An Introduction to Supply Chain Metrics & KPIs
This article, from business software provider NetSuite, lays out a Comprehensive Guide to Supply Chain Metrics, including 22 top supply chain metrics and KPIS and the formulas to calculate them.
At FocusCFO, our CFOs work closely with owners and management teams to evaluate whether the right metrics are being collected an analyzed in order to monitor the health of the supply chain and know whether investments are paying off.
What Are Supply Chain Metrics?
Supply chain metrics are the numbers and ratios a company tracks to measure how efficiently it delivers goods to customers. Keys to efficiency in supply chain execution include how well and cost-effectively companies drive the flow of materials from procurement to delivery, including activities like production, warehousing, and transportation.
The right metrics shed light on where to invest to achieve maximum returns.
- It’s vital to employ metrics and KPIs to assess how your entire business is performing, including it’s supply chain.
- Important KPIs for finance include cash-to-cash cycle times and gross margin return on investments.
- Inventory turnover ratios and inventory velocity are two central gauges of how well your company manages its intake and outflow of goods.
- A central KPI dashboard accessible to all stakeholders helps leaders stay on the same page and prioritize resources.
Supply chain leaders are constantly seeking an edge—they know that even a modest technical or process improvement, multiplied on the scale of modern supplier networks, can pay huge competitive and cost-saving dividends.
Because there are many metrics that can add value, it is advisable for companies to divide supply chain KPIs into tiers based on functions. Your CFO can help you decide on a bucket of top metrics that are most important to the business and watch some lower-tier KPIs occasionally.
The NetSuite Guide outlines 22 top supply chain metrics and KPIs, provide the formulas to calculate them, and discuss how dashboards can help track the success of your improvements and updates.