It’s no surprise that most supply chain managers consider cost reduction as a major key performance indicator (KPI). It makes sense. After all, cost savings can indicate greater overall efficiency in your operations. However, cost reduction is just one of the critical supply chain performance metrics. As an industry-leading third-party logistics (3PL) company, GlobalTranz is here to provide you with a wider scope so you can broadly analyze your supply chain management and make changes where necessary.
3 Common Measures of Supply Chain Performance That Are Beyond Cost Reduction
Metrics for measuring supply chain performance include:
This is a critical metric to consider. Afterall, it took capital expense to procure. The goal is to keep inventory levels at an appropriate level to meet customer needs. A pull system is better than a push system.
What about measuring working capital in the supply chain?
The handful of companies in the top quartile of working capital performance had working capital expenditures as a percentage of overall revenues of between 6-10%. In comparison, the poorest-performing companies in the lowest quartile had a range of working capital between 23-39% as a percentage of revenues.
Isn’t time important in the supply chain?
Time is a critical component of supply chain performance measurement. That includes:
- Promise time
- Lead time
- Cycle time
- Transit time
- Delivery time
- Unloading time
- Processing time
- Quality assurance time
- Processing time
- Turnaround time
- Receiving time
- Shipping time
For clarity, in measuring supply chain performance metrics, the focus should be on:
- Working capital
We can’t forget cost reduction. It is the key performance indicator for supply chain management when measuring performance.
Transportation is measured as a cost rather than what it does for the organization. That’s not to say that cost reduction is an indicator of poorly measuring performance, but it’s not the only supply chain metric to measure when considering transportation.
Other areas to consider measuring as it relates to transportation include:
- Managing inventory
- Ensuring that lost sales are at a minimum
- Supply chain is efficient by transit time
Remember, you should still focus on costs. We should not forget that non-cost-based measurements could prove to be beneficial to supply chain professionals.
10 Soft Supply Chain Metrics When Measuring Performance
Collaboration and communication between supply chain partners
The supply chain has become increasingly collaborative, and supply chain entities are taking note of how collaboration between once-perceived enemies and competitors can help build trust with consumers, maintain compliance with authoritative entities, ensure transparency across the organization, be applied and implemented through different software and further drive customer-centric focus.
Customer service levels
When it comes to how a shipper defines the value of a logistics provider or 3PL, there are often several KPIs and logistics metrics taken into consideration. Every company knows customer service is important, but it is seldom well-defined and even more rarely measured in logistics operations.
Effective and successful key performance indicators for supply chain management
Effective KPI management starts with some key areas for both parties to understand. These are core principles that will guide the rest of the more detailed and statistical KPIs.
Using supply chain technology to aid in measurement and efficiency
In today’s highly competitive marketplace, it’s imperative for businesses to innovate new ways to streamline their supply chain and optimize productivity. With the aid of modern supply chain technology applications, you can create better visibility within your supply chain, which will enable you to have more control over your business and stay ahead of the competition. Technology can help to simplify your supply chain management, which will enable your business to operate more efficiently, and give you more visibility and control over your inventory. It will also help to reduce your operational costs.
RFID, AIDC, and IoT systems
The advantages of using RFID-, AIDC- and IoT-based technologies seem simple. Each of these logistics technologies provides a benefit that meets the demands of its respective driving forces. However, these technologies are poised to give benefits throughout the industry in several other ways as well.
Risk management methods
Supply chain risk management and resiliency are hot-button topics in the industry. However, some supply chain entities do not understand how resilience relates to risk management and what it means for improving focus on the supply chain. As the supply chain continues to grow in complexity and regulation, the opportunities for problems and other events that impact operations negatively will consequently grow. As a result, supply chain entities need to understand how risk management and resiliency apply to both good and bad situations and how an organization can improve supply chain risk management and resiliency processes.
Cyber security systems
We are now familiar with the concept of the “Internet of Things.” If you take the manufacturing industry, for example, many manufacturers are now widely operating in an increasingly connected environment and making the most of it.
Global Positioning System (GPS) is a navigation system that depends on satellites to locate vehicles anywhere on earth. It was originally developed by the United States Defense Department. The first such satellites were launched in 1979. A few years later, the GPS system was made available for civilian use.
Supply chain visibility
Supply chain visibility has long been a goal supported by supply chain professionals. Until recently, however, technologies that could make this goal a reality have not been available. Today, there is hardly an activity that doesn’t produce some kind of data that can help companies understand what is going on within their supply chains. As the ability to see more clearly and deeper into supply chains improves, supply chains will become safer and more secure.
Staying Abreast of the State-of-The-art in Supply Chain Management
It’s important to learn about lean initiatives in the supply chain, robotics, and voice of the customer (VoC) to improve supply chain performance. View our Trends Resource Section to stay up to speed.
GlobalTranz: Your Complete Shipping Partner
But, we should never forget the major ingredient in measuring supply chain performance. People make it all happen. IT systems and tools truly enhance the supply chain, but without people communicating and collaborating, there is no supply chain management success.
As a shipper, you have access to an enormous number of solutions and services to help you face today’s supply chain challenges. And you don’t have to do it alone. GlobalTranz offers a quality carrier network, a leading transportation management system delivering data-driven insights, and a team of industry experts available around the clock for support. Connect with one of our experts to optimize your supply chain so your company can save money and increase efficiency!