In our current competitive landscape, a healthy and effective supply chain is crucial for business viability. If you’re a supply chain manager, there are several key metrics you need to be aware of in order to maintain a healthy order and delivery system. While this is just the tip of the iceberg, here are a few data points we recommend monitoring.
Order Fill Rate (OFR)
One of the most important metrics for supply chain management is order fill rate (OFR). OFR is the number of orders your warehouse can currently fill. This number is helpful in gauging customer needs, which can be particularly useful when adjusting for seasonal demand shifts. Generally, it’s recommended that fill rates exceed 98%.
Equation: Total # of Customer Orders Shipped / # of Customer Orders Filled X 100
On-Time Delivery
We’ve all been the customer eagerly tracking the arrival of our parcel, only to see the ETA get pushed further back and back. As supply chain managers, you want to mitigate this as much as possible. This is why we recommend monitoring your on-time delivery percentage. If you aren’t already tracking, start with your upcoming quarter and continue monitoring from there. As your company grows, you may want to track by month, season and year, too.
Equation: # of Orders Delivered On Time in Given Period / # of Orders Shipped in Same Period x 100
Perfect Order Rate
Similar to On-Time Delivery, perfect order rate is another way to track the efficiency of your business. This metric shows how many orders you shipped without errors or deviations from the original shipment plan. Like on-time delivery, you can choose to measure this rate on a weekly, monthly, quarterly or annual basis.
Equation: % of Orders Deliver On Time x % of Orders Complete x % of Orders Damage Free x % of Orders with Accurate Documents x 100
Inventory Turnover
As mentioned above, accuracy is especially important when it comes to managing shifts in demand. Inventory turnover measures the number of times inventory is sold in a certain time period. For example, if you’re a backpack supplier, it’s necessary for you to know how many backpacks you sell in the months before school starts vs. the months after so you are adequately stocked.
Equation: Cost of Goods Sold / Average Inventory
Order Cycle Time
From purchase to delivery, the order cycle time shows how long, on average, it takes for your business to complete a customer’s order. Short cycle times show responsiveness and a healthy supply chain system while long cycle times may indicate that your operations aren’t synced efficiently.
Equation: Actual Ship Date – Customer Order Date
Rate of Return
One way to measure customer satisfaction is by knowing your return rate, the rate at which shipped items are sent back to your facility. Customers can return items for any number of reasons, but if you find that there are certain times of the year or certain employees that are working on orders that are often returned, you can help nip issues in the bud faster.
Equation: Total Items Returned / Total Items Shipped
