20 Essential Supply Chain KPIs for Your Business to Track
A smooth and efficient supply chain ensures products are delivered on time to the right customers, keeps your warehouse stocked and protects your business against costly disruptions. Even the smallest oversight can prevent your business from scaling — and have a devastating effect on your bottom line.
Today, with the lasting impact of COVID and additional global factors continuing to disrupt supply chains in mind, we analyze 20 key performance indicators (KPIs) designed to shore up your supply chain management.
What Are Supply Chain KPIs?
Simply put, supply chain KPIs are metrics a business uses to assess and optimize supply chain efficiency. These metrics provide quantitative insight into a company’s warehousing, transportation, purchasing and sales processes.
KPIs highlight whether your business is reaching its logistical goals and identify areas that may need improvement. Here are some key metrics your business should be tracking to ensure your supply chain is in peak condition:
20 Supply Chain KPIs You Should Be Tracking
- Cash-to-Cash Cycle Time – This valuable supply chain metric measures the length of time between your company purchasing inventory and receiving payment for said materials after a sale. In other words, it tracks the amount of time it takes to turn your inventory into cash in your accounts.
- Operating Ratio – This indicator describes the relationships between the amount of revenue your company generates and the operating expenses you accrue. To calculate, divide your total operating expenses by your total revenue.
- Gross Margin Return on Investment (GMROI) – The GMROI evaluates how much money your company makes on specific inventory items. Paying close attention to this metric can give you valuable insight into which inventory items are contributing to your bottom line — and which aren’t.
- Days Sales of Inventory (DSI) – The DSI tracks the average number of days it takes for you to sell off your inventory. A high DSI may be a sign that your inventory isn’t being managed properly or that the items you’re stocking aren’t in high demand.
- Days Sales Outstanding (DSO) – Your DSO represents how long it takes to receive payment after a sale has been made. A low DSO means that you’re collecting revenue from accounts receivable quickly and efficiently, which keeps your cash flow healthy.
- Inventory to Sales Ratio (ISR) – As the name suggests, ISR describes the ratio between the inventory you have on hand and the actual sales being made. Monitoring this metric is key to ensuring that you have an appropriate amount of stock in your warehouses.
- Inventory Turnover Ratio (ITR) – Closely related to your ISR, the ITR measures how quickly your entire inventory is sold during a specific amount of time.
- Inventory Velocity (IV) – This KPI describes the amount of inventory projected to be sold over the next quarter (or some other determined period of time). This assists in optimizing inventory to avoid overbuying slower moving inventory or blowing through your stock of high-demand items.
- Inventory Days of Supply (IDS) – This metric represents the amount of time it would take for you to sell out of your existing inventory if you weren’t to restock your supply.
- Stock Rotations – Also called stock life or stock coverage, stock rotations refer to the average number of days that it takes your company to sell through your inventory. Stock rotations give you insight into how frequently you need to be replenishing your stock to avoid selling out or overordering.
- Freight Bill Accuracy – This metric measures the precision of the orders being shipped either between warehouses or from warehouse to customer. To calculate, divide your error-free freight bills by your total freight bills and multiply by 100.
- Freight Cost per Unit – This important metric allows you to track how economically you are shipping your products. To calculate, simply divide your total freight costs by the number of units.
- Pick and Pack Cycle Time – This indicator measures the amount of time between when an item is retrieved from the shelves in your warehouse and when that item is packed and ready for shipment.
- Fill Rate – Another essential metric for meeting customer expectations and maintaining high customer satisfaction, fill rate refers to the percentage of your customer’s orders that are filled during the first shipment.
- Customer Order Cycle Time – This metric measures the amount of time between when an order is placed and when your customer receives that order. Keeping this metric low is essential for keeping your customer base satisfied.
- Return Reason – This KPI is quite straightforward, but still an important one to keep track of. By tracking the reasons why your customers are returning purchased items, you gain valuable insight into the quality of products and can analyze areas of weakness in your inventory, shipping, and other critical areas of your supply chain.
- Perfect Order Delivery Rate – This metric measures your company’s ability to deliver orders without incident or error. A high perfect order delivery rate aids in customer retention and overall satisfaction.
- Delivery Time – As the name indicates, this metric measures the amount of time needed to deliver products by tracking shipments from the moment they leave the warehouse to the time they’re delivered to a customer’s door.
- On-Time, In-Full (OTIF) Delivery – This insightful metric helps ensure that your customers are receiving the correct products in the correct amount within the agreed upon delivery timeframe.
- Service Rate – The service rate measures the percentage of products that are delivered on time. To calculate this KPI, simply divide the number of products that were delivered on time by the total number of orders received.
Partnering with a reliable third-party logistics company (3PL) is a great way to take pressure off of your team and ensure that your supply chain KPIs are where they should be for optimal business performance and growth. Contact First Call Logistics today to see how we can help you meet your freight shipping and warehousing goals.
Streamline Delivery with Flexible Storage Solutions
Speedy delivery is crucial to any growing business. First Call’s Warehousing & Distribution Services can help establish resilient supply chains, deliver products on time and achieve long-term business goals.
More Resources on Warehousing and Distributions Solutions:
- Article: Safeguarding Your Business Against Logistics Fraud
- Article: How Partnering With a 3PL Strengthens Your Supply Chain
- Article: Understanding Accessorial Charges
- Article: How to Optimize Inventory and Warehouse Management
- Article: Why Supply Chain Visibility Matters
- Article: How to Identify Weak Points in Your Supply Chain
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