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Supply Chain Performance Indicator Essay

785 words - 4 pages

Key Supply Chain Performