Key Takeaways: Supply chain KPIs are essential for tracking and enhancing the effectiveness of your supply chain operations. Inventory turnover, customer order cycle time, fill rate, perfect order rate, and freight cost per unit are some crucial KPIs to monitor. Accurate KPI tracking and decision-making depend on efficient data collection and analysis. KPIs can be used to pinpoint areas that need improvement, establish performance targets, and track advancement towards those targets. Supply chain management is a vital aspect of any business, as it covers everything starting from obtaining raw materials to delivering goods to end customers. So, in order to keep meeting customer demands, you must ensure that you keep track of your supply chain KPIs. As per report, the global supply chain management was estimated to be around $16 billion in 2020. This is going to increase as a result of the development of international trade. Using these analytics help business owners make informed decisions to improve strategic, operational, and overall efficiency. In this blog, we’ll delve into the top supply chain KPIs including inventory turnover, fill rate, and cash to cash cycle time. So, let’s get started on how you can choose the key metrics and enhance your supply chain operations. Forget Spaghetti Routes, Optimize Routes for Your Entire Team with Upper Start a 7-Day Free Trial Table of Content Understanding Supply Chain KPIs 8 Key Supply Chain KPIs to Track and Measure Automating Supply Chain KPI Tracking with Upper Frequently Asked Questions Conclusion: Leveraging Supply Chain KPIs for Operational Excellence Understanding Supply Chain KPIs A key performance indicator (KPI) is a reliable way to measure the performance of a particular aspect in business. A supply chain KPI is used to track the effectiveness of various processes such as logistics, inventory management, and customer service, which are important for business development. Supply chain KPIs help you see how well your operations are running. They show you what’s working and what needs improvement. By tracking these metrics, you can make smart decisions to improve your business. The importance of selecting relevant KPIs Choosing the right KPIs is crucial for your supply chain success. Not all metrics are equally important for every business. You need to pick the ones that align with your goals. Relevant KPIs give you a clear picture of your supply chain health. They help you: Spot problems early Make data-driven decisions Improve efficiency Reduce costs Enhance customer satisfaction If you’re occupied with supply chain problems like maintaining supply chain costs and inventory-to-sales ratio, there are high chance that your customers will start looking elsewhere to buy items. By analyzing the right supply chain metrics, you can understand the areas of improvement and optimize operations to drive growth. How to determine your most crucial supply chain metrics Selecting the best KPIs for your business takes some thought. Here’s how to do it: Define your goals: What do you want to achieve? Identify key processes: Which parts of your supply chain are most important? Consider your industry: What metrics matter most in your field? Look at your pain points: Where do you often face challenges? Think about your customers: What affects their satisfaction? Remember, less is often more. Focus on a few key metrics rather than trying to track everything. This helps you stay focused and take action. Getting an all-round perspective on key performance indicators allows you to take appropriate action in achieving your desired benchmarks. By choosing the right KPIs and tracking them regularly, you can stay on top of your supply chain performance. This leads to better decisions, happier customers, and a stronger business overall. 8 Key Supply Chain KPIs to Track and Measure 1. Inventory turnover Definition and formula The KPI that measures the number of times your inventory is sold and replaced in a given time period is inventory turnover or inventory velocity. A high inventory velocity means that inventory is being managed efficiently and sold quickly. So, there’s an area of improvement if you are experiencing a low turnover rate. You can calculate the inventory turnover ratio as below: Inventory turnover ratio = Cost of goods sold (COGS) / Average inventory value in that period Insights and applications Calculating your inventory turnover ratio regularly is a good way to maintain levels of overstocking and understocking of products. This KPI (inventory-to-sales ratio) measures how fast your inventory is sold after you buy it. 2. Customer order cycle time Definition and formula Customer order cycle time shows the time between a customer placing an order and receiving it. It is a key indicator of your company’s supply chain efficiency. Customer order cycle time = actual delivery date – date of order Insights and applications This metric highlights the efficiency of the entire order process, from receipt and processing to delivery. A long cycle time can point to issues with logistics, supplier delivery, or customer service. To reduce customer order cycle time, you can focus on optimizing delivery routes, improving your logistics operations, and refining your customer support. 3. Fill rate Definition and formula Fill rate measures the percentage of customer orders that are successfully fulfilled on the first attempt. The formula to calculate the fill rate: Order fill rate = ((total number of Items – number of shipped items) / total number of items) * 100 Insights and applications A high fill rate indicates a successful order fulfillment process and strong customer satisfaction. A low fill rate, on the other hand, suggests inventory management or logistics issues, potentially affecting customer satisfaction and revenue. This KPI helps you ensure that products are readily available for on-time shipments, preventing stockouts or delayed deliveries. 4. On-time delivery performance Definition and formula On-time delivery performance measures the percentage of orders delivered on or before the promised delivery date. You can calculate it as below: On-time delivery = (Number of on-time orders / Total number of orders) * 100 Insights and applications This KPI is critical for ensuring customer satisfaction. A low on-time delivery rate may highlight weaknesses in your logistics, routing, or supplier relationships. Improving this metric often requires upgrading delivery processes and implementing software for efficient route planning and tracking. Start Making On-Time Deliveries with Upper Want to make your customers happy with timely deliveries without compromising on your efficiency? Upper makes your routing process simple and quick. Try Upper for FREE 5. Perfect order rate Definition and formula Perfect order rate calculates the percentage of orders delivered on time, complete, and without damage. Perfect order rate = (Number of perfect orders / Total number of orders delivered) x 100 Insights and applications A higher perfect order rate shows that your supply chain is functioning smoothly and driving growth. A low rate due to damaged goods or delayed deliveries could result in dissatisfied customers, lost revenue, and high return rates. This KPI helps identify areas for improvement in your warehouse and delivery operations. 6. Cash-to-cash cycle time Definition and formula Cash-to-cash cycle time measures how long it takes to convert investments in resources into cash from sales. Cash-to-cash number of days = Payment date of materials – Customer’s payment date Insights and applications A shorter cash-to-cash cycle is desirable, as it indicates efficient resource management and faster inventory turnover. Reducing excess inventory and improving your forecasting methods are key to optimizing this KPI and ensuring consistent cash flow. 7. Days sales outstanding rate Definition and formula Days sales outstanding (DSO) is the average number of days it takes to collect payment after a sale. DSO rate = (Accounts receivable / Net credit sales) * Number of days Insights and applications This KPI directly impacts your cash flow. A high DSO indicates that customers are slow to pay, potentially causing cash flow issues. Improving credit and collections processes can help manage DSO, ensuring a healthier cash cycle. 8. Carrying cost of inventory Definition and formula Carrying cost of inventory measures the total costs associated with storing and maintaining inventory. Carrying cost = (Total carrying cost) / (Total value of inventory) * 100 Insights and applications A low carrying cost indicates effective inventory management, while a high cost may signal inefficiencies. Reducing inventory carrying costs can involve balancing inventory levels, increasing turnover, and optimizing your supply chain processes. Automating Supply Chain KPI Tracking with Upper Now that you know how to analyze the crucial supply chain KPIs, you might want to automate your delivery route planning method. As you have so many metrics to work upon, scheduling delivery routes by adding addresses manually is a tedious task you must avoid. Upper is here to lower down the extra layer of burden from you and here’s how: 1. Route optimization If you have delivery orders across various routes, Upper has your back. You can create multi-stop delivery routes and seamlessly assign them to your delivery drivers. Moreover, you can schedule optimized routes for months in advance and relax as your packages are delivered on time. 2. Reducing manual dependencies If you are tired of manually planning delivery routes, the best thing to do is give Upper a shot. Upper’s excellent route optimization algorithm helps find the best routes in seconds. You simply need to import addresses from your spreadsheet and let Upper optimize delivery routes for you. 3. Driver performance enhancement Whether you are running a delivery business for food or medical supplies, Upper helps you frequently or weekly analyze the drivers’ performance by generating in-detail reports. Thus, you can get help from past records to decide whether to make changes to the delivery operations or not. 4. Fuel expense savings Another factor in the supply chain logistics is the rising fuel prices. You can save fuel expenses by adding delivery preferences such as avoiding tolls, ferries and highways. Upper lets you assign optimized and cost-effective routes so your drivers can get going instantly. Businesses can reduce transportation costs, lower fuel usage, and improve delivery efficiency by optimizing routes using the Upper. Explore more about using Upper and make your last mile delivery operations automatic by signing up for a 7 days free trial today! Level Up Your Delivery Performance with Upper Get rid of burdensome route planning and make cost-effective deliveries in the least amount of time. Schedule multi-stop routes for different drivers within seconds. Start Using Upper Frequently Asked Questions Why is it important to choose the right KPIs for my supply chain? Selecting the right KPIs is essential for effectively analyzing the supply chain performance for any problematic areas of improvement. By keeping track of the most relevant KPIs through the supply chain metrics dashboard, you can get actionable insights to various supply chain processes to boost performance in your business. How do I determine the most relevant KPIs for my business? The KPIs relevant to your business will be based on your specific business goals and how they associate with your supply chain. You can determine your KPIs by taking appropriate measures as below: Identify your goals Understand industry benchmarks Consider multiple perspectives (stakeholders, suppliers, and customers) Track both leading and lagging indicators Be specific and actionable Test and evolve What are the best practices for tracking and analyzing supply chain KPIs? Here are the best practices to track and analyze supply chain KPIs: Identify which KPIs to track Collect and analyze data Locate areas for improvement Implement the required changes Keep monitoring and reviewing KPIs regularly Conclusion: Leveraging Supply Chain KPIs for Operational Excellence Choosing the most relevant KPIs is important to track and analyze the performance of supply chains. Businesses can increase supply chain responsiveness, streamline processes, and get a leg up on the competition with the right KPIs in place. The best way to conduct an in-depth supply chain analysis and see all of your metrics under one umbrella is by getting a supply chain KPI dashboard. Since now you know the importance of measuring these KPIs, you must upgrade your delivery route planning methods. Upper helps you get rid of manual paperwork and efficiently schedule the best routes so your delivery drivers can make faster deliveries. Sign up for a 7 days FREE trial to get Upper started. Author Bio Rakesh Patel Rakesh Patel, author of two defining books on reverse geotagging, is a trusted authority in routing and logistics. His innovative solutions at Upper Route Planner have simplified logistics for businesses across the board. A thought leader in the field, Rakesh's insights are shaping the future of modern-day logistics, making him your go-to expert for all things route optimization. Read more. Share this post:
