A pivotal supply chain KPI, the inventory velocity, or IV, provides a visual snapshot of the percentage of inventory that's projected for consumption within the next period or quarter. Benchmark:Achieving TEI between 150 and 180 is the best practice in terms of balancing gross margin and inventory. The Perfect Order Measure calculates the error-free rate of each stage of a Purchase Order (error in order forecasting for procurement, error in warehouse pickup process, error in invoicing and error in shipping orders etc.). It is in a company’s best interests to pay its suppliers slowly. People love to use buzzwords in the tech industry, so check out our list of the top 10 technology buzzwords that you won’t be able to avoid in 2021. Your stock is essential to your commercial operation which is why tracking your inventory through a central nerve center will make sure that every supply chain effort and initiative improves the way you run your business as opposed to hindering it. Benchmark:There is no specific benchmark for ITR. Distributors & manufacturers that keep an eye on the these 4 key performance indicators will reduce inventory levels 1. However, organizations who are product leaders in the market are likely to satisfy with ITR of 3-4 while operational excellence oriented organizations, such as low-cost airlines or wholesalers aim at achieving 8-9 ITR. All 17 Key Metrics For Supply Chain Management that you ever need [updated] View Larger Image To make rapid decisions in today’s fast-acting environment , we need smart, time-saving, easy to interpret and most importantly decision-supporting key performance indicators (or even better Actionable Insights). In pursuit of better operations management, managers have used Key Performance Indicators (KPIs) to monitor operations as they provide internal and external visibility, and consequently help decision making (Chae, 2009). Want to visualize & track supply chain metrics with ease? Supply Chain Management KPI Reports in Excel . By calculating your on-time shipping rate and comparing it to other competitors within your industry, you will be able to create a clear management reporting practice, see where you stand, and take the appropriate action to improve it over time - this will result in a boost in brand authority as well as an increased bottom line - so it’s important. - Wael Safwat, SCMAO. Later in this article, I will suggest some rather more comprehensive guidelines, b… Whilst having IV less than 60% indicates excessive stock, IV over 80% is risky in terms of being out of stock as it calls for Kanban-Pull system. SCM seeks to minimize inventory days of supply in order to reduce the risks of excess and obsolete inventory. The number of days between paying for materials and getting paid for product. The KPI’s can be represented as a table ( see Level 1 Metrics) or by contribution to shareholder value. Supply chain metrics are defined by establishing specific parameters which are used in quantifying and defining supply chain performance. The shorter the conversion cycle the better, and this invaluable supply chain metric will help you take the right measures to ensure that you can run your business with less money tied up in operations. For more data-driven wisdom, check out these great dashboard designs that you can get inspiration from. Tracking IV on a monthly basis will provide significant clues in terms of aligning inventory level to the optimal level for matching supply-demand, and preventing excessive stock in the warehouse. Tracking GMROI on a monthly basis provides a significant clue in terms of having a clear understanding of which SKU or brand produce more gross profit in the inventory. By tracking this KPI on a monthly basis, you’ll quickly gain an insight into which items in your inventory are poor performers and which are worth investing in more - gold dust in terms of business-based information. In general though, the key performance indicators (KPI's) established by a company illustrate the gap between planning and execution in the supply chain, and are metrics set up to monitor one … Working with three core ratios - the days of inventory (DOI), the days of payables (DOP), and the days of receivables (DOR) - the cash-to-cash time cycle KPI visualizes the period required between the moment a business pays cash to its suppliers and the moment it receives cash from its customers. Essentially, a low, or healthy, DSO number means that it takes a business fewer days to collect its accounts receivable. With all the systems and softwares created to facilitate logistics management, ... metrics related to your supply chain. To cover this, we need the following KPI. The on time shipping rate is key to customer satisfaction. This particular insight is one of the most critical supply chain KPIs for businesses operating in a multitude of sectors. The percentage of freight bills that are error-free. The literature on supply chain management is wide … Thanks to modern data visualization tools you can create stunning supply chain management dashboards with all your needed KPIs with a few clicks. GMROI: [Gross Profit] / [(Opening Stock-Closing Stock) / 2] X 100. A low days sales outstanding indicates a more efficient business. The longer the average payment period the more efficient the business. Applying Pareto Principle will help easily categorize SKUs (e.g. Benchmark: Achieving GMROI between 200 and 225 is the best practice by means of generating gross profit from the inventory hold for the related SKUs or brands. The goal in this example is to avoid wasting money, retain customers, and define the stability of a business. Because of this, assessing overall performance and efficiency is … Here is how freight bill accuracy is calculated: (error-free freight bills / total freight bills) * 100. It should not be difficult to determine which KPIs to capture, nonetheless, every industries and environment is unique, it is […] The lasting success of your supply chain relies on feedback from key performance indicators, or KPIs. This priceless