What variables should you measure to optimize your supply chain?

Measuring is one of the keys to management success. But only by measuring the right variables you will get the appropriate indicators that can contribute to optimizing your business.

In a past blog, we spoke about certain features logistics metrics should incorporate to be useful in managing your supply chain. A good indicator must be easy to understand, actionable and easy to collect.

Today, we’ll review the most important variables that are usually measured by different types of companies. These are indicators that have a direct influence on achieving important goals such as an on-time-delivery, finding the best route or the fastest route.

TIME. “Those metrics that relate to time are easily calculated, easily understood, and clearly show operational effectiveness,” says Martin Murray, logistics and supply chain expert.

The level of on-time deliveries, on-time receipts, time to process purchase orders and time to fulfill an order are useful and accurate metrics that contribute to improving your fleet’s performance.

COST. These metrics “can help your company improve margins and the overall bottom line and can identify where in the business the improvements can be made,” explains Gary Marion, another logistics and supply chain expert.

Mr. Murray adds that “this is an important performance metric as it shows how efficient parts of the company are. Businesses need to be profitable and by focusing on cost metrics, they can identify where improvements can be made. Inventory carrying costs is a popular performance metric that companies look at to see how much it costs them to carry items in the warehouse. Companies are always trying to identify where they can make changes to improve cash flow and making business more profitable.”

QUALITY. It is the milestone of indicators - or it should be. Generally, this metric is used to measure customer service and customer satisfaction.

“For companies that want to improve customer satisfaction –explains Mr. Marion- supply chain metrics focused on quality (along with on-time and cost metrics) are important. Although the metrics around delivery times are important to customer service, improvements in the quality of the product can significantly improve customer satisfaction. Understanding your customer’s specifications and meeting their expectations helps reduce customer returns and increase your customer’s confidence in your capabilities.”

How do you measure your time, cost and quality in your company? Let’s share experiences. I appreciate your comments below.

Other interesting blogs:

Essential logistics KPI`s that you should consider for your business

How to choose a Transportation Management Software for your company

How visibility in your supply chain can help you overcome a crisis

How fleet tracking systems improve customer experience

The importance of metrics for logistics managers