The 3 key supply chain metrics to improve your Performance!
In today’s business
it becomes more and more important to optimize processes to save cost.
Especially through analyzing and improving the Supply Chain, significantly
increased performance can be achieved.
Very complex Supply Chains tend to offer such a huge amount of
information and data that it becomes necessary to encapsulate these in
easy and self-explaining key supply chain metrics.
Key Performance Indicators (KPIs) are metrics which companies can use to
effectively measure their performance, as well as control and benchmark it.
Complex processes can be portrayed easier, which in turn means that their
analysis can be simplified through comparisons and benchmarking.
I ran a study together with SAP customers in different industries to figure out the
most important KPIs. The following three SCOR-KPIs showed very high
significance in Customer Interviews and have a hugh potential to increase the
performance of every Supply Chain.
Perfect Order Fulfillment:
The KPI Perfect Order Fulfillment (POF) of the SCOR-Model measures the delivery
performance and consequently the customer service. A percentage value serves as
the metric, which presents the ratio of
perfectly delivered Orders. A very high percentage value usually means high
It became clear in interviews with customers, that the POF-KPI is at least partly in use
or that there is a high interest in using it. Especially the information, if
deliveries are complete and thus contain all ordered items, and the information,
if the order was delivered to the right
place at the right time are very valuable and important for a world-class
Figure 1: Hierarchy of the Perfect Order Fulfillment KPI
Cash-to-Cash Cycle Time
The Cash-to-Cash Cycle Time measures the average timeframe, which is
necessary to convert investments and resources to real Cash Flows. With this information,
an organization can evaluate how efficient they are handling their assets. The
Cash-to-Cash Cycle Time is calculated by observing the metrics of the Days
Sales Outstanding, Inventory Days of Supply and Days Payables Outstanding. The
number of Inventory Days of Supply is a very important metric, since it does
not only help for the evaluation of Asset Management Efficiency, but also is
valuable for process management.
Figure 2: The Control Tower Dashboard
Order Fulfillment Cycle Time:
The Order Fulfillment Cycle Time measures the
actual average time of an order which can be consistently achieved. The Order
Fulfillment Cycle Time encompasses the whole timeframe starting with the
initial order placement by the customer and ending with the proof of delivery.
This metric is used for measuring the responsiveness of an organization.
This metric was also very popular in Customer
interviews, since a quick response time to customer orders and thus high
customer satisfaction is desirable. Similar metrics for the analysis of
responsiveness are not optimal though, especially in the cases of dwell times
and pre-orders. The Order Fulfillment Cycle Time KPI covers all important
aspects of responsiveness and helps to improve better customer service.
By using these three metrics companies can effectively measure and improve their delivery performance,
asset management and their responsiveness.
SAP Supply Chain Control Tower comes with pre-delivered Supply Chain KPIs and
presents them in a clear and concise way.
Additionally Control Tower gives Supply Chain Professionals full control and overview over the
end-to-end Supply Chain. Data from multiple systems like SAP ERP, APO, BW or 3rd
party can easily be integrated into Control Tower. All of the necessary
information will be stored in SAP HANA running in the Cloud to have ONE view of
your Supply Chain at the right time.
In order to organize all important KPIs and
Supply Chain metrics, SAP Control Tower’s Custom Alerts grant users fast and
precise overview of the most important issues. These Custom Alerts can be assigned
via Tasks to fellow employees to align and resolve negative trends and issues.
Improve your Supply Chain performance today with SAP Supply Chain Control Tower!
Oskar Ong is a student working at SAP in Germany.
Together with Michael Mack, he ran a customer co-innovation on Supply Chain