15 Supply Chain Metrics & KPIs

You Need For A Successful

Business

"It's not the organizations that are competing. It's the supply chains
that are competing." - Wael Safwat, SCMAO

The supply chain is essentially the backbone of any business: a living

ecosystem that ensures the smooth, efficient, and consistent
delivery of a product or service from a supplier to a customer. And if
your supply chain is inefficient, ineffective, or fragmented, it could
seriously hinder your commercial prospects. That's why it's critical to
monitor and optimize relevant supply chain metrics.

In this post, we will cover essential supply chain KPIs and deliver bits
and details about the top 15 that you should track. Finally, we will
show how to combine those metrics with the help of modern KPI
software and create professional supply chain dashboards.

But first, let's start with the basic definition.

:
 What Are Supply Chain Metrics?
Supply chain metrics are defined by establishing specific parameters
which are used in quantifying and defining supply chain
performance. The metrics can be utilized in the inventory accuracy
and turnover metrics, to the inventory-to-sales ratio.

Concerning the continual growth, evolution, development, and

success of your company’s supply, fulfillment, and delivery efforts,
supply chain performance metrics are the most invaluable tools
available at your fingertips. By collecting, curating, and analyzing key
supply chain metrics (SCM) you will be able to spot inefficiencies
within your ecosystem while capitalizing on your current strengths
and establish goals that will help your supply chain scale with the
success of your company. While there are numerous KPI examples
you can select for your assessment and optimization, we have
focused on a list that will enable you to identify potential bottlenecks
and ensure sustainable development.

Our Top 15 Supply Chain Metrics Examples

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.

That said, here we’re going to look at the top 15 supply chain metrics
that will help you, and your business, work toward a bright and
prosperous future.

1. Cash-to-cash Time Cycle

:
 This priceless supply chain metric will help you calculate the length
of time required to transform your resources into bonafide cash
flows. 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. 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.

2. Freight Bill Accuracy

Shipping and freighting your items from supplier to warehouse or

warehouse to the consumer is vital to the success of your entire
operation, and any issue or error can prove harmful with time and
investments being wasted.
:
 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. Here is how freight bill accuracy
is calculated:

(error-free freight bills / total freight bills) * 100

3. Perfect Order Rate

This particular insight is one of the most critical supply chain KPIs for
businesses operating in a multitude of sectors. 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. The higher the
perfect order rate, the better, because this KPI has a direct impact on
your customer retention and loyalty levels.
:
 4. Days Sales Outstanding (DSO)

The days sales outstanding (DSO) KPI measures how swiftly you are
able to collect or generate revenue from your customers.

Essentially, a low, or healthy, DSO number means that it takes a

business fewer days to collect its accounts receivable. 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. 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.

5. Inventory Turnover

One of the most superbly helpful supply chain KPI available today
focuses on logistics KPIs and helps a business understand the
:
 number of times its entire inventory has been sold over a certain time
frame: an incredible indicator of efficient production planning,
process strategy, fulfillment abilities, and marketing and sales
management. 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.

6. Gross Margin Return On Investment (GMROI)

Every business, regardless of service, product, or sector strives to

achieve the best return on investment (ROI) for each and every
commercial activity it undertakes. Maintaining a consistently solid
ROI is the bread and butter of ongoing eCommerce success.

In supply chain metrics, the GMROI offers a clear representation of

the gross profit gained for every AED (or $, £, €, ₺) of the average
investment made in your inventory: a calculation achieved by dividing
the gross profit by the average inventory investment. 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.

7. Warehousing Costs
:
 We continue our list of supply chain metrics (SCM metrics) with the
warehousing costs. The cost distribution and the management of the
time and space of your inventory are critical in establishing a healthy
supply chain. While such costs vary from warehouse to warehouse,
it's important to measure this indicator and review it regularly in
order to identify opportunities and decrease unwanted costs. The
management of the warehouse facility includes various costs such
as labor costs, warehouse rent, utility bills, equipment costs,
material, and information-handling systems as well as costs related
to supplies, ordering, and storing the goods.

