Every growing ecommerce brand needs an effective and efficient supply chain to support its continued growth. The ability to gauge success by tracking key performance indicators (KPIs) allows brands and supply chain professionals to discover weaknesses and optimize certain areas of the supply chain.
What Are Supply Chain Management KPIs and Why Are They Important?
Supply chain KPIs are those indicators that deal specifically with the supply chain. The two main goals of these KPIs are to increase productivity and improve customer satisfaction, and the specific KPIs a brand chooses should reflect these goals.
8 Top Supply Chain Management KPIs to Track
Like any goal-setting activity, each brand’s supply chain KPIs will be slightly different depending on its goals and supply chain strategy. Here are the top eight supply chain KPIs brands and supply chain professionals should consider tracking.
1. Perfect Order Rate
This might be the most important supply chain KPI for a supply chain professional to track because it encompasses so many aspects of the supply chain. It effectively measures the total number of orders in which there were no errors. That means the correct item was shipped, the item was received on time, and the item was not damaged. Calculating this rate can also help brands identify weak spots in the supply chain. For example, if the rate of on-time delivery is low, brands would be wise to invest time into improving that performance metric.
The perfect order rate is important for determining customer satisfaction. In ecommerce, the customer experience is often synonymous with the delivery experience, so it follows that if a customer receives the correct customer order on time, overall satisfaction with the order will be achieved.
2. Fill Rate
The order fill rate is the percentage of orders that are immediately fulfilled by available stock. This rate determines how efficiently brands are able to meet customer demand. For example, if a company’s fill rate is consistently low—or falling—that means they are unable to meet customer demand for their products and need to review their inventory strategy.
3. Cash to Cash Cycle Time
This supply chain KPI measures the time it takes between paying for raw materials and getting paid for products a brand sells. This metric is a combination of several supply chain KPIs—including both inbound logistics and outbound logistics KPIs. The cash-to-cash cycle time tells a brand how quickly it can turn its resources into cash, and the shorter the cycle, the better. Tracking this performance metric will help brands optimize in the right areas to ensure less cash is tied up in the supply chain operation.
4. On Time In Full Delivery (OTIF)
On-time in full delivery measures the percentage of orders that are delivered on time, to the correct location, including everything within a customer’s order, and is a supply chain management KPI that ties to customer satisfaction. A brand’s ability to offer fast, accurate delivery can be a make or break in a competitive eCommerce market.
5. Inventory Turnover
One of the most important inventory KPIs is inventory turnover. Inventory turnover is the ratio of the total supply chain cost of goods sold in a period (usually a year) to the cost of a company’s average inventory. Simply, it measures how efficiently a company uses its inventory. However, a low inventory turnover could mean weak sales ratio or excess inventory, while a high inventory turnover could mean strong sales or inadequate inventory levels. Brands should aim for a turnover rate of 2 to 4. Demand forecasting can also help brands and supply chain leaders determine the ideal turnover rate for their specific products.
6. Reasons For Return
Unlike many of the supply chain KPIs on this list, reasons for return are a category list—usually presented as a pie chart—rather than a single metric. However, this metric is key to understanding why customers are returning products. The reasons will also vary from industry to industry—think: item didn’t fit for fashion brands. Some reasons—like the wrong item shipped—are applicable to brands across industries. Looking into these areas can help brands and supply chain leaders optimize the supply chain and reduce costly returns in the future.
7. Supply Chain Costs vs. Sales
This supply chain management KPI calculates supply chain costs as a percentage of total sales. Having a clear picture of where the supply chain costs are can help brands optimize in areas that make sense. Optimizing a supply chain means reducing costs when possible, but if reducing costs negatively impacts other KPIs, brands will need to adjust.
8. Repurchase Rate
Customer repurchase and retention are critical KPIs for many companies, particularly as the total cost of customer acquisition online has risen sharply in recent years. The repurchase rate is the percentage of customers who make an initial purchase and then return to buy from a company again within a given time period. This metric can be used to improve marketing campaigns, ideate ways to increase customer loyalty, and better understand the customer lifecycle.
Optimize Supply Chain Operations with Omniflow Software from Flowspace
Flowspace partners with brands to optimize the supply chain. Flowspace’s OmniFlow Visibility Suite gives brands real-time visibility and the ability to track supply chain KPIs. But Flowspace’s platform goes beyond just tracking KPIs; Flowspace’s platform provides merchants with actionable recommendations for how to improve and optimize their supply chain.
The OmniFlow suite of tools provides visibility and control from order fulfillment through delivery with platform-level transparency so brands can stay ahead of low inventory. The inventory planning software’s real-time insights and predictive analytics allow brands to forecast inventory needs. Ensuring optimal inventory levels can improve customer satisfaction and build customer retention.
Get in touch with Flowspace today to learn more about how Flowspace can help your business optimize for supply chain KPIs.