How can supply chain management improve a company bottom line?

Can your Logistics Management performance be optimized with KPIs or Metrics??

Covid 19 followed by the Suez Canal blockage by Ever Geven in March has disrupted and wreaked global Supply Chain to a standstill.

These events have created some significant challenges for worldwide Supply Chains.

While companies are now starting recovery, it’s essential to focus on how to gain competitiveness. This requires a reliable, efficient and responsive Supply Chain.

So how can an organization pinpoint opportunities for improvement ? and balance customer demands with their needs for lower costs and enhance efficiency? Metrics or Key Performance Indicators (KPIs) are the obvious solutions.

Indeed, monitoring metrics or KPIs improves organizational alignment and enables agility and ultimately leads to greater customer satisfaction.

In many industries, margins are tight, and competition high; driving inefficiencies out of one’s supply chain is a way to improve the bottom line.

Logistics KPIs are precious witnesses to the health of a company and guide the decision-making of supply chain managers.

They are valuable data for shaping logistics strategy, and can help business continually improve and quickly achieve goals.

Metrics selected should be meaningful ; feasible and cost-effective to measure. For example, performance data could be shipping and arrival dates, shipment status, fill rate, on-time delivery variance, orders shipped complete, stock out frequency, number of defects, response time to inquiries, customer complaints, and so on.

Here below are some logistics KPIs which optimize one company supply chain operations :

1. Perfect Order, Supply chain reliability

A perfect order is an order in which the right product, the right quantity, the right condition, the right place, the right time, the right customer, the right cost are satisfied.

In short, it is the percentage of orders, meeting delivery performance with complete and accurate documentation and no delivery damage or defects.

2- Supply Chain Cycle Time, Supply chain responsiveness

This metric is an excellent indicator of the overall efficiency of your supply chain. A shorter cycle means the process is flexible, agile and responsive to environmental changes. Tracking supply chain cycle time identifies existing or potential problems, so your business can take corrective action. For each individual order, this cycle time starts with the order receipt and ends with customer acceptance of the order. Agility in the supply chain is its ability to respond to market changes and remain competitive.

3- Cash-to-Cash Time (C2C)

Also known as cash conversion, C2C measures the time between when a company pays suppliers and when it receives cash from customers. The C2C cycle is made up of three supply chain measurements: days of inventory, days of payables, and days of receivables.

4. Fill Rate or Customer service ratio

The customer service ratio measures customer service levels based on the percentage of product delivered compared to the amount ordered by the customer. The most basic calculation is full orders delivered complete and on time

In a make-to-order company, it is usually some comparison of the number of jobs shipped in a given time period compared with the number of jobs that were supposed to be shipped in that time period.

Knowing your fill rate is important because it represents the sales you can recover or service better if you improve inventory performance.

5. Inventory Turnover

Inventory turnover is the number of times inventory cycle turns over during the year. It’s an important metric as it provides an accurate, comprehensive image of the efficiency of the entire supply chain process. Shortening lead times and making to order results in increased inventory turns.

Logistics dashboard is an essential tool which supplies with valuable insights on supply chain metrics ad has?an impact on business??success. Therefore Supply chain management efficiency efforts are?powerful levers that improve?a company profitability.