A chain is as vulnerable as its weakest link, according to an old saying. The supply chain of a business is no exception.
There are simply too many moving parts in ecommerce to handle, and the consequences of each operation can ripple out across the next.
This is why good supply chain management is so important for an ecommerce company’s operation. But, how can you tell if a supplier chain is effective? And how do you determine which areas of improvement are worth pursuing?
To effectively manage your business, you must keep a close eye on your supply chain performance.
What is supply chain performance?
The ecommerce supply chain is a complex system that engages many individuals and organizations throughout the world. The supply chain’s performance, or how well each stage of the ecommerce supply chain optimizes costs, reduces inefficiencies, improves speed, and satisfies customer needs, is referred to as supply chain performance.
The supply chain is made up of many components, each with its own set of responsibilities. On-time delivery, stock availability, order accuracy, and production lead times are all factors that contribute to the smooth and quick performance of a company’s operations.
Why is supply chain performance important?
The supply chain acts as a link between your company and the end customer. It connects consumers with both your products and services, allowing them to make purchasing decisions based on their needs. Accounting, sales, and employee and client satisfaction all rely heavily on supply chain performance.
By analyzing data for a range of KPIs, you may identify and address issues that might affect the supply chain. You can get insights and information to help make improvements and establish a solid logistics system by setting and tracking particular KPIs throughout the supply chain. However, it also aids in keeping your business healthy across departments so you can meet revenue and growth.
It affects both short-term and long-term goals
Whether or not you meet your company objectives — both in the long and short terms – is determined by supply chain performance.
If you want to expand into foreign markets and maintain a healthy profit margin, for example, how your supply chain activities are functioning now will determine if you’re operating at a level that’s sufficient.
You may have a business objective of increasing sales by X%. However, if your supply chain efficiency shows that fulfillment rate is declining due to a large monthly order quantity, it’s unlikely you’ll be able to fulfill orders on time.
Many organizations track a variety of KPIs to get a better picture of their overall performance and be prepared for future production, inventory replenishment, and faster fulfillment.
It helps with reducing operating costs
Supply chain performance provides an all-encompassing overview of how logistics operations are performing at each step. This helps organizations to identify areas where they can improve.
You may use systems, processes, and workflows to minimize expenses once you’ve recognized what needs to be improved.
Because measuring performance improves supply chain visibility, it helps avoid costly blunders such as failing to reorder at the appropriate moment or overstock on slow-moving products.
It improves the financial performance of the company
A lean supply chain demands continual assessment of supply chain operations. It’s not only a method to find improvements, but it also provides an opportunity to eliminate waste throughout the supply chain so that lead times and expenses can be reduced.
When customers can get the items they want without any delays, they stay loyal to your brand and will be more likely to spend more money with you in the future. As a result, orders may be completed promptly while maintaining accuracy, which enhances brand loyalty significantly.
Supply chain performance KPIs to track
Businesses must maintain a constant eye on their supply chain KPIs and make adjustments where necessary.
You can significantly increase your operations by monitoring supply chain analytics and distribution metrics, which may help you worry less about logistics while also enhancing the quality of your product.
Here are some of the most common supply chain performance indicators to watch.
Perfect order rate
What exactly constitutes as a perfect order?
- On-time delivery
Overall, excellent order metrics assess supply chain effectiveness.
Tracking a perfect order rate implies that the proper number of orders are completed correctly, packed with all required documentation, and delivered on time without any losses.
Supply chain costs
When it comes down to it, lowering expenses is all that matters.
Costs associated with moving goods from origin to user, also known as logistics expenses, include all costs incurred in the supply chain.
These costs can include:
- Transportation and shipping costs — both first-mile delivery and last-mile delivery
- Warehousing and storage costs
- Fulfillment costs
There are several supply chain cost-cutting methods, but one of the most prevalent is to utilize cutting-edge logistics automation. Another popular choice is to collaborate with a 3PL that has already built up the necessary fulfillment infrastructure and simply provide access to it.
Order fill rate
The fill rate is the proportion of orders you can ship from your available stock without any lost sales, backorders, or stockouts.
It’s beneficial to track order fill rate because it reveals your company’s capacity to fulfill customer demands for rapid and exact delivery.
It may also assist you in measuring how often stockouts and backorders occur so that you can make adjustments as needed.
Cash-to-cash cycle time
The time it takes for a company to turn a profit to cover the cost of goods sold is known as the cash-to-cash cycle time.
Keep an eye on how quickly you can convert money into cash so you can estimate sales and see how profitable your company is before replenishing inventory.
A quick cash-to-cash cycle time, for example, indicates that your supply chain is lean and that you’re quickly turning purchased goods into profit.