A supply chain is defined as the sequence of processes involved in the production and distribution of a commodity. But what is involved in the management and performance measurement of a supply chain?
First, what is supply chain management? For that we turn to a video from Wisc-Online, a repository of free high-quality educational learning materials.
Supply chain management is focused on improving the supply process from one end to the other. This includes the design, planning, execution, control, and monitoring of all activities in the supply chain.
Wisc-Online lists four main links that comprise the supply chain:
- Manufacturing and Operations
- Warehouse and Distribution Centers
Several organizational departments are responsible for a smooth chain of supply. These include:
- Customer Service
You can view Wisc-Online’s video here.
Now that we have a brief overview of supply chain management, what are the performance measurements needed to ensure an efficient and effective supply chain? We turn to two videos from Accelerated Analytics to learn of the 12 key performance indicators they recommend. They define the metrics and show how they are to be calculated.
Here are the 12 performance metrics and their definitions. See the videos for the calculations.
- Cash to Cash Cycle Time
- Number of days between paying for materials and getting paid for the product
- Customer Order Cycle Time
- How long it takes to deliver a customer order after the purchase order is received
- Perfect Order Measurement
- Percentage of orders without errors
- Fill Rate
- Percentage of a customer’s order that is filled on the first shipment
- Inventory Days of Supply
- Number of days it would take to run out of supply if it was not replenished
- Supply Chain Cycle Time
- Time it would take to fill a customer order if your inventory levels were at zero
- Freight Bill Accuracy
- Percentage of error-free freight bills
- Freight Cost per Unit
- Cost of freight on a per item or SKU basis
- Inventory Turn Over
- Number of times a company’s inventory cycles on an annual basis
- Days Sale Outstanding
- How quickly can revenue be collected from your customers
- Average Pay Period for Production Materials
- Average time from receipt of materials and payment for those materials
- On Time Shipping Rate
- Percentage of items, SKUs or order value that arrives on or before the requested ship date.
You can view Accelerated Analytics videos here: