- August 01, 2023
- 4 read
Top 5 Supply Chain KPIs and Metrics To Track
As you likely know, an efficiently managed supply chain can make all the difference in meeting customer demands, minimizing costs, and gaining a competitive edge in the industry. But how can you tell what's working, what isn't, and where there's room for improvement? That's where supply chain KPIs come in.
Supply Chain KPIs: The Basics
Key Performance Indicators (KPIs) are indispensable for pursuing supply chain excellence. These metrics act as the compass guiding supply chain managers and decision-makers toward more informed and data-driven choices.
With these insights on hand, businesses spot bottlenecks, streamline processes, and boost their overall performance.
Today, we will explore the symbiotic relationship between KPIs and supply chain management.
Why Track Supply Chain Metrics
Before diving into the top five supply chain KPIs to track, let's take a closer look at the value they bring.
Here are some key reasons businesses should prioritize tracking these metrics:
Visibility and transparency
Supply chain KPIs offer a clear and comprehensive view of the entire supply chain process.
Remember, by tracking critical metrics, businesses can:
- Identify potential issues
- Track performance
- Ensure transparency across various stages of the supply chain
KPIs serve as a benchmark for evaluating the performance of different aspects of the supply chain, such as inventory management, transportation, and order fulfillment. This evaluation helps businesses identify strengths and weaknesses, enabling them to make targeted improvements.
Data-driven decision-making is at the core of successful supply chain management. KPIs provide real-time insights into the supply chain's health. These insights allow managers to make informed choices and optimize operations.
Supply chain KPIs encourage a culture of continuous improvement. By monitoring metrics regularly, businesses can spot trends, make necessary adjustments, and refine their processes to enhance efficiency and reduce costs.
Meeting customer demands is crucial for any business's success. KPIs help ensure you deliver products on time and customers receive exceptional service. The result? Increased customer satisfaction and loyalty.
The Top Five Supply Chain KPIs to Track
While numerous supply chain metrics exist to consider, certain KPIs have proven to be particularly valuable for driving supply chain excellence. Here are the top five KPIs that businesses should track:
On-Time Delivery (OTD)
This KPI measures the percentage of orders delivered to customers on or before the promised delivery date. OTD directly impacts customer satisfaction and retention, making it a vital metric for supply chain performance.
If you want to boost this supply chain metric, one of your first steps is implementing better demand forecasting and collaborating closely with suppliers to ensure timely deliveries of raw materials.
Inventory turnover calculates how quickly a company sells and replaces its inventory within a specific period. A higher inventory turnover generally indicates efficient inventory management, reducing holding costs and the risk of stock obsolescence.
If this supply chain KPI isn't where you want it, consider adopting just-in-time (JIT) inventory management principles, which involve ordering and producing goods only when needed.
Order accuracy measures the percentage of orders fulfilled correctly without errors or discrepancies. A high order accuracy rate enhances customer trust and reduces the cost of returns and replacements.
Invest in robust order management systems and automated order processing to improve order accuracy and minimize human errors. Conducting regular quality checks and audits on order fulfillment processes and providing training to warehouse staff can further enhance accuracy.
Lead time measures the time it takes for an order to be processed, manufactured, and delivered to the customer. Reducing lead time enhances responsiveness and agility—crucial qualities in a competitive market.
However, improving this KPI is no small feat. Reducing lead time requires optimizing and streamlining processes across the supply chain. You'll need to collaborate closely with suppliers to negotiate shorter lead times for raw materials and components.
Supply chain cycle time
This KPI represents the total time it takes for a product to move through the entire supply chain, from raw material procurement to delivery.
Businesses can identify and eliminate bottlenecks in the supply chain by conducting thorough process mapping and analysis. Employing technologies like IoT (Internet of Things) and AI (Artificial Intelligence) can enhance supply chain visibility and optimize coordination between different stages.
Did you know we've partnered with the Port of Oakland to help bring digitization to ports? Learn more here!
Supply Chain KPI FAQs
Finally, let's review three top questions people have about supply chain metrics, so you have all the answers you need in one place.
What are the five measures of supply chain performance?
The five key measures of supply chain performance are:
- On-Time Delivery (OTD)
- Inventory Turnover
- Order Accuracy
- Lead Time
- Supply Chain Cycle Time
What is the most important KPI for the supply chain?
Every business is bound to prioritize different KPIs based on its specific goals and challenges. Still, one of the most universally essential KPIs for supply chain management is "On-Time Delivery" (OTD).
What are the top 3 KPIs metrics that are critical for customer support to track?
In terms of customer support in the supply chain, three KPI metrics stand out as being the most telling:
- Customer response time: Measures how quickly customer inquiries or issues are acknowledged and responded to by the customer support team.
- First-time resolution rate: Tracks the percentage of customer issues or complaints resolved during the first interaction with the customer support team without requiring further follow-ups.
- Customer satisfaction score (CSAT): Assesses the level of satisfaction among customers with the support they receive, usually gathered through post-interaction surveys or feedback mechanisms.
Time and time again, supply chain KPIs prove to be indispensable tools that provide valuable insights into the performance of the supply chain, helping businesses identify areas for improvement and make data-driven decisions.
At QuayChain, we take supply chain management to the next level with the power of artificial intelligence. By utilizing AI, we generate proprietary data to digitize the supply chain, helping businesses make more informed choices and drive efficiency across their operations.
To learn more about how QuayChain is revolutionizing supply chain management with AI-driven solutions, get to know us and explore the cutting-edge technologies shaping the future of supply chains.
Discover our solutions today to see how our AI-powered platform can transform your supply chain and propel your success in the dynamic and ever-changing business landscape.
Did you learn a lot about supply chain KPIs in this post?
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