How to Measure Supply Chain Performance

Summary

Effective supply chain performance is measured across four key areas: planning, operations, delivery, and post-delivery. Key performance indicators (KPIs) like stock turnover, planned vs actual production, order lead time, order fulfillment, and invoice accuracy help identify areas for improvement. Monitoring these KPIs ensures efficient stock management, timely deliveries, accurate order fulfillment, and customer satisfaction, ultimately optimizing the entire supply chain.

Takeaways

• 😀 Measuring supply chain performance helps identify what's working and what needs improvement.
• 😀 There are four key areas to focus on when measuring supply chain performance: planning, operations, delivery, and post-delivery.
• 😀 Planning performance can be assessed using stock turnover and planned versus actual production metrics.
• 😀 Stock turnover helps balance inventory levels while ensuring enough stock is available for customers.
• 😀 Comparing planned production with actual production figures allows adjustments for better efficiency.
• 😀 Operations performance is assessed using order lead time, which tracks the time from order placement to delivery.
• 😀 On-time order delivery is critical for satisfying customers and ensuring smooth operations.
• 😀 Delivery performance is measured through order fulfillment (correct quantity, quality, and timeliness) and on-time delivery.
• 😀 Low order fulfillment indicates inefficiencies in the delivery process, which can lead to customer dissatisfaction.
• 😀 Post-delivery performance is measured by returns and invoice accuracy, with late or incorrect invoices causing customer dissatisfaction.
• 😀 Key performance indicators (KPIs) across all areas help identify strengths and areas for improvement in the supply chain.

Q & A

What is the purpose of measuring supply chain performance?

Measuring supply chain performance helps identify what's working and reveals areas that need improvement, ensuring the supply chain operates effectively.

What are the four main areas of focus in supply chain performance measurement?

The four main areas are planning, operations, delivery, and post-delivery performance.

What is stock turnover, and why is it important?

Stock turnover is the ratio of total sales to the actual inventory at a given point in time. It helps maintain an optimal inventory level to avoid both stockouts and overstocking.

How does comparing planned versus actual production help improve supply chain efficiency?

It helps determine whether goals are being met, allowing for adjustments to production plans for better efficiency and goal alignment.

What is the key performance indicator for operations in the supply chain?

The key performance indicator for operations is order lead time, which measures the time between a customer placing an order and receiving it.

Why is on-time delivery critical in the supply chain?

On-time delivery ensures customers receive their orders as promised, helping to avoid additional costs such as returns and dissatisfied customers.

What does order fulfillment measure, and how does it reflect the efficiency of a supply chain?

Order fulfillment measures how many orders are delivered correctly, on time, and with the right quality. High order fulfillment indicates an efficient supply chain.

What are the consequences of low order fulfillment rates?

Low order fulfillment leads to inefficient delivery processes, customer dissatisfaction, and potential financial losses due to returns and delays.

What indicators are used to measure post-delivery performance?

The key indicators are returns and invoice accuracy. Returns occur if products are wrong or defective, and invoice accuracy ensures timely payments.

Why is accurate invoice management important in supply chain performance?

Accurate invoices ensure timely payments, reducing errors and disputes. Mistakes in invoices can lead to delays in payment and customer dissatisfaction.