3 Supply Chain Performance Indicators That You Need To Pay Attention To

Seeing the visibility of Supply Chain Performance is very necessary for companies. Supply chain management is not enough but your company must be able to measure the sustainable performance of the supply chain. This is the key to business success.

By knowing the performance measurement system you can evaluate the supply chain running in your company. You need the right metrics to be able to manage the successful operation of a company that varies greatly by industry and by company.

The absence of this framework will make metrics increase the likelihood that the company's performance measurement system is unable to provide insufficient support to management. These resources will be wasted on developing duplicative, misaligned or even contradictory metrics. To be able to find out the Supply Chain Performance in your company, there are several performance indicators that must be considered as follows:

Inventory Investments
To find out and also measure supply chain performance, you can measure inventory investment first. Directly, this inventory investment will affect your profit and cash flow in your organization or company. Organizations or companies can invest in raw materials, work in progress as well as finished goods which are used to ensure the required target customer service.

What goes into inventory investment, for example, is gross or net income, it must be calculated based on the item and also the location, according to the item's waiting time, the expected demand and also the target for customer service.

Inventory Efficiency
To be able to find out the performance of the next supply chain that can be done is to look at inventory efficiency. A high inventory investment in itself will not indicate a problem in inventory because this inventory investment will be related to the demand for the product.

It is important for you to streamline this inventory by measuring inventory turnover as well as several days of inventory. This inventory turnover will be calculated as the ratio of the annual cost of goods sold or COGS as well as the average monthly inventory investment. This inventory turnover will measure how often this turnover changes in this year. Some companies will exclude inventory that is excessive as well as obsolete. For example, this is inventory which has no demand for the next 30, 60 or 90 days.

Forecasting Accuracy
Supply Chain Performance can also be seen from the accuracy of forecasting. This forecasting accuracy is an important supply chain metric because it forecasts future demand so with every aspect of an organization's supply chain. The accuracy of this forecast can be calculated by both product and product family.

Most organizations or companies will be able to select 30, 60 or 90 day prospects. This will suit both industry and maturity estimates. There are many ways that can be done to estimate or forecast accuracy as below:

• Average deviation. This forecasting error only calculates the monthly average deviation, calculates the demand difference and estimates it as actual demand. Although this method is very easy for forecasting accuracy, the disadvantages obtained are positive and negative estimates which cancel each other out.
• Mean absolute deviation. Used to be able to overcome the losses that can be caused by calculating the average deviation, some companies use the absolute mean deviation in order to calculate the accuracy of the forecast.
• Root mean squared deviation. A useful calculation because it is used as a determinant of a specific safety stock for a particular product or product group.

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