Supply chain management sounds like a big task, and it definitely is. To help you understand how to measure supply chain performance let’s get to the basics first. In this text you will learn the basics of supply chain performance measuring, and what that means for your business. Say you need the services of a national shipping company of Saudi Arabia. Read below what you need to know in advance.
What exactly is a supply chain?
Whether you have your own company or you deal with the import-export business and looking out for a company to work with, knowledge of the supply chain mechanism has to be on point. This is how the companies track their success, their goals, and achievements. Most importantly, to measure supply chain performance means to know how effective your business is. The supply chain is a term that describes a full set of relations between a company, suppliers, and customers who buy the company’s end products or services. In the global business world, working means you have multinational competition. To have your business blossom, you have to deal with the competition. The best way to ensure regular customers and smooth money flow is to know what are your strengths and your weaknesses, and how to improve them.
What is supply chain performance?
Supply chain performance addresses the overall performance of the whole chain concerning meeting end-customer needs. It includes things such as product or service delivery time, availability of the products, does the chain contains enough inventory and capacity to get the final product to a customer efficiently and satisfactorily, etc. Supply chain performance is in constant need of improvement, due to the large competition. The globalization process offers easy access to companies all over the world. In other words, the competition is huge, and you need to stand out with quality service so the customers continue buying from you. This requires measuring supply chain performance continuously.
How to measure supply chain performance?
There’s a thing called KPIs which stands for Key Performance Indicators. These indicators are there to show you the overall performance of your company, regarding your quality goals. Simpler said KPIs are there to help you be successful. KPIs are also used to compare the company’s success to other competitive companies. Say you need cargo shipping to Saudi Arabia, how would you know which company to hire? There are numerous KPIs to help you check the metrics of certain companies.
KPIs you want to check
When you want to measure supply chain performance, the best thing to do is stick to the most common indicators of success. Here are the top KPIs you want to check when planning a business, or wanting to improve the performance of your own company. Pro tip: check Saudi customs clearance so you know what to expect when doing business in KSA
- The first and very important KPI you want to use to measure supply chain performance is concerning the orders.
- You will want to check the following: what’s the percentage of on-time deliveries;
- how many deliveries are fully correct, aka on time and to the right person
- is there any damaged goods, if so, what’s the percentage
- and did the delivery include all the necessary documents for the buyer
Being extremely careful about the proper delivery process is very important for keeping the customers. Everything does operate on global levels, but a satisfied customer with a great review is very good for any company, on any level. It doesn’t matter how small or big are you, a good review is a good marketing tool! Using these KPIs can help you calculate overall customer satisfaction. For example, if you have a low percentage of on-time deliveries, meaning your customers aren’t getting their orders on time, the chances for satisfaction aren’t so well. Bonus tip: sea transportation can be slower, but it’s efficient when you want to move larger quantities. Search for sea cargo Jeddah for more information.
The next KPI is concerning the speed of cash flow. To explain in simpler words, it’s an indicator that shows how quickly you get from paying the materials needed for the product, to getting paid for the end product. You can calculate with this simple formula. The date on which you paid for materials minus the date on which a customer paid for the end product or service. The lower the number, the better. It shows that the company works efficiently and the cash needed for the next investment doesn’t stay tied up for a long time.
Inventory related KPIs
The first one we want to mention is called inventory turnover. What that KPI shows you is how quickly can a company move its inventory. Simpler – it shows how often the company can sell all inventory during a specific period, usually a year. Having a good inventory turnover means you can save money on storage as the inventory moves quickly, plus you won’t have to do sales and clearances. This means you won’t need to lower the prices to sell a product and clear out storage for new products or get more storage capacity. In any case, it’s a winning situation.
This may be written off as unnecessary to even discuss, but it’s quite problematic. This KPI regards inventory accuracy, meaning you have to have a way of tracking exactly what you have in your inventory. This means your numbers have to match. What is in the database under inventory, has to match the physical inventory of the company. In perfect circumstances, this would be a piece of cake, but unfortunately often this isn’t the case. The mismatch of the data and the physical inventory leads to backorders and higher inventory costs.
When planning a business or a partnership, or just looking for a new company for cooperation, there are a lot of things to consider. Understanding how to have an efficient and successful company can be easier when you know what stands behind a good business. To measure supply chain performance is just one of the ways to see the efficiency of one company, if their goals are fulfilled and how the customers all over the world feel about it. Hopefully, this text initiates more thorough research on this topic, as it is very complex.