6 KPIs to Watch for in the Supply Chain

1. Perfect Order Rate

When developing your eCommerce business, a “perfect order” is a good KPI to track. A high perfect order rate indicates operational efficiency and high customer satisfaction. nMaking your customers happy consistently results in excellent reviews and repeat consumers.

Here are some of the factors that influence your ideal order rate:

  • Location: Did the items arrive at their intended destination?
  • Product & Quantity: Was the correct product delivered in the right amount?
  • Time: Was the order completed in the specified time?
  • Condition: Was the purchase in good condition? There should be no damage.
  • Package: Was the order correctly packed?
  • Customer:Did it go to the proper person?
  • Documentation: Was the invoice sent with the order?

The following formula is used to calculate order fulfillment performance:

(Percent of orders delivered on time) * (Percent of orders complete) * (Percent of orders damage free) * (Percent of orders with accurate documentation) * 100 = perfect order rate

To keep improving operations, a good order rate is a critical KPI to track and improve.

2. Fill Rate

The percentage of client purchases that your firm can immediately fulfill is called the fill rate. The buyer must receive their goods without placing back orders or missing any sales. Maintaining a high fill rate indicates that your firm is quickly filling requests by keeping enough product in the supply chain.

Here’s how to figure out your business’s fill order rate:

(Total Number of Customer Orders Shipped / Number of Customer Orders Filled) * 100 = fill rate

The higher your fill rate, the better. Why? Because it has an influence on your customer interaction. Customers will not continue to make purchases with you if you continuously keep them waiting for long periods of time or direct them to a competitor. Furthermore, this KPI demonstrates how effectively your firm handles its inventory and makes use of data.

Finally, a low fill rate implies that you’re losing revenue. The amount you don’t complete is money that your firm missed out on. Improving your fill rate will improve both your company and its profits.

3. Customer Order Cycle Time

Another crucial KPI to track is the customer order cycle time. It’s the duration between when a client places an order and when they receive it. The process, preparation, and delivery of the product are all included in the cycle. Here are some important points throughout the customer order cycle:

  • Customer order: Customers will pay for the product only after they have ordered it.
  • Customer entry: When a customer pays for your goods or service.
  • Manufacturing order: When the program places an order for the items.
  • Warehouse packing: When the employee has finished packing the item.
  • Delivery: When you send the item to the client

The formula for customer order cycle time is the following: 

(delivery date – order date) / total number of orders shipped = customer order cycle time

The customer order cycle time is a great supply chain KPI to monitor and improve since it influences consumer pleasure considerably. It also might provide you useful insights into where your warehouse can do better in each step of the process.

4. On-time Shipping

Another important KPI to keep an eye on and improve is delivery timeliness. One of the most effective methods to distinguish your brand and provide consumers satisfaction is to ship orders on time. Keep in mind that although customers appreciate quick deliveries, “on time” does not always imply “quick.” It simply indicates that your product was delivered on schedule, whether it’s in two days or two weeks.

Here are some of the ways late deliveries hurt your company:

  • Bad customer reviews
  • Loss of loyal customers
  • Loss of valuable business
  • Rising expenses

Follow these steps to keep track of your on-time delivery costs:

Total number of orders delivered / Number of deliveries that arrived after the promised delivery date = on-time delivery (OTD)

To raise your on-time delivery rate, consider the following:

  • Set an internal deadline (and encourage workers to reach it)
  • Interview several individuals and see what assistance they may provide in achieving delivery goals.
  • Tiered inventory management is strongly advised. There are software solutions that may assist with this.
  • Use a different picking approach, such as batch, zone, or cluster picking to optimize order selection.
  • Reduce the amount of packaging you use.
  • Use a route-management program.

Improving this KPI also helps you improve your perfect order rate!

5. Inventory Days of Supply

Another important KPI to watch is the inventory days of supply. This is the average length of time a firm keeps its inventory before selling it. Inventory days of supply, often known as “days inventory outstanding,” is the time it takes for a company’s products to run out or be used up.

Here’s how to figure out how many days it will take you to go through your inventory:

(average inventory/cost of goods sold) x period length = days in inventory

This KPIs is crucial to measure and improve since it indicates how well a firm performs in terms of operations and finances. It shows that a company is operating and selling effectively if it has few days of inventory. On the other side, if a firm has a lot of inventory on its books, it suggests that it needs to improve its marketing, branding, or make other crucial adjustments.

6. Inventory Turnover

The inventory turnover ratio is our last supply chain KPI to focus on. This measures how quickly a firm sells its goods and replaces them. This KPI assesses a company’s ability to sell its merchandise. A high inventory turnover rate indicates that a firm is selling a lot of items (which then have to be replaced). A low inventory turnover rate implies that the firm isn’t selling very much merchandise.

Let’s start with the inventory turnover ratio (IRR). This is a calculation that begins and ends on the balance sheet. Here are two ways to calculate inventory turnover:

Cost of goods sold / inventory = inventory turnover rate