23 February 2023
Topics in this article
  • Cost Optimization
  • Strategy & Planning
  • Supply Chain & Logistics

Balancing the management, processing, and data leveraging of all aspects of your supply chain can be daunting. Supply chain metrics, or key performance indicators (KPIs), typically tracked in a supply chain dashboard, can help businesses manage data concerning the growth and success of a company’s comprehensive supply chain. It can help to identify strengths or inefficiencies and, most importantly, help establish goals to evolve and optimize your business.

Below are some common performance phrases to help you visualize and track information in your supply chain operations to manage inventory levels, understand customer demand and sales, shipping, suppliers, and more.

Cash-to-Cash Cycle Time

Cash-to-cash cycle time is critical to a company’s operation as no capital can be generated if goods for sale are tied up in inventory. Cash-to-cash cycle time measures the time between the purchase of materials from a supplier and when payment is collected for sale of goods.

Day Sales Outstanding

Days sales outstanding (DSO) is a measure of the number of days that it takes a company to collect payment for a sale, usually on a monthly, quarterly, or annual basis. It is calculated by dividing the average accounts received by the total value of sales during the same time period, then multiplying the result by the number of days in the time period you have set.

Delivered On Time and In Full (OTIF)

While seemingly straightforward, delivered on time and in full (OTIF), is one of the most powerful insight metrics as it allows you to pinpoint specific factors at play and make quick decisions if the metric is lagging.

Freight Bill Accuracy

Freight bill accuracy is a metric to track how precise your freight bills are to control logistics spend. Freight invoice validation against contracted rates ensures correct payments for services requested.

Gross Margin Return on Investment

The gross margin return on investment (GMROI) is calculated by dividing the gross margin of an item by the average inventory cost. It is used to help businesses understand inventory profitability above the cost of inventory.

Perfect Order Rates

Perfect Order Rate assumes that an order is delivered correctly to the customer, with no flaws, on time, and with the proper documentation. If there is any discrepancy in the process, the order is less than perfect.

Rate of Return

Rate of Return is a strict metric that shows you the rate at which items are shipped back to you. Knowing the reasons why items are being returned can help you understand how to mitigate returns in the future.

Reasons for Returns

Understanding the reasons for returns provides key insight into why customers return orders and thus, a key opportunity to determine how you can address weaknesses, decrease returns, and improve cash flow.

Supply Chain Costs (Supply Chain Costs vs Sales)

Supply chain costs vs. sales is a way of understanding supply chain costs as a portion of total sales; this percentage can be benchmarked against others in your relevant industry.  

Inventory Turnover

Inventory turnover identifies the number of times a business’s inventory has been sold during a certain timeframe. This is a helpful metric for sales, marketing, fulfillment, and planning processes.

Order Cycle Times

Order cycle time refers to the average time taken to ship out an order from when it was placed, excluding the actual shipping time. The shorter the order cycle time, the more responsive the company is toward customer orders.

Use of Packing Materials

Use of packing materials is an easily trackable metric that gives you a view into the amount and cost of packing materials used. Ideally, you would set a benchmark and re-evaluate as needed.

Warehousing Costs

Warehousing costs help businesses to understand the cost of distribution and management of time in warehouse facilities, a critical component of a healthy supply chain. This can include costs such as labor, rent, utilities, equipment-related expenditures, materials, and information systems.

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