The journey of your product from inventory to delivery is facilitated by a supply chain. KPIs are key performance instruments that measure the performance of that supply chain by looking into different components involved in that very journey of the product. They help you gather specific data related to various parts of the supply chain and understand how to best use the data for your profitability. Here are some of the top KPIs for measuring supply chain performance.

Cost of Goods Sold

This KPI tells you the total cost that is incurred by you starting from the production of the product and ending at successfully delivering the product to your consumer. This cost reflects what the supply chain is costing you in its entirety. You will have a good idea of the profitability of your business once you calculate this cost since it tells you about all the expenses related to the supply chain.

You must analyse this cost and look for the expenses that can be reduced so that your business can remain profitable. The fewer the expenses, the more profit you will gain.

Cash to Cash Cycle Time

A smooth and quick cash flow is important for a business to grow. Cash to cash cycle time allows you to figure out how to ensure such cash flow. This KPI tells you how much time it takes for the invested capital to turn back into cash in the supply chain.

When you buy the material to produce your product or directly buy inventory, that is when you invest your operational capital into the supply chain. The capital becomes cash once again when the inventory is sold. The time taken for this to happen should be short for your business to be profitable.

Transportation Cost Per Unit

Another top KPI is the transportation cost per unit. It tells you the cost incurred upon shipping one unit of your product. Using this data you can calculate the total cost of transportation and how you can reduce it. However, you will need to figure out how to reduce this cost without reducing the quality of your service.

Perfect Order

A perfect order means an order that is delivered to the consumer perfectly. This includes on-time delivery, the delivery of correct items, the delivery of undamaged items, etc. The rate of a perfect order should be high because this rate tells you how smoothly your supply chain is functioning.

Inventory Turnover

This is a KPI that shows you how good your inventory management is. The data you gain through this KPI is the time it takes for your existing inventory to be replaced by new inventory. This turnover rate should be high for your carrying costs to be low. This will increase your business’s profitability.

The Bottom Line

These are some of the top KPIs for measuring supply chain performance. If you need help in the analysis of the performance of your supply chain, you can check out Supply Chain KPI – Trace Consultants.