Supply Chain metrics

One of the key elements of any business today is it’s reliance on metrics and KPI’s ( Key Performance indicators) – gone is the time when the only indicator was profit and loss – today’s business relies on a myriad of measures to ensure it’s business remains on track.

This is especially true within Supply Chain. Supply chain benefits (usually) from producing a wealth of data in it’s day to day transactions – think about purchase orders being raised, invoices being paid, stock being issues etc. Supply chain therefore should be able to produce some compelling analysis of it’s business – but for many the questions is what to measure.

Having worked within Supply chain for many years I don’t think that there is a definitive answer – Metrics are often aligned to the industry sector that the business operates from. And different businesses weight different activies differently. Any metrics should usually filter up towards business targets so you'll want to make sure that your analysis supports this.

However in my opinion you can often distill supply chain metrics down to a number of core constituents. The following 3 supply chain metrics are the basic raw materials for procurement that we tend to start off with – there are plenty of others out there but this should get you thinking.

1/ Number of Suppliers

One of the key elements for any organisation are the suppliers that they are transacting with – when working with clients the first port of call is to look at the Supplier profile – i.e. take a period say an accounting year – then list all the suppliers that were transacted with (this can be taken from either the purchase ledger or order book)

2/ Spend Profile

The next step is to add in the financials - Add in the money that was spent with each supplier. For later analysis we throw in a category now that could be commodity based (this is what we usually use) or geographical – something that’s relevant to your business. Once this is complete you then have something tangible to look at - clients are often suprised by how many suppliers they have for commodities such as logistics or stationery -

3/ Supplier performance

Lastly – try to analyse the suppliers performance – we usually look at Supplier Schedule Adherance – we measure that (albeit crudely) as “did my supplier deliver on or before the date I requested”. Now I now that for some early delivery represents a penalty but we tend to start out with the crude measure and go from there.

Once you've got those 3 down - think of some targets that you want - for example do you want to rationalise your supply base? Do you need your schedule adherance improving? Linking targets to analysis can often form the basis of improvment plans.

Over to you – we’d love to know what supply chain metrics that you use.