Supply management is no easy feat, especially as your organization grows and your supply chain logistics become more complex.
One of the keys to simplifying supply chain management processes, though, is making sure you’re paying attention to specific metrics and KPIs (key performance indicators).
Still trying to figure out what to track? In this guide, you’ll learn 10 of the most crucial supply chain management metrics you should be monitoring.
1. Inventory Turnover
Inventory turnover tells you the number of times inventory gets sold within a specific period. This metric is calculated using this formula:
Cost of Goods Sold / Average Inventory
If you have a high turnover, that means you’re selling out of products quickly, indicating a high demand. Conversely, a low turnover might mean that you’re overstocking your products.
2. Inventory Accuracy in Supply Chain Management
Next on the list of essential supply chain metrics to monitor is inventory accuracy, which is a comparison between physical inventory and what you’ve recorded in your database.
Inventory accuracy helps to reduce carrying costs and stock outages. An inventory accuracy rate ranging from 95-99 percent is ideal.
You can calculate inventory by using this formula:
Database Inventory Count / Physical Inventory Count
3. Order Fill Rate
Your order fill rate tells you the number of customer orders that can be shipped immediately from your available stock. This number helps you see how well you meet customer demand, as well as how efficient your delivery service is.
You can calculate the order fill rate by following this formula:
Total Number of Customer Orders Shipped / Number of Customer Orders Filled x 100
A low order fill rate might indicate problems with demand forecasting and may mean you need to adjust your inventory replenishment strategy.
4. Perfect Order Rate in Supply Chain Management
Perfect order rate tells you how many of your orders ship without any errors or deviations. It tells you a lot about your storage and delivery processes and customer satisfaction rates and can help with cost management.
For an order to be considered perfect, it must arrive complete, on time, undamaged, and with the correct documentation. The formula for calculating the perfect order rate is as follows:
(Percent of orders that were delivered on time) x (Percent of completed orders) x (Percent of damage-free orders) x (Percent of orders that had accurate documentation) x 100
5. On-Time Shipping in Supply Chain Management
Another one of the most important supply chain management metrics to measure is on-time shipping rates.
As the name suggests, this metric measures the percentage of orders that get shipped on or before the requested shipping date.
You can calculate it using this equation:
(Number of On-Time Items / Total Items) x 100
6. Backorders
On the other end of the spectrum from on-time shipping is the number of backorders you experience. Backorders can’t be filled when the customer places an order.
You can calculate your backorder rate using this equation:
Number of undeliverable orders/by the total number of orders x 100.
Consistently high backorder rates point to a problem with your supply chain and may mean you need to reorder certain products more frequently.
7. Inventory Cycle Time
Also known as order cycle time, this metric tells you the average cycle time required for a customer to receive a product after they place an order. It’s calculated as follows:
Actual Ship Date – Customer Order Date
A short order cycle time points to a responsive company. Conversely, long order cycle times could mean there’s a problem with your operations that is slowing things down.
8. Inventory Days on Hand
Inventory days on hand is a supply chain management metric that tells you the average number of days required to sell off inventory. It lets you know when to restock inventory levels.
You can calculate the metric using this formula:
(Average Inventory for the Year / Cost of Goods Sold) x 365
A high inventory days on hand rate could mean you have inventory that’s hard to sell or that there’s a problem with how you’re managing it.
9. Rate of Return
The rate of return metric lets you know the rate at which items you’ve shipped get returned. You can calculate this metric using the following formula:
Total Items Returned / Total Items Shipped
If you have a high return rate, you’ll need to do some detective work to determine why so many people are dissatisfied with their orders.
10. Cash-to-Cash Time
Last on the list of critical supply chain management metrics is the cash-to-cash cycle (also known as cash conversion). This metric tells you the time between when a company sends cash to suppliers and when it receives cash from customers.
To calculate cash-to-cash time, you must know three other metrics:
- Days Inventory Outstanding (Average inventory / cost of goods sold x 365)
- Days Sales Outstanding ((Accounts Receivable / Net Credit Sales) x Number of days in a set period)
- Days Payable Outstanding (Accounts Payable x (Number of Days/Cost of Goods Sold))
Once you’ve calculated these three metrics, you can use this formula to calculate the cash conversion cycle:
DIO + DSO - DPO
How DashboardFox Can Help You in Supply Chain Management
Keeping a close eye on key metrics is fundamental for success in supply chain management. However, monitoring these metrics doesn't have to feel like an uphill battle. With the right tools, such as DashboardFox, you can transform raw statistics into rich, visual data stories that truly drive decisions.
DashboardFox offers an impressive suite of data visualization capabilities. It enables you to design interactive dashboards, detailed charts, and clear, easy-to-understand graphs.
By bringing your metrics to life, DashboardFox ensures that you are not just collecting data, but deriving meaningful insights that empower you to optimize your supply chain strategies.
Why settle for overwhelming spreadsheets and static data reports when you can immerse yourself in dynamic, real-time visualizations that make your metrics more accessible and actionable?
Turn your data into a powerful ally for your supply chain management today. We invite you to try DashboardFox for free, participate in a live demo session, or book a meeting with us to discuss further how we can support your data-driven journey.
Experience firsthand the power of DashboardFox in helping you monitor the top 10 supply chain management metrics effectively and efficiently.