Prioritize the Right Supply Chain Metrics and KPIs

Supply chain metrics are measurements of the supply chain’s operational effectiveness. 

Supply chain leaders must measure supply chain performance to ensure they are making the right trade-offs to deliver the desired outcomes.

Supply chain performance targets focus on inventory and cost, service and demand. Supply chain targets will vary based upon customer expectation around price, fulfillment and perfect order.

The Gartner Hierarchy of Supply Chain Metrics identifies the 17 critical metrics to focus on across the end-to-end supply chain: forecast accuracy; perfect order; SCM cost; cash to cash; accounts payable; accounts receivable; inventory total; supplier quality; supplier on-time; raw materials inventory; purchasing costs; direct material costs; cost detail; production schedule variable; plant utilization; WIP and finished goods inventory; order cycle time; and perfect order detail.

Our research finds that too many supply chain metrics and a siloed approach to reviewing them leave companies without the ability to find correlations in the data that will give them real insights to improve operational performance. The best supply chain leaders avoid metrics overload.

They also strive to increase understanding, oversight and cross-functional management around the range of customer experience metrics. Our research finds that measurement of the corporate customer experience strategy is a gap on many supply chain metrics dashboards.

To measure supply chain performance related to externalities/environment, it is typical for data collection to occur in the following areas: competitors and competition, adjacent markets, externalities, and current and future trends.

For customer/consumer metrics, information coverage typically includes: key consumer issue, attitudes/behaviors, retailers/distributors, operations, and past experience with related products/campaigns.

For brand/product/service/experience metrics, information coverage typically includes: features, usage, characteristics, packaging, price, benefits, look/feel and service.

It is important when designing a data collection plan that you detail collection responsibilities to avoid inefficiency. In other words, identify the source of information and give a narrow information assignment to teams/team members for ease and clarity.

A supply chain KPI scorecard is a concise set of metrics derived from the key drivers of supply chain operation, which makes them easy to understand and actionable. The best scorecards have around 12 supply chain metrics. Cross-functional partners value the supply chain metrics, and as metrics become outdated, they are filtered out of the supply chain KPI scorecard. Supply chain metrics are retained for the sake of continuity, not for immediate business concerns. 

Commonly tracked external indicators can be bucketed between macroeconomic indicators and microeconomic indicators.

Macroeconomic leading indicators are a useful means of adding context to planning reviews but can overcomplicate decision making if a clear link is not drawn between a change in the indicators and its impact on a business driver or key assumption. Included among commonly tracked macroeconomic indicators are sustainability pressures (e.g., war on plastics, removal of waste around activities such as packaging, and drive to reduce carbon emissions).

On the other hand, microeconomic indicators are often more clearly linkable to future business performance. Commonly tracked microeconomic indicators include the following: innovation product pipeline, price of substitute products to price of raw materials, and customer satisfaction.