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KPIs are critical to understanding and managing complex systems. They allow managers and other decision-makers to make informed and cost-effective business decisions. These decisions involve which materials to purchase, quantities, timing, and logistics costs. Having the right KPIs is one of the best practices that planners deploy to keep supply chains running smoothly. Below, we’ll explore some of the critical KPIs in supply chain planning.
Few things concern companies as much as inventory. Accurate inventory means that enough material is in stock to meet demand, while not so much that it ties up operating capital. Using inventory optimization software allows companies to initiate perpetual inventory where transactions and on-hand supply are updated in real-time as production progresses. It also tracks inventory turns to help managers understand how inventory affects cash flow.
In an age where consumers expect fast shipping and quick order turnaround, on-time delivery is critical. By delivering goods at or before the quoted delivery date, companies have a greater chance of repeat business and brand loyalty. With demand and supply planning software from Plex DemandCaster, end-to-end visibility in the supply chain lets planners respond quickly as bottlenecks occur. The system automatically alerts planners to problems or automates responses to optimize on-time delivery.
Companies with manual or fragmented supply chain planning systems may not even know the time between receipt of a purchase order and the delivery of the good. But it’s a critical KPI that significantly impacts other things and is directly related to inventory turns, on-time delivery, and cash-to-cash cycles. A lower customer order cycle time will result in greater turns and better customer satisfaction.
Planning departments may operate within budget constraints when purchasing raw materials and components. The time in days between paying for raw materials and components vs. the time in days for the company receiving payment for them after delivery can be used to measure supply chain efficiency; the lower the ratio, the more efficient the supply chain, storage, and delivery costs. Like inventory turns, it’s also an indicator of how much money is tied up and affects cash flow.
Inaccurate or late delivery of goods can result in production stops. Many companies encounter vendors with poor performance on ship time and full-order requirements. Late or short goods can ripple across an operation, causing problems for labor utilization, inventory control, and more. Demand and supply planning software lets planners know when orders are approaching late or when they’ve been shipped short. This knowledge helps them run “what-if contingencies” to plan ahead and mitigate the impact.
For more insight, many KPIs can be rolled up and analyzed as a master KPI. With demand and supply planning software, a quick roll-up of the percent of fully delivered goods, on-time delivery rate, and accurate documentation can help improve customer satisfaction. Without software, this KPI would be difficult to track and analyze manually. But using advanced analytics, companies can utilize the perfect order rate to view their supply chain success holistically.
Plex DemandCaster Demand and Supply Planning software can help you accurately manage your KPIs to gauge your supply chain's agility and resilience. You can plan confidently with accurate control over your inventory using reliable real-time data to make decisions.