13 Key Supply Chain KPIs You Should Track and Analyze

KPIs for the supply chain are crucial for supply chain optimization. They act as the guiding compass for businesses, leading them towards efficiency and success.

Picture this: a busy factory, a fleet of trucks, a warehouse filled with products. Amidst this turmoil, KPIs for the supply chain act as guiding lights, illuminating the way with their insightful metrics.

Imagine knowing exactly when your goods will arrive, how efficiently they’re being moved, and where potential hiccups might occur. That’s the enchantment of KPIs for the supply chain. They convert the unclear logistics into a clear stream of decision-making based on data.

But wait, there’s more! KPIs for the supply chain extend beyond quantitative data. It’s about being responsible, working together, and maybe even a sprinkle of competition. By setting clear goals and targets, they inspire teams to aim for high quality, fostering an environment of growth.

Let’s embark on a voyage into the heart of supply chain management. Together, we will discover why KPIs for the supply chain are the Most Valuable Players in modern commerce.

Table of Content:

1. What are Supply Chain KPIs?
2. Why are Supply Chain Metrics & KPIs Important?
3. 13 Key Supply Chain KPIs You Should Be Measuring
   1. Order Accuracy (Perfect Order Rate)
   2. Order Cycle Time
   3. Inventory Turnover
   4. Days of Inventory Outstanding (DIO)
   5. On-Time Delivery (OTD)
   6. Lead Time
   7. Supply Chain Cycle Time
   8. Freight Bill Accuracy
   9. Return Rate
   10. Cost of Goods Sold (COGS)
   11. Supplier Lead Time
   12. Backorder Rate
   13. Total Supply Chain Costs
4. How to Choose & Track KPIs of the Supply Chain?
5. How to Analyze KPIs for Supply Chain Using Example?
6. Supply Chain KPIs Analysis Example
7. What are the Advantages of Supply Chain KPIs?
8. Tips For Improving KPIs in Supply Chain
9. Supply Chain KPI and Metrics FAQs
10. Wrap Up

First…

What are Supply Chain KPIs?

Definition: Supply chain KPIs are metrics used to measure the performance of various supply chain elements. These metrics offer valuable insights into the supply chain’s efficiency, effectiveness, and overall health.

Consequently, they help organizations assess their performance and make data-driven decision-making to optimize their supply chain operations. They are critical in driving success and competitiveness in the modern-day dynamic business environment.

Common supply chain KPIs examples include:

1. On-time delivery: Measures the percentage of orders delivered according to schedule.
2. Inventory turnover: Calculates how quickly inventory is sold or used within a specific period.
3. Order accuracy: Tracks the percentage of orders fulfilled accurately without errors.
4. Lead time: Evaluates the time it takes for an order to be processed and delivered to the customer.
5. Supplier performance: Assesses the reliability and quality of suppliers based on factors like delivery times and product quality.

Why are Supply Chain Metrics & KPIs Important?

Here are the reasons why these metrics are so darn important.

• Performance evaluation: Supply chain KPIs offer a means to assess the supply chain performance. This enables you to recognize the strong and weak points of your company.
• Efficiency boost: Efficiency can be improved by monitoring metrics such as on-time delivery and inventory turnover. This can help identify inefficiencies and make operations more streamlined for optimal efficiency.
• Cost reduction: KPIs assist in pinpointing areas where you can minimize costs. For example, you can minimize surplus stock or streamline transportation routes, substantially reducing costs.
• Risk management: Risk management involves keeping track of metrics such as supplier performance and lead times. It helps to forecast and address potential risks. This guarantees that operations will continue without interruption.
• Decision-making: Decision-making is supported by precise information from supply chain metrics. This aids in making informed decisions about inventory control, supplier choice, and strategic planning. As a result, it results in better outcomes and increased competitiveness.

13 Key Supply Chain KPIs You Should Be Measuring

1. Order Accuracy (Perfect Order Rate)

This KPI measures the percentage of orders delivered without errors in quantity, quality, or timeliness. A high order accuracy rate indicates a smooth and reliable supply chain process, minimizing customer complaints and returns.

2. Order Cycle Time

Order cycle time tracks the total time taken from order placement to delivery. This reflects supply chain responsiveness and operational efficiency. Reducing cycle times can significantly enhance customer satisfaction.

3. Inventory Turnover

Inventory turnover indicates how often inventory is sold and replenished within a given timeframe. A higher turnover suggests effective inventory management, reducing holding costs and avoiding obsolete stock.

4. Days of Inventory Outstanding (DIO)

DIO measures the average number of days inventory sits in stock before being sold. A lower DIO indicates a more efficient inventory system, while a higher DIO may suggest overstocking or sluggish sales.

5. On-Time Delivery (OTD)

This KPI tracks the percentage of orders delivered within the promised timeline. Reliable on-time delivery performance helps build trust with customers and maintain competitiveness in the market.

6. Lead Time

Lead time is the total duration taken to process and fulfill an order, including procurement, production, and shipping. Shorter lead times ensure quicker responses to customer demands and market changes.

7. Supply Chain Cycle Time

This measures the total time required to complete a supply chain process, assuming no inventory is available. A lower supply chain cycle time indicates streamlined processes and efficient operations.

8. Freight Bill Accuracy

Freight bill accuracy measures how often shipping bills match the agreed-upon costs. Errors in freight billing can lead to disputes, financial losses, and inefficiencies.

9. Return Rate

The return rate measures the percentage of products returned due to defects, wrong shipments, or customer dissatisfaction. Monitoring this KPI helps identify issues with product quality, packaging, or delivery accuracy.

10. Cost of Goods Sold (COGS)

COGS represents the total production and procurement costs of goods sold. Optimizing COGS can help lower expenses and improve overall profitability in the supply chain.

11. Supplier Lead Time

This KPI measures the time suppliers take to deliver goods after an order is placed. Consistent monitoring ensures reliable supplier performance and timely inventory replenishment.

12. Backorder Rate

The backorder rate indicates the percentage of orders that cannot be fulfilled immediately due to insufficient inventory. A high backorder rate can signal poor demand forecasting or inventory management.

13. Total Supply Chain Costs

This measures the overall cost of running the supply chain, including production, warehousing, shipping, and administrative expenses. Optimizing these costs improves profitability and operational efficiency.

How to Choose & Track KPIs of the Supply Chain?

Tracking supply chain KPIs requires attention to detail, analytical prowess, and a knack for problem-solving. But fear not; this guide will help you track your KPIs for the supply chain efficiently.

1. Identify relevant KPIs: Pinpoint the key metrics that align with your supply chain objectives. These could include on-time delivery rates, inventory turnover, order fulfillment accuracy, transportation costs, and supplier performance metrics.
2. Define clear metrics: After identifying your KPIs, it is crucial to define them clearly. Make sure there is no opportunity for misunderstanding or ambiguity. Every metric needs a clear definition that everyone in the organization easily understands.
3. Gather data: With your KPIs defined, it’s time to gather the necessary data. This might involve pulling information from sources such as ERP systems, warehouse management software, and manual records. Cast your net wide to capture all relevant data points.
4. Centralize data management: Centralization is the holy grail of efficient data management. It ensures data integrity, accessibility, and ease of analysis. Centralize all your supply chain data into a single repository or platform. This could be a robust analytics tool or a dedicated supply chain management system.
5. Analyze performance: Delve deeply into your data to discover trends, patterns, and anomalies. Evaluate how current results measure up to past data and benchmarks. Discover information that exposes strengths and areas needing improvement.

How to Analyze KPIs for Supply Chain Using Example?

Data analysis can be a daunting task. Crunching numbers, spotting trends, and making sense of it can feel like searching for a needle in a haystack. The stakes are high when analyzing Key Performance Indicators (KPIs) for the supply chain.

That’s where data visualization comes in. It’s like turning a complex puzzle into a clear picture.

