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Understanding Supply Chain Metrics



There are numerous metrics that you can track throughout your supply chain. Many companies make the mistake of failing to collect enough data, making it difficult to make decisions based on trends or patterns. However, many other companies collect too much data, which makes it difficult to sort through the unnecessary data points to find what is valuable. The best practice in data collection is to identify some key metrics that provide important data to you and your company. Below is a list of some common supply chain metrics, and what they mean for your supply chain company. This list is not exhaustive, and there are many more metrics that are available which may be more applicable to you and your company.

Cash-to-cash time cycle
This cycle measures the time that elapses between payment from you to your supplier, and the payment to you from your customer. This gives you a basic estimate on the time it takes for you to receive a return on your investment.

Freight bill accuracy
This is the percentage of freight bills that are completed without errors. Knowing this number gives you an idea of your current standing in terms of accuracy, and allows you to track improvements.

Perfect order rate
This is the percentage of orders completed without errors, so higher is better. The more orders that can be completed without errors, the better customer satisfaction you can achieve.

Days sales outstanding
This is a measure of how many days it takes to collect receivables after an order is completed. This metric can help to inform financial decisions and let you keep an eye on customers who may be taking too long to pay.

Inventory turnover
This metric measures the number of times that an entire inventory has been sold over a period of time, often a quarter or a year. This helps to inform purchasing decisions, ensuring that products are available when you need them.

Return reason
This metric tracks the percentage of people who have returned items for a specific reason, such as 5% of your returns being due to poor product quality. This gives you an idea of where your supply chain can improve to reduce customer returns and increase customer satisfaction.

Inventory velocity
This is the percentage of your inventory that is projected for consumption within the next quarter or next year. This gives you an idea of how lean your supply chain is, and where inventory inefficiencies could be eliminated.

Inventory days of supply
This metric is the number of days it would take for you to run out of inventory, given a situation in which there was no replacement. This metric will help to give you a broader sense of your current inventory, and can also help with risk mitigation and contingency planning in the event of supply chain issues.

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