Keeping the costs on the lower side of the spectrum starts with
being well informed about all the processes that are happening at
the warehouse facility and how exactly it operates. That way, you will
have a better chance to reduce unnecessary costs and introduce
steps to manage operations more efficiently as well as adjust them
when needed. Besides, if you collect your information on a regular
:
 basis with the help of a professional online reporting tool, you will
have the opportunity to rely upon your reports and make faster, more
accurate business decisions.

8. Supply Chain Costs

Costs are one of the supply chain key performance indicators that
shows relevant costs that are associated with supply chain
management. These costs can include planning, managing teams,
sourcing, delivering, etc., and it will show how efficient parts of the
company are. It's critical for any business to increase its profit and
reducing costs is one of the strategies that is often applied. That
way, the company can identify if there is any space for improvement
without the need to increase sales in the process.

However, it's essential to evaluate what kind of impact the cost

reduction will have on the whole supply chain. For example, if your
transportation costs are high and you decide to push the speed and
weight of trucks, you can risk accidents and potentially detrimental
consequences for your business. You may also keep in mind that
cutting costs in one area of the supply chain can increase in another
so careful analysis in this part is essential. You can perform a
benchmark or compare yourself with competitors in order to know
whether this KPI in supply chain is steady and healthy or you need
additional adjustments to be competitive. If you want to learn more
about costs and the financial side of the business, we suggest you
read our guide on financial graphs.

9. Supply Chain Costs vs. Sales

:
 Our list of supply chain KPIs and metrics continues with additional
cost analysis, connected to sales. This indicator basically calculates
your supply chain costs as a portion of sales and, in essence, it will
give you an indication of how much you are spending relative to a
whole. By calculating such supply chain management metrics, you
will be able to perform a healthy spend analysis and establish
processes for potential savings. Optimizing the supply chain means
reducing costs as much as possible but here, as we mentioned, it's
important to cut costs where it makes sense, and not simply doing it
to bring down the numbers. The reason is simple: if you cut costs
that are consequently increased in another part of your supply chain,
the whole process is not very useful.

To know whether you're successful in comparing your costs with

sales, you can simply research industry benchmarks or compare
your business with competitors. That way, you will know whether
your percentage is too low or too high. In any case, it's critical to
:
 compare your data with the averages of the relevant industry.

10. On-time Shipping

An excellent indicator of how long you may need to ship a particular

type of order to a client, customer, or partner, this KPI will allow you
to set a benchmark shipping time relative to each product which, in
turn, will allow you to optimize your shipping and delivery processes,
reducing turnover time, and boosting customer satisfaction levels.

11. Delivery Time

Delivery time is a KPI for supply chain that focuses on improving

service: it measures the amount of time needed from the moment
the order is shipped to the delivery on the customers' doorstep. The
order needs to be correctly prepared and the destination reached
within a reasonable time frame. Otherwise, the general service may
:
 be affected and the impression you leave on your customers: no one
likes to wait for 9 months to get their delivered goods.

It makes sense to reduce this supply chain management KPI and

create more precision in informing clients when the goods or
products will be delivered. It's much better to state that the delivery
will arrive in 4-5 business days in comparison to 1-5 business days.
Moreover, if you manage to specify the time, even better for your
service. You can also offer special delivery services to decrease the
delivery time and see how your customer satisfaction, in the long
run, rises. You can even include supply delivery metrics in your
performance dashboard focused on the supply chain, and monitor it
more closely. Please, see the bottom of this article to take a closer
look at a supply chain KPI dashboard.

12. Return Reason

:
 The return reason supply chain metric offers an astute insight into
the various motives causing your customers and clients to return
their orders – a piece of information that is priceless to the ongoing
success of an eCommerce business. 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. By gaining this level of
insight, you stand an excellent chance at decreasing returns,
boosting profits, and improving cash flow as a result.

13. Inventory To Sales Ratio

One of the key supply chain metrics on our list, the inventory to sales
ratio, is critical to track since inventory is one of the most important
instruments in your supply chain. This metric measures the amount
:
 of inventory for sale in comparison to the actual quantity that is sold,
expressed as a ratio. It will help you to adjust your stock in order to
ensure high margins and tell you how well your company is dealing
with unexpected situations.

Here the main point is that to keep a healthy ratio, you need to know
how to balance it properly. It would make sense to keep the ratio not
too high since it could affect your inventory turnover rates so the
balancing act is essential. A modern dashboard maker can help you
in creating an interactive inventory KPI that will update the data
automatically and you can monitor the performance in real-time.
Moreover, you will be able to adjust your future strategies and ensure
there is an optimal ratio, specific to your business.

14. Inventory Velocity (IV)

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.

Calculated by dividing the opening stock by the sales forecast for the
following period, the IV is a KPI that will help you optimize your
inventory levels, give you a greater chance of meeting consumer
demand, and prevent you from wasting money on excess levels of
stock.

15. Inventory Days Of Supply

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.
:
 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.

Supply Chain Management Dashboard

Examples
Thanks to modern online data visualization tools you can create
stunning supply chain management dashboards with all your needed
KPIs with a few clicks.

1. Supply Chain Management Dashboard

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. The next KPI of this particular dashboard is the carrying
cost of inventory, followed by inventory accuracy and out of stock
items. The goal in this example is to avoid wasting money, retain
customers, and define the stability of a business.
:
 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.

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. By drilling
down into inventory management logistics, this particular
KPI dashboard (which can also be used as an interactive dashboard)
will help you deal with unexpected supply chain situations, enhance
your stock buying practices, reduce operational as well as financial
inefficiencies, significantly improve the accuracy of your and a great
deal more. 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.

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.

2. Supply Chain Costs Dashboard

Consumer goods are another important industry that relies on

effective supply chain management. Especially when it comes to
cost optimization, there should be not much room for ignoring the
financial analysis as it can cause serious damages to the bottom line.
A comprehensive BI dashboard can help you in automating your KPIs
and ensuring you focus on what really matters: the information,
visuals, and data in front of you.
:
 On top of this supply chain metrics dashboard, you can see a quick
overview of the total net sales, total supply chain costs, and the
average cash-to-cash cycle, all-important supply chain management
metrics to start your data presentation. On the left side are
represented supply chain costs by category that includes
warehousing, transport, carrying costs of inventory, customer
service, and inventory management. Below these indicators, there is
a clear overview of the supply chain costs vs sales. This KPI is
additionally broken down by calendar week and compared to the
previous period. We have already analyzed this metric so we won't
go into much detail but the important thing to keep in mind is to track
this metric and perform a more detailed spend analysis and, finally,
adjust if needed.

On the right side of this supply chain performance dashboard are

additional cost-related essential metrics: the cash-to-cash cycle and
:
 carrying costs of inventory. These metrics are essential if you want to
know how much cash you need to finance ongoing operations and
how much profit you can make based on your inventory. Such a
dashboard you can easily create with a supply chain dashboard
software.

Summary & Next Steps

Recent studies suggest that 79% of companies with high-
performing supply chains earn a revenue growth greater than the
average within their sector. Moreover, the usage of the software is
growing 9% year over year, showing that this clear-cut value of
developing an efficient supply chain lays within modern solutions to
improve a company's performance.

That's where the power of the dashboard comes into play. If you
want to create a data-driven company, save countless hours in the
analysis processes, and work with real-time data, dashboards are a
great way to do so. And for more data-driven wisdom, check out
these great dashboard designs that you can get inspiration from.

Here is a summary of our top 15 supply chain KPIs we discussed in

detail:

1. Cash-to-cash Time Cycle

2. Freight Bill Accuracy
3. Perfect Order Rate
4. Days Sales Outstanding (DSO)
5. Inventory Turnover
6. Gross Margin Return On Investment (GMROI)
7. Warehousing Costs
8. Supply Chain Costs
9. Supply Chain Costs vs Sales
:
 10. On-time Shipping
11. Delivery Time
12. Return Reason
13. Inventory To Sales Ratio
14. Inventory Velocity (IV)
15. Inventory Days Of Supply

If you want to track and visualize your supply chain metrics and KPIs
with ease, you can try our software for a free 14-day trial!
: