Order accuracy and on-time delivery are important where omnichannel supply chain is concerned, making the difference between getting the right product to consumers at the right time and getting a similar product to consumers at the right time too crucial. The difference can have major implications for your business which include lost revenue for returning the product, processing the return, shipping out the correct product and time spent in addressing the issue at your customer service center. Such a situation shows how important it is to establish and track the right supply chain KPIs for continuous improvement.

Perfect Order

A perfect order is the most important among supply chain KPIs. A perfect order consists of on-time deliver, in full delivery, damage-free delivery and appropriate, accurate documentation. When all these components are present, the consumer faces no problems and your business continues to fulfill its next order. The perfect order KPI keeps track of the overall accuracy and timeliness of each shipment.

Perfect Order KPI = On-Time Delivery and Shipment KPI x Complete Order Percentage x Damage-Free Percentage x Accurate Invoicing Percentage.

Calculate the perfect order KPI by multiplying the on-time delivery and shipment KPI, the complete order percentage, damage-free percentage and accurate invoicing percentage together. In other words, should your perfect order percentage is 81.9%, the likelihood of anything getting faulty is 18.1%.

On-Time Delivery and Shipment

To calculate the abovementioned perfect order percentage, there needs to be full comprehending of the on-time KPI. The on-time delivery KPI is determined by dividing the number of orders shipped and delivered by the total number of orders shipped and delivered on-time.

On-Time Delivery and Shipment KPI = Total Order Shipped and Delivered (Including The Orders Delivered Late)/Total Number of Orders Shipped and Delivered On-Time.

Order Fill Rate

The order fill rate all filters down into order fill, line fill and unit fill.

Calculate the total order fill rate by dividing the total number of orders shipped on the first try by the total orders that should have been able to ship based on inventory on hand.

Multiplying these three sub- KPI percentages together, as with the perfect order KPI, helps get the overall fill rate KPI.

Cash-to-Cash Cycle Time

This KPI may seem like it’s a purely financial aspect, but it also indicates the efficiency of your operation. Calculate cash-to-cash cycle time by averaging the cycle time, from paying for raw supplies to being paid for the finished product by consumers, of all orders together. As the KPI decreases, efficiency increases, freeing up capital for other uses.

Let’s say an average cycle time is 168 hours. That means the company is sitting on inventory for one week, so the number of reorders decrease. If the same product can achieve a lower cash-to-cash cycle time of two days, it creates an opportunity to spend profits on reordering product, other products or improving marketing. As the KPI decreases, carrying costs decrease, improving profitability and efficiency.

Storage Space Utilization

Effective supply chain management requires a certain level of awareness concerning your space utilization. Calculate your storage space utilization and by dividing the total storage area used by the total storage area of the facility available. As with the previous KPIs, multiply the end result by 100 to obtain a percentage.

Warehousing and Transportation Costs

Warehousing and transportation costs per item need to be tracked too. The calculation is similar and comparable to that of the storage space utilization – dividing the total warehousing and transportation costs by number of shipped items over a given period of time. The duration can differ and that gives warehouse managers the chance to compare average costs against past time periods. Costs may be tracked over a week, month, quarter, or year in order to achieve comparison.

 

Don’t forget to catch up on the rest of our article at Dovetail!

 

Source: cerasis