Anyone who is even partially responsible for supply chain management can tell you how important it is to track the proper numbers. Metrics allow supply chain professionals to get a sense of how their team is performing and where they need to improve. Without the right data, you are essentially driving blind.
The problem with supply chain metrics is that it's not possible to track every single type of data. Companies have limited time and resources that they can devote towards monitoring KPIs, which is why it's important to pick the right metrics to keep track of.
Here are 6 of the most important numbers you should be keeping an eye on and why:
Most Important Supply Chain Management Numbers
1. Perfect Order Measurement
This tells you how often you get your orders perfect, without any mistakes. This metric is useful because it lets you know how accurate your supply chain work is: it's also valuable because you can break it down and apply it to each stage of supply chain management, from procurement to warehousing.
2. Inventory Days of Supply
This metric lets you know how quickly you would run out of supplies if you were unable to order new inventory. Looking at this metric from a supply chain standpoint, it's always better for it to be as low as possible. This number is important because it tells you whether or not you have excess inventory that is sitting around unused, wasting your valuable storage space.
3. Freight Cost Per Unit
Freight cost per unit determines how much it costs to ship each individual product or unit. This measurement is important because it tells you how efficient your shipping and packaging is. If you're paying more than you thought per unit, you may want to look into alternate solutions.
4. Value of Unusable Stock
This number is all about determining your waste. If this metric is higher than you believed, it means that you are spending too much money on inventory that is not being used, and you should consider how many items you really need to keep on hand.
5. Value of Stock Wasted
Wasted stock can deal a huge blow to your supply chain management costs. This metric is vital because it can let you know if your processing, distribution, or inventory management procedures need to be revised
6. On Time Arrivals
Whether you are receiving or shipping, this metric is important because it lets you know how punctual your shipments are. If you are receiving and you have lots of orders that are coming in late, it might be time to have a talk with your supplier. On the other hand, if you are shipping and many of your own shipments are late, you need to reevaluate your distribution process and see where you can make improvements.
Every organization will have slightly different numbers that they should track, but these metrics are important for companies in every field. Make sure that you don't just pay attention to the right metrics: you also have to act on what you learn if you want to truly improve your supply chain management to save money and better satisfy your customers.
About Michael Wilson
Michael Wilson is AFFLINK'S Vice President of Marketing and Communications. He has been with the organization since 2005 and provides strategic leadership for the entire supply chain team. In his free time, Michael enjoys working with the Wounded Warrior Project, fishing, and improving his cooking skills.