5 Critical KPIs for Supply Chain Analytics
Choosing the right KPI for supply chain analytics is a process that asks businesses to clearly define their objectives and then design performance indicators that allow them to monitor the progress towards those objectives. Here are 5 critical KPIs for supply chain analytics:
1. Warranty Expenses as Percentage of Sales
To cut down the expenses related to the flaws of quality control group, businesses look at their warranty expenses as the percentage of sales. This KPI lets marketers form a clear picture of the total expenditure on replacement and repairs of the distributed units, when compared to the total sales.
Since warranty expenses considerably affect a business, it is critical to understand if the expenses related to faulty units are very high in order to make required improvements.
2. Period of Cash-to-Cash Cycle
The cash-to-cash cycle is an extremely important KPI that can give a lot of valuable information about several sections of the supply chain. It can help in precisely calculating the time for a cash-to-cash cycle i.e. from paying for supplies to selling completed units, thus providing an average time of the cycle.
This metric can assist companies scale up the efficiency of their supply chain. With the capacity to monitor the average time of cash-to-cash cycle, businesses can make necessary changes, hence freeing up resources for other uses.
3. Timings of Shipment and Delivery
Another important KPI that is imperative for supply chain analytics is shipment and delivery timeframes. Depending upon the business operations and preferences set for on-time shipment or on-time delivery, one can determine which metric is more vital for the business. The latent reason for the significance of these metrics is the same, as it all boils down to consumer satisfaction over shipping times.
4. Precision of Inventory Details
In ideal cases, the numbers displayed in your inventory management software database should match with your physical inventory. However, in most cases, there’s usually a considerable disparity between the displayed number and the situation on hand. With the assistance of the Inventory Accuracy KPIs, it is possible to regularly check up on the number of units in stock and the ones displayed in the database and bridge the gap.
5. Revenue of Inventory
This KPI allows one to measure how well a company is able to move its inventory. It helps gain a better insight about the efficiency of the supply chain, the purchasing practices of the business, and also to judge the demand for the products. Basically, it tells one how often the business is able to empty its whole inventory over the year. The capacity to swiftly move the inventory is necessary; as it considerably reduces the storage expenses as well as permits you to sell products at value prices instead of starting promotions for stock clearance.