How to Measures the performance of your supply chain strategy

Measuring the performance of your supply chain strategy is crucial for ensuring that your business is operating efficiently and effectively. By tracking key performance indicators (KPIs), businesses can identify areas of weakness and make improvements to their supply chain strategy. In this blog post, we'll take a look at the key KPIs that businesses should track in order to measure the performance of their supply chain strategy.

1. Inventory turnover: This KPI measures how often a business sells and replaces its inventory. A high inventory turnover rate indicates that a business is efficiently managing its inventory and selling products quickly. To calculate inventory turnover, divide the cost of goods sold by the average inventory.

2. Lead time: This KPI measures the amount of time it takes for a business to receive products from suppliers. A shorter lead time means that a business is able to receive products quickly and respond to customer demand. To calculate lead time, subtract the date an order is placed from the date the order is received.

3. On-time delivery: This KPI measures the percentage of orders that are delivered on time. A high on-time delivery rate indicates that a business is efficiently managing its logistics and meeting customer expectations. To calculate on-time delivery, divide the number of orders delivered on time by the total number of orders and multiply by 100.

4. Fill rate: This KPI measures the percentage of orders that are fulfilled without stockouts. A high fill rate indicates that a business is efficiently managing its inventory and able to fulfill customer orders. To calculate fill rate, divide the number of orders fulfilled without stockouts by the total number of orders and multiply by 100.

5. Carrying cost of inventory: This KPI measures the cost of holding inventory, including costs such as storage, insurance, and opportunity cost. A low carrying cost of inventory indicates that a business is efficiently managing its inventory. To calculate carrying cost of inventory, add up all the costs associated with holding inventory and divide by the average inventory.

6. Logistics cost: This KPI measures the cost of transportation and logistics. A low logistics cost indicates that a business is efficiently managing its logistics and keeping costs low. To calculate logistics cost, add up all the costs associated with transportation and logistics and divide by the total number of products shipped.

7. Customer satisfaction: This KPI measures the level of satisfaction of customers with the products and services provided by the business. A high customer satisfaction rate indicates that a business is meeting customer needs and expectations. To calculate customer satisfaction, survey customers and ask them to rate their satisfaction with the business on a scale of 1 to 10.

In conclusion, measuring the performance of your supply chain strategy is crucial for ensuring that your business is operating efficiently and effectively. By tracking key performance indicators such as inventory turnover, lead time, on-time delivery, fill rate, carrying cost of inventory, logistics cost, and customer satisfaction, businesses can identify areas of weakness and make improvements to their supply chain strategy. It's important for businesses to regularly track these KPIs and make adjustments to their supply chain strategy as needed in order to stay competitive in the market. By measuring the performance of their supply chain strategy, businesses can improve their efficiency and effectiveness, and ultimately increase their chances of success.