supply chain metric will help you calculate the length of time required to transform your resources into bonafide cash flows. The 10 Essential SaaS Trends You Should Watch Out For In 2021, Top 10 Analytics And Business Intelligence Buzzwords For 2021, Top 10 IT & Technology Buzzwords You Won’t Be Able To Avoid In 2021. ITR: COGs / [(Opening Stock-Closing Stock)/2]. Manufacturing is an industry typified by countless unique processes and workflows. That is not helping senior management to address root causes and understand what went wrong. A fast cash to cash indicates a lean and profitable supply chain. By gaining this level of insight, you stand an excellent chance at decreasing returns, boosting profits, and improving cash flow as a result. A logic behind TEI is to keep high ITR for SKUs or brands generating low margins and to satisfy with medium- or low-level ITR for SKUs or brands generating high margins. Short cycles make for a more efficient and agile supply chain. Specifically, they enable you to monitor how effectively your organization is achieving its target goals. It is calculated by dividing gross profit by the average inventory investment. Key performance indicators (KPIs) can make or break supply chain operations and it seems as though there are more to choose from every day. By tracking, analyzing, and understanding this stream data on a regular basis, you will be able to prepare for, and avoid, any stock-based calamities in an emergency situation, saving your reputation and cash flow in the process. Others Metrics for your supply chain : On-time delivery (DOT = Delivery on time). During this time cash is not available for other purposes. Sum of the longest lead times for each stage of the cycle. Let’s take a look at the 10 business intelligence buzzwords that will be present in the BI world in 2021. To make rapid decisions in today’s fast-acting environment, we need smart, time-saving, easy to interpret and most importantly decision-supporting key performance indicators (or even better Actionable Insights). Benchmark: There is no specific target for DOS, but measuring it by considering the following months’ sales forecasts (as value) will help us to have a clear understanding of at which level we need to keep our stock to be able to improve inventory management on a monthly basis. The next KPI of this particular dashboard is the Carrying Cost of Inventory, followed by Inventory Accuracy and Out Of Stock Items. Deciding the number of ITR is heavily related to the gross margin generated by related SKUs or brands. TEI helps us to combine the gross margin and turnover. By calculating this often, you'll be able to collect revenue faster and more efficiently, which will help boost your bottom line in the long run. Usually measured as the cost of freight per item or SKU. Choosing the Right Key Performance Indicators (KPIs) to Monitor your Supply Chain Performance ... explains how digital technologies and cognitive analytics can help you optimize inventory performance. You can explore our supply chain management dashboard in greater detail here. Omnichannel supply chains help businesses sell products through all possible sales channels. While Key Performance Indicators (KPIs) may be reviewed quarterly or monthly, the speed with which supply chain operations occur makes a daily view of more tactical and operational metrics a growing necessity. There's no denying it: optimal supply chain management conducted in a continually consistent, strategic, and data-driven manner will yield incredibly fruitful long-term results - the kind that will help your business evolve and scale over time. The percentage of a customer’s order that is filled on the first shipment. Billing accuracy is key to profitability and customer satisfaction. Presented in a digestible pie chart-style format with a key showcasing the primary reasons for return, you will be able to assess your areas of weakness, analyze the quality of critical areas of your supply chain process, and make the kind of improvements that will enhance not only your reputation but your overall level of service significantly. While this may not be the most panoramic or all-encompassing of supply chain metrics, inventory days of supply is particularly useful as it will give you a fairly accurate calculation of the number of days it would take you to run out of stock if it wasn’t replenished. So here are some KPI tips for you. 1. nsider t, … Benchmark: For continuous SKUs, keeping IV between 60-70% will provide a good match of demand while 75-80% of IV can be more beneficial for fast-moving SKUs. It is calculated by dividing the average inventory on hand (as value) by the average monthly demand (as value) and then multiplying it by thirty, when measuring on a monthly basis. 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. The days sales outstanding (DSO) KPI measures how swiftly you are able to collect or generate revenue from your customers. Managing Partners: Martin Blumenau, Jakob Rehermann | Trade Register: Berlin-Charlottenburg HRB 144962 B | Tax Identification Number: DE 28 552 2148, News, Insights and Advice for Getting your Data in Shape, BI Blog | Data Visualization & Analytics Blog | datapine. By tracking these critical supply chain performance metrics in one initiative space, you will be able to implement initiatives that not only hold maximum value but will also ensure the smooth running and perpetual improvements of your supply chain processes, ensuring that every single cog in the wheel is turning to maximum efficiency - which of course, is priceless. By Sandra Durcevic in KPIs, Sep 27th 2018, "It's not the organizations that are competing. Lead Time for customer and supplier deliveries. Supply Chain KPIs are Essential – The Right Ones! fast-, continuous-, intermittent- and slow-moving SKUs). A high rate indicates an efficient supply chain. The perfect order rate measures the success of your ability to deliver orders incident-free, which will ultimately help you iron out issues such as inaccuracies, damages, delays, and inventory losses. Please check our buyer and supplier pages to learn what the Tradecloud network is about. Cost reduction is still … The fast growing Tradecloud network connects thousands of B2B buyers & sellers who collaborate real time on orders, forecasts and shipments to increase margins and reduce waste. Analysis of this critical metric can help recognize pain points or competitive advantages. The percentage of orders that are error-free. Fill rate can be important to customer satisfaction and has implications for transportation efficiency. Nevertheless, DOS does not help us to understand how well our inventory will match the demand. Keep in mind that when it comes onto key performance indicators they all vary. Recent studies suggest that 79% of companies with high-performing supply chains earn a revenue growth greater than the average within their sector. (error-free freight bills / total freight bills) * 100. And if your supply chain is inefficient, ineffective, or fragmented, it could seriously hinder your commercial prospects. SCM seeks to minimize freight cost per unit. Essential SaaS trends and insights for 2021 and beyond. There are other financial benefits to minimizing this metric — excess inventory tends to tie up operational cash flow. It's the supply chains that are competing." In other words, it measures the number of opportunities to earn profit that we experience each year from our working capital invested in the inventory. In the example below, we have collected data focusing on inventory metrics: Inventory-to-Sales ratio, which you can combine with the Inventory Turnover, and clearly see the financial stability of your business. Odette International sets the standards for e-business communications, engineering data exchange and logistics management in the automotive industry. This is the percentage of orders in quantity delivered on time. A higher DSO level demonstrates that a company is selling its product to customers on credit and taking longer to collect revenue in a tangible sense, which can stunt cash flow and minimize profits in the grand scheme of things. For instance, having 160 TEI for a brand can be interpreted as having 20% margin and turning inventory 8 times or having 40% margin with turning inventory 4 times per year. The time it would take to fill a customer order if inventory levels were zero. On the other hand, distributors that handle a wide range of brands and strive to meet customer needs aim at keeping ITR around 5-7. One of our most powerful business dashboards, the supply chain dashboard boasts a digestible, functional, and visual representation of all key areas of supply chain performance, from inventory accuracy and turnover to the inventory-to-sales ratio. © Tradecloud - #FocusOnExceptions #ZeroWaste, Artificial intelligence (AI) for supply chain management, – https://www.linkedin.com/pulse/12-key-metrics-supply-chain-management-mamta-sethi-. DOS:  Average Inventory / Monthly Demand x 30. Practically, not all SKUs or brands can be treated equally via aforementioned KPIs. A variant of this is the promised customer order cycle time: requested delivery date – purchase order creation date. Here are some thoughts to help you with KPIs ( Key Performance Indicators ) in your Supply Chain and Logistics operations. We have collected the most important supply chain metrics for you. Tradecloud is the largest network in the industry and technical wholesale. 7 Magazine Issues per year of Supply Chain Management Review magazine. Linking over 4000 businesses in the European motor industry and their global trading partners. IV is the percentage of inventory we are projecting to be consumed within the next period. Maintaining a consistently solid ROI is the bread and butter of ongoing eCommerce success. Here are some of the key performance indicators that can be very useful for supply chain analytics: Inventory Turnover Inventory turnover is a KPI that measures how well an organization is able to move its inventory. There is a lot of metrics to keep track in the varies function, but a supply chain should focus the essential or real Key Performance Indicators (KPIs) which will display the most important headlines immediately. If you’ve ever seen the flight deck of a modern airliner, you know even with the large multi-function displays located in front of the pilots, that there are still many other gauges and instruments seemingly demanding attention—enough to make you wonder how the crew can possibly monitor them all. The information on this page WILL help you get it right.Many people get confused about KPIs or Key Performance Indicators in Logistics and Supply Chain operations. Categorization can be based on monthly sales volume, margin percentage or the number of exists from the warehouse. A higher inventory turnover indicates an efficient supply chain. A key performance indicator is a value that measures how effectively a department or business achieves its objectives. The metrics can be utilized in the inventory accuracy and turnover metrics, to the inventory-to-sales ratio. Billing accuracy is critical to profitability as well as customer satisfaction, so tracking this particular metric will help you spot detrimental trends, improve your overall shipping accuracy, and ultimately, help your business grow. Remember: Today, access to your metrics 24/7/365 is really important, what online data analysis tools can guarantee and ensure that your chances of long-term success increase. ((total orders – error orders) / total orders) * 100. Cost-effectiveness key performance indicators Cost-effectiveness KPIs are another important group of indicators that help measure the performance of any supply chain organization. (1 – ((total items – shipped items) / total items)) * 100. Supply Chain Key Performance Indicators or KPIs often cause confusion. Able to collect its accounts receivable is in a company ’ s take a look at 10. Possible sales channels Monthly demand X 30 will match the demand of times that company... 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