Back in 2014, I remember talking on a webinar about Supply Chain KPIs, and when asked about my thoughts on these, I responded as follows:
1) Make them ‘meaningful’
2) Keep them simple
3) Don’t have too many
The chart below illustrates the Level 1 Supply Chain KPIs that I suggested: (these are for just one specific industry)
Please note that:
Advantage = the top 20% performers in this sector
Parity = the next 30% of organisations
Disadvantage = the lower 50%
The results in the Blue boxes are a ‘sample’ company.
In case you’re not familiar with all the KPIs in the chart above, just read on for a quick explanation of each one.
Delivery in Full (By Line)
The term “line” in this KPI refers to a line on the sales order. To clarify, a typical delivery or shipment manifest will show each SKU on its own line, showing the name of the product and the quantity ordered.
As an example, if a customer places an order for five products, the order (and the delivery manifest) will have five lines. The “delivery line fill” KPI monitors the percentage of lines (across all orders for a given time period) that were fully and completely delivered.
Delivery on Time
This KPI can be used to measure inbound deliveries (from your suppliers) or those you make to your customers. Its purpose is to monitor the percentage of sales or purchase orders that are made on time. “On time” is typically defined as whatever time window is agreed between supplier and customer.
DIFOT stands for Delivery in full and on time. This KPI is calculated by dividing the number of units/lines/orders delivered on time and in full, by the total number of units/lines/orders delivered in a given time period.
Total Supply Chain Management Cost as a Percentage of Sales
This KPI pretty much speaks for itself. If your company sells $1 million worth of goods and your total supply chain costs amounted to $100,000, total supply chain management cost as % of sales would be 10%.
Cash-to-Cash Cycle Time
This KPI measures the average amount of time elapsed between when your company releases payment for raw materials (or finished goods if your company is not a manufacturer) and when it receives cash from the end-customer.
This is a KPI that measures the rate at which your inventory is consumed, and is normally calculated by dividing the dollar value of inventory consumed in a year by the dollar value of inventory typically held in your storage facilities.
For example, if your company typically holds quantities of an SKU worth $1 million, and you consume (or issue) 10 million dollars worth of that SKU in a year, your number of stock turns would be ten.
Need More KPI Knowledge?
While the KPI explanations in this post are very brief, you’ll find a wealth of more detailed information here on the Logistics Bureau blog, as well as on that of our supply chain benchmarking and KPI consulting division, Benchmarking Success.
Editor’s Note: This post was originally published in May 2014. It has now been revamped and updated with more comprehensive information.
It’s great to find an expert who can explain things so well