Building a customer-centric supply chain doesn’t happen without planning and strategic decision-making. In fact, if you want to achieve the dream of having a supply chain that has direct communication with the customer, you’ll need to make sure you’re tracking the efficacy and performance of your despatching operations.
Mastering supply chain management requires the ability to juggle complex dependencies between teams, departments and any partner companies you may have. Measuring the success of particular factors like procurement, error-free orders, inventory etc becomes a natural area to apply the right metrics.
So we scoured the industry's top resources to find out which supply chain metrics were the most commonly used, and we’ve condensed them below. But first, what are they exactly?
A short introduction to supply chain metrics
If you’re in need of something to assist you making fast and error free decisions, then measuring success through metrics just may be the right method for you. Making decisions on the fly in a fast paced environment, opens up the need for easy to access and interpret key performance indicators.
This is where metrics comes in. Say you want to figure out how long your loyal customers have to wait for their purchase order to be received, but you’re unsure how to properly investigate this. Maybe you look into a few transactions, but the data isn’t consistent enough to give you a holistic view of how your business is performing on the whole.
Then you come across the metric customer order cycle time, and it allows you to measure exactly how long it’s taking for customers to receive their POs after they committed to paying. And there you have it; an easy way to measure the performance of a particular metric in a complex supply chain.
Let’s take a look at some of the most commonly used metrics for supply chain success.
4 top supply chain metrics
1. Perfect Order Measurement
In a business landscape setting in to focus heavily on providing a great customer experience, perfect order measurement is one of the most important metrics you’ll want to keep an eye on.
Perfect order measurement will keep you on top of how many orders are fulfilled without any errors. They are broken down by:
- Procurement 99.99% perfect
- Production 99.12% perfect
- Transportation 99.02% perfect
- Warehousing 99.98% perfect
Using this metric will make it possible for you to track the error-free at every stage of a purchase order.
2. Cash to Cash Cycle Time
If you’re interested in getting paid (which all of us are!) then you’ll want to keep an eye on your cash to cash measures. Put simply, this is the number of days between paying for materials and getting paid for product.
You’ll need to figure out the materials payment date to the customer order payment date. You would typically average these out for any given period of time that is significant in the operation of your business (for example, each quarter or season).
A fast cash to cash rate should indicate a lean and profitable supply chain, but if you have a lot of time where capital is tied up, it should be a good indication of some kind of inefficiency occurring somewhere in your business.
3. Fill Rate
Fill rate definitions and calculations vary greatly depending on what you choose to focus on. In a general sense, the fill rate measures shipping performance and can be an important indicator of customer satisfaction and transport efficiency.
An easy way to think about fill rate is the total number of items shipped, compared to the actual amount of items ordered. So say you have a customer that has ordered 20 different items, and you were only able to ship 16 of those items in the first shipment. That would mean you have a fill rate of 16/20.
A customer does not need to know that you have a great fill rate. But they do want to receive all the items they ordered quickly and in one go. This is not always possible, but it’s an important metric to consider in a customer centric supply chain.
4. Freight Cost Per Unit
In industries driven by eCommerce, or have high inventory turnover – especially of small packages – it’s worth looking into your freight cost per unit. Simply divide the total freight by the number of items shipped to see how much it costs per unit to send. If your freight cost per unit is high, it may be worth looking into more efficient means of shipping your inventory.
If you’re keen to learn more about supply chain metrics, check out our article on 6 key supply chain metrics you should consider benchmarking.