that link suppliers to customers through the process of value-added manufacturing, then the goals are clear. The Supply Chain must contribute to enhancing shareholder value at the highest level by making the business more competitive and profitable within the context of your business model. The challenge is to find the most important metrics which reflect what the supply chain needs to do to support these goals.
Some of the key metrics which can be used to optimize our supply chain are:
- Perfect order Index- It measures the error-free rate of the entire supply chain process.Perfect order index is an outstanding benchmark for the efficiency of the entire supply chain. And we can evaluate, detect and fix problems when we drill down. Then the index can be measured over time to assess progress towards process change.
- Cash to cash time-The cash-to - cash (C2C) cycle , also known as cash conversion, calculates the time between sending cash to suppliers by a business, and receiving cash from clients. The C2C period is a further composite metric consisting of three measures of the supply chain: inventory days, payable days and receivables day.
- Supply chain cycle time- This metric is the sum of the longest lead times available for each point of the supply chain cycle. The metric is an excellent measure of our supply chain's overall performance. A shorter cycle ensures the process is versatile, agile and sensitive to changes in the environment. Tracking cycle time for the supply chain identifies current or future issues, so the company can take corrective steps.
- Inventory Turnover- Inventory turnover calculates the amount of times the entire stock is sold in a given period of time. It is an important metric because it gives an accurate , detailed picture of the performance of the whole supply chain operation.
- Day sales Outstanding- A measure of how quickly customers can earn revenue.Outstanding low-days sales indicate a more efficient business.
- On - time shipping- An excellent measure of how long we will need to ship a specific form of order to a company, company or partner, it will enable us to set a target shipping time relative to each product which, in turn, will allow to optimise shipping and distribution processes, minimise turnaround times and improve customer satisfaction levels.
Also it is better if we divide the metrics into groups like metrics for evaluating the supply chain performance,customer service , cost etc.This will help to evaluate each area efficently. Best-in - class businesses have a balanced range of performance indicators that extend from top to bottom of the sector, closely connected in successive degrees of detail from level to level. Many of these very organisations have bonuses and benefits that are related to their success metrics to really promote positive improvement.
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