Is Your Supply Chain On the Right Track? 3 Metrics to Judge Supply Chain Performance

Supply chain efficiency is integral to supply chain services and overall business success. This function integrates and connects the various business and external stakeholders. Supply chain services efficiency defines the ability of the business to manufacture high quality products, through compliant suppliers and ensures timely delivery to final consumers.

Customer satisfaction

It is the prime factor that judges business success and supply chain is the root cause of it. Thus, it is critical to measure supply chain performance.  How well you are able to measure your supply chain activities, and efficiency levels can give you a holistic idea of where your business is headed and how you can make changes to make sure business runs on the right track and customers are delighted with every single experience with the brand.

Supply chain professionals out there quite often equate cost reduction with supply chain success. They devote their entire focus on reviewing cost reduction. The more the business is able to save and reduce costs through its supply chain activity, it becomes the deciding factor of business success. But in actuality, this is a narrowed and a flawed approach. Cost reduction is indeed important since the whole purpose of running a business is profitability. But having said that, there are several other important metrics that supply chain professionals need to consider to completely understand how well the supply chain function is performing and the areas that need to be looked into to take the supply chain function and the business to the next level.

To begin with, there are three very important metrics that in no way should be missed.

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Warehouse management

Warehouse management solutions  are the supervision of non-capitalized assets (inventory) and stock items. Inventory management supervises the flow of goods from manufacturers to warehouses and from these facilities to the point of sale. A key function of inventory management is to keep a detailed record of each new or returned product as it enters or leaves a warehouse or point of sale.

Hence, in a nutshell, there are huge sums of money involved while dealing with inventory. If inventory is more than what is required, business needs to spend huge sums of money on storage, upkeep, and maintenance. On the other hand, under-stocking is also a risky proposition. If customers’ demands are not met due to a shortage of products, and this becomes a frequent occurrence, it can lead to brand and reputation depreciation. Thus, it is dangerous to be on the extreme side of the spectrum. It is critical that business maintains the optimum amount of inventory; the amount that is just right to meet the demands of the customers and an amount that requires no or fewer storage costs. If you are able to maintain your inventory levels to the right amount, it is definitely a good sign that your supply chain operations are on track.

Working capital

What is working capital?

Working capital is the cash available for day to day operations in any business. Working capital is a strong measure of a company’s short-term financial health and how effectively it is able to manage its daily operations.  Often it’s the company’s supply chain that is the first place that people look to for working capital reduction opportunities. Optimizing working capital is not about running the business on a shoestring budget, but rather it is much dependent on the kind of business that you run. It’s about understanding the current service environment and identifying whether you are over or under servicing your customers. Next, it’s about tailoring your operations to strike the right balance between service and cost.

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In today’s world, time is indeed money. How quickly business is able to conduct its operations and serve its customers is a strong judge of business and supply chain efficiency. The less time you take to receive orders, process them and finally deliver it to your customers, the better you are placed to satisfy your customers. Time becomes a competitive advantage, so business needs to carefully consider how it is able to execute the various processes in minimum time. There are a number of time measurements that company needs to take into account. Some of them are  lead time, cycle time, transit time, unloading time, delivery time, processing time, turnaround time, and delivery time.

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