But let’s face it – Excel has its limitations in this department. That’s why we recommend using ChartExpo.

Why?

ChartExpo’s advanced data visualization capabilities rescue data from the blandness of Excel, turning it into captivating visual stories.

Let’s learn how to install ChartExpo in Excel.

1. Open your Excel application.
2. Open the worksheet and click the “Insert” menu.
3. You’ll see the “My Apps” option.
4. In the Office Add-ins window, click “Store” and search for ChartExpo on my Apps Store.
5. Click the “Add” button to install ChartExpo in your Excel.

ChartExpo charts are available both in Google Sheets and Microsoft Excel. Please use the following CTAs to install the tool of your choice and create beautiful visualizations with a few clicks in your favorite tool.

Supply Chain KPIs Analysis Example

Let’s say you want to analyze the KPIs of supply chain data below.

Supply Chain (KPI)	Measurement (%)
Order Fulfillment Rate	90
Inventory Turnover Ratio	85
Perfect Order Rate	70
On-Time Delivery	80
Lead Time	75

Let’s visualize these KPIs for supply chain data using ChartExpo and glean valuable insights.

• To get started with ChartExpo, install ChartExpo in Excel.
• Now Click on My Apps from the INSERT menu.

• Choose ChartExpo from My Apps, then click Insert.

• Once it loads, scroll through the charts list to locate and choose the “Progress Circle Chart”.

• Click the “Create Chart From Selection” button after selecting the data from the sheet, as shown.

• ChartExpo will generate the visualization below for you.

• If you want to add anything to the chart, click the Edit Chart button:
• Click the pencil icon next to the Chart Header to change the title.
• It will open the properties dialog. Under the Text section, you can add a heading in Line 1 and enable Show.
• Give the appropriate title of your chart and click the Apply button.

• Add the percentage sign with values by clicking on the small pencil icon as follows:

• Change the Legend Shapes according to the chart.
• For example, you can change the order fulfillment rate into Circle as follows:

• Click the Save Changes button to persist the changes made to the chart.

• Your final Progress Circle Chart will look like the one below.

Insights

• Order Fulfillment Rate: A 90% rate signals adeptness in promptly meeting customer demand.
• Inventory Turnover Ratio: At 85%, it signifies effective inventory management, potentially slashing holding costs and optimizing cash flow.
• Perfect Order Rate: Hovering at 70% indicates avenues for enhancing order accuracy and reducing errors.
• On-Time Delivery: An 80% achievement denotes satisfactory performance, yet there is room for bolstering reliability.
• Lead Time: Sitting at 75%, it denotes moderate efficiency in order fulfillment but could benefit from streamlined processes to meet demand promptly.

What are the Advantages of Supply Chain KPIs?

Supply chain KPIs are like the switchblades of business – versatile and indispensable. Here are the advantages they bring to your business

• Performance Measurement

Supply chain KPIs offer a comprehensive snapshot of your operational performance, from inventory management to delivery times. They provide quantifiable data that allows you to track progress, identify successes, and pinpoint areas that need improvement.

• Goal Setting and Alignment

Having KPIs handy makes goal-setting effortless. By enhancing order fulfillment rates or reducing lead times, they assist in bringing everyone towards a shared goal. From the warehouse to the executive suite, all individuals understand their goals, promoting unity and focus.

• Identifying Areas for Improvement

Key performance indicators for supply chain function as investigative instruments, revealing inefficiencies and obstacles in your operations. You can pinpoint areas for improvement by examining metrics such as inventory turnover or transportation costs. This could involve simplifying procedures, renegotiating contracts, or upgrading technology.

• Data-Driven Decision Making

Say goodbye to gut feelings and hello to hard data. Supply chain KPIs provide the factual foundation for making informed decisions. Need to choose between suppliers? Let supplier performance metrics guide you. Unsure whether to invest in warehouse automation? Let warehouse efficiency KPIs be your compass.

• Resource Optimization

Time, money, and manpower are precious resources, and supply chain KPIs help you make the most of them. You can allocate resources strategically by analyzing metrics like cost per order or labor productivity. This helps ensure maximum efficiency and minimum waste.

Tips For Improving KPIs in Supply Chain

1. Optimize Inventory Management

• Use advanced tools like Just-in-Time (JIT) and automated inventory systems to balance supply and demand effectively.
• Leverage demand forecasting to avoid overstocking or stockouts, improving Inventory Turnover and Days of Inventory Outstanding (DIO).

2. Leverage Technology and Automation

• Implement systems like ERP, AI-driven analytics, and IoT to streamline operations and monitor real-time data.
• Use warehouse management systems (WMS) to improve efficiency and reduce errors, enhancing Order Accuracy and Lead Time.

3. Enhance Supplier Collaboration

• Build strong relationships with suppliers through clear communication and performance-based KPIs.
• Monitor Supplier Lead Time and work collaboratively to improve delivery schedules and reduce delays.

4. Streamline Logistics and Transportation

• Optimize shipping routes, select cost-efficient carriers, and adopt multi-modal transportation to reduce costs and improve delivery times.
• Track On-Time Delivery (OTD) to ensure customer satisfaction.

5. Improve Demand Forecasting

• Use predictive analytics and real-time data to better anticipate demand, avoiding excess or insufficient inventory.
• Align production and procurement analysis with market trends to reduce the Backorder Rate.

6. Implement Quality Control Measures

• Introduce rigorous checks during production and shipping to minimize Return Rates caused by defective or incorrect orders.
• Train teams to improve accuracy and enhance the Perfect Order Rate.

7. Focus on Continuous Improvement

• Regularly analyze processes using methodologies like Lean Six Sigma to identify and eliminate inefficiencies.
• Monitor KPI dashboards in real-time to make quick, data-driven decisions.

Supply Chain KPI and Metrics FAQs

Why are supply chain metrics important?

Supply chain metrics are crucial in evaluating performance, pinpointing inefficiencies, and informing decision-making. They offer benchmarks to monitor progress, enhance procedures, and ensure alignment with company objectives. This helps to drive efficiency and profitability.

What are the 5 measures of supply chain performance?

The five measures of supply chain performance are:

1. On-time delivery.
2. Inventory turnover.
3. Order fulfillment accuracy.
4. Transportation costs.
5. Supplier performance.

These metrics provide insights into operational efficiency, customer satisfaction, and overall supply chain effectiveness.

What are the top 5 KPIs that you would use to judge supplier performance accurately?

The top 5 KPIs for judging supplier performance include:

1. On-time delivery rate.
2. Lead time variability.
3. Quality of goods received.
4. Responsiveness to inquiries.
5. Cost-effectiveness.

These metrics provide a comprehensive view of supplier reliability and effectiveness.

Wrap Up

The significance of KPIs in the supply chain cannot be emphasized enough. These measurements act as the guide leading businesses through the intricacies of logistics and operations.

KPIs for the supply chain provide clear benchmarks and measurable objectives. This allows you to assess performance, pinpoint areas needing enhancement, and base decisions on data.

You can improve processes and boost customer satisfaction by monitoring key performance indicators such as on-time delivery rates. Moreover, KPIs for supply chain management help create productive partnerships with suppliers and stakeholders. This promotes responsibility and openness throughout the entire supply chain network.

KPIs allow for swift adaptation to changing market conditions and customer demands. They offer real-time insights into how the supply chain is performing. Thus, you can take action ahead of time to solve problems, mitigate risks, and take advantage of growth opportunities.

Moreover, consistently monitoring and analyzing supply chain KPIs helps promote innovation and maintain competitiveness. The insights can assist you in identifying emerging market trends, streamlining resource distribution, and seizing opportunities.

Embrace the KPIs for the supply chain and let them guide you through the complex world of commerce. The insights they offer will help you gracefully and confidently address the obstacles of supply chain management.