Competition on global platform has made it essential and more relevant for the companies to perform better than their competitors, to sustain and flourish. In such a fierce contest it becomes very essential for companies to know and understand the attributes which will help them to measure their supply chain performance. I will discuss few of the vital KPI which manufacturing organizations should concentrate to fathom and improve their supply chain performance.
Delivery Performance: On time delivery - In today’s world , it is mandatory for businesses to deliver the ordered product to customer at right time and right place. On time delivery cannot be compromised and businesses need to attain it every time without any mistake . On-time delivery clearly indicates the way business is serving end customer.
Order Lead time: It is defined as the time elapsed between customer order confirmations and actual delivery. Organization should always strive to cut order lead time to minimum. Shorter order lead time will increase customer satisfaction and on other dimension it increases organization ability and flexibility to handle dynamic order scenarios.
Response time to Customer: It is the time organization takes to respond to customer query/enquiry on order status , product information etc. Faster the companies respond to customer with the required information better it is for business.
Capacity Utilization or Productivity: Capacity Utilization is the attribute which indicates whether the available resources are been judicially been used and whether there is a scope to increase production with current resources.
Capacity Utilization helps organization to identify their bottleneck resources which are overloaded and slowing the supply chain operations.
Product Development cycle time - It is defined as the time an organization takes to translate a product from drawing board to shop floor. Shorter product launching cycle time provides an edge over competitors. Organization should keep a close watch over its Product Development cycle time and try to cut it shorter as far as possible .
Accuracy of forecasting - In make to stock business accuracy of the forecasting is very vital parameter. Inaccurate forecasting may either lead to more inventory or lost order due to scarcity of stock . Hence, accurate forecast is very essential for the organization and business should strive to close forecast error gap by taking appropriate measures like monitoring the forecast error in each time bucket , implementing forecasting applications etc
Percentage of Defects/Rework - Minimize defects and increase bottom line. One of the attribute which suggests operational efficiency is percentage of the defects/rework . Businesses should benchmark their defect percentage against industry standard and aim to bring down defects/rework.
Inventory carrying cost against Opportunity Cost - In an ideal scenario organization should not carry any stock in inventory and the moment stock is available from production it should be moved to customer . But practically it is not really possible due to the uncertainty factor in real world hence to counter these uncertainties organization carry inventory as buffer . Organization should keep a balance between inventory carrying cost and opportunity cost of holding the stock in inventory. Business should check its inventory every month for each SKU against the opportunity cost of carrying this inventory and then decide on the optimum stock quantity.
Aged/Dead Stock - Aged or dead stock hits the top and bottom line of businesses directly . Organizations ends up having dead or aged stock due to error in forecasting , obsolete product line,return stock from customer etc .Not only the material cost and production cost is linked with the dead/aged stock but there is huge inventory carrying cost associated with it . Target for any organization should be zero aged and dead stock at any point of time.
Percentage of finished goods in-transit - Manufacturing the goods with excellent operational efficiency doesn’t end the story . Customer will be delighted only when the delivery is been received at right time. Organizations should monitor their transportation efficiency from manufacturing plant to distribution center(DC) and DC to customer. Any aberration in higher percentage of stock under in-transit requires urgent attention and needs to be resolved quickly.
Disclaimer : The views mentioned are my own and does not represent the thoughts, intentions, plans or strategies of my employer
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