PRESENTATION ON : SUPPLY CHAIN PERFORMANCE

METRICS
“One of the secrets of life is to make stepping stones out of
stumbling blocks.”

-Jack Penn
 SUPPLY CHAIN METRICS

The average Supply Chain management professional measures their Supply

Chain by reviewing cost reduction. Is cost reduction all that there is in
measuring Supply Chain performance?
Sure, supply chain cost reduction is important in reducing the cost of goods
sold (COGS) and increasing profit, but there are other measurements which
should not be forgotten.
 KEY REASONS FOR SC METRICS

• Meeting customer expectations

• Improving supply chain capability
• Enhancing asset performance
• Instilling workforce cooperation
• Enriching the stakeholders
• The important decision for any company is to prioritize which supply chain
metrics are important and how they will be used.
• Many companies use supply chain performance metrics that are easy to
calculate but may not necessarily give a true indication of how the supply
chain is performing.
• Some companies use a range of metrics that they require their logistics
department to adhere to, but do not realize that in doing so, other parts of the
supply chain may be negatively impacted.
• Therefore selection of supply chain performance metrics is of utmost
importance now a days.
 CHARACTERISTICS OF A GOOD
PERFORMANCE METRIC

• Easy To Understand
• Quantitate
• Measures what is Important
• Causes Correct Behaviour
• Metrics Should be Easy To Collect
 CATEGORIES OF PERFORMANCE
METRICS

• Time
• Cost
• Quality
The common SCM metrics used in industries to track their supply
chain performance are -

1. Fill Rate Measurement

2. On-time Metrics
3. Performance to promise dates
4. Back Order Reporting
5. Inventory Turnover
6. Upside Flexibility
7. Cycle Time
8. Transportation Metrics
9. Benchmarking
 FILL RATE MEASUREMENT
The percentage of a customer's order that is filled on the first shipment.

(1 - ((total items - shipped items) / total items)) * 100

• Fill rate can be important to customer satisfaction and has implications for
transportation efficiency.

Example: Xiaomi Company

 TYPES OF FILL RATE MEASUREMENT

• Line count fill rate

• SKU fill rate
• Case fill rate
• Value fill rate
 LINE COUNT FILL RATE

• The amount of order lines shipped on the initial shipment versus the amount of lines ordered. This
measure may or may not take into consideration the requested delivery date (see On Time
Delivery)
example- ABC Company orders 10 products (one order line each) on its Purchase Order #1234.
The manufacturer ships out 7 line items on March 1 and the remaining 3 items on March 10. The
Fill Rate for this Purchase Order is 70%. It is calculated once the initial shipment takes place.
Calculation: Number of Order Lines Shipped on the Initial Order* / Total Number of Order Lines
Ordered (7/10 = 70%)
 SKU FILL RATE

• The number of SKU's (Stock Keeping Units) ordered and shipped is taken into consideration.
Above, we consider each Order Line to have an equal value (1 ). Here, we count the SKU's per
Order Line.

• Example: If on Line 1, the order was for 30 skus of product "AB" and on line 2, they ordered 10 skus
of item "AC". If Line 1 ships on April 1 and line 2 on April 20, the SKU Fill Rate is 75%
Calculation: Number of SKUs Shipped on the Initial Shipment / Total Number of SKUs Ordered
(30/40 = 75%).
 CASE FILL RATE

• The amount of cases shipped on the initial shipment versus the amount of cases ordered.
example- ABC Company orders 6 products that total 200 cases. The manufacturer ships out 140
cases on 3/1/01 and the remaining 60 cases on 3/10/01. The Fill Rate for this Purchase Order is
70%. It is calculated once the initial shipment takes place. The number of Order Lines is not
considered in this calculation. This Fill Rate measure gives "weight" to the order lines that are
shipped out.
Calculation: Number of Cases Shipped on the Initial Order / Total Number of Cases Ordered .
(140/200 = 70%)
 VALUE FILL RATE
• Same as previous, except the order line value is used instead of cases.

Calculation:
Value of Order Lines Shipped on the Initial Order / Total Value of the Order
($400/$500 = 80%)
 ON-TIME METRICS

• Ratio of portion of order shipped on or before the scheduled time to the total order.

• It is not clear how the number of units on time is calculated.

• OTD calculation reference points are unclear; e.g. are they based on RDD, first confirmation date (CDD) or last CDD?

• The shipment date is used for actual delivery date (ADD), not the actual delivery date on the customer’s premises.

• Early deliveries without customer approval (e.g. month end pressure) are defined as delivered on time.

• OTD is calculated on order level, not on order line level.

 TYPES

• On-time Line count

• On-time SKU count
• On-time Case Count
• On-time value rate
 ON-TIME LINE COUNT

• The amount of order lines shipped On Time* versus the amount of lines ordered.
example- ABC Company orders 10 products (one order line each) on its Purchase
Order #1234. The Order has a Requested Ship Date of March 1. The manufacturer
ships out 5 line items on February 28 and 2 items on March 1 and the remaining 3
items on March 10. The On Time Line Count for this Purchase Order is 70%. It is
calculated based on the Requested Ship Date OR, if available, substitute actual
Delivery Date vs Requested Delivery Date.
Calculation: Number of Order Lines Shipped on or before the Requested Date / Total
Number of Order Lines Ordered
(7/10 = 70%)
 ON-TIME SKU COUNT

• The number of SKU's (Stock Keeping Units) ordered and shipped is taken into
consideration. Above, we consider each Order Line to have an equal value (1 ). Here,
we count the SKU's per Order Line.
example: If on Line 1, the order was for 30 skus of product "AB" and on line 2,
they ordered 10 skus of item "AC". The Requested Ship Date is April 1st. If Line 1
ships on March 28 and line 2 on April 20, the the on-time SKU count is 75%
Calculation: Number of SKUs Shipped On Time / Total Number of SKUs Ordered
(30/40 = 75%).
 ON-TIME CASE COUNT

• The amount of cases shipped On Time versus the amount of cases ordered.
example- ABC Company orders 6 products that total 200 cases, on its Purchase
Order #1235. The manufacturer ships out 140 cases on 3/1/01 and the remaining 60
cases on 3/10/01. The Requested Ship Date is 3/1. The Case On Time Rate for this
Purchase Order is 70%. The number of Order Lines is not considered in this
calculation. This On Time measure gives "weight" to the order lines that are shipped
out.
Calculation: Number of Cases Shipped On Time / Total Number of Cases Ordered .
(140/200 = 70%)
 ON-TIME VALUE RATE

• Same as above, except the order line value is used instead of cases.
Calculation: Value of Order Lines Shipped On Time / Total Value of the
Order ($400/$500 = 80%)
 PERFORMANCE TO PROMISE DATES

• It is a measure of ability of the manufacturer to fulfil his promise (original or revised) i.e. the
proportion of the promises the manufacturer is able to fulfil
 EXAMPLE

• ABC Company Orders 2 Products on Purchase Order #1234, with a Requested Ship Date
of June 10.
The first item is in-stock and ships on June 10th..
The second item is on backorder. The manufacturer estimates that the 2nd item will ship
by July 1.
The item is manufactured and ships out on June 28.
The Performance to Promise Date is 100% (items ship on time or early)
*However, if the 2nd item does not ship till July 2nd, then it's late. The Performance to
Promise Date is 50%.
 BACKORDER REPORTING

• It is the ratio of the portion of the order shipped as backorder.

It may be expressed in pieces, SKUs or value. It may be tracked at a variety of

levels i.e. customer wise, division wise or the total company as a whole.
 TYPES

• Partials
• Multi Line Orders
 PARTIALS

What if a customer orders 100 pieces of an item. You currently have 90 pieces.
Should the 100 pieces be considered a backorder or should the backorder be considered 10
pieces (100 ordered - 90 available)?
The answer is it depends. If the customer accepts a shipment of a partial quantity, then the 90
pieces will ship out and the backorder is 10 pieces. If the customer only accepts only full
quantities, then the backorder is 100 pieces. This is because, in the customers eyes, they ordered
100, but you did not ship them anything.
 MULTI LINE ORDERS

What is a customer places an order for 3 different items and they request you hold the order until
you can ship it completely. You have inventory to fill the first two items, but not the third.
Are all 3 items then on backorder? While there is no specific standard, generally you would only
consider the third item as on backorder.
Backorders may be expressed in "pieces", "SKU's" or in "value". Backorder calculations are often
tracked at a variety of levels. Example: Customer, Division, Total Company
 INVENTORY TURNOVER

• The number of times a company’s inventory cycles or turns over in a financial year.
• Calculation: A frequently used method is to divide the Annual Cost of Sales by the Average
Inventory Level.
Example: Cost of Sales = $36,000,000. Average Inventory = $6,000,000.
$36,000,000 / $6,000,000 = 6 Inventory Turns
• Turns can be viewed using Cost Value, Retail Value, or even in Units. Just make sure that you're using
the same Unit of Measure in both the Numerator and the Denominator.
• Although results vary by industry, typical manufacturing companies may have 6-8 inventory turns
per year. High volume/low margin companies (like grocery stores) may have 12 or more inventory
turns per year or more. It is common for a company to target slowly increasing it's turns year after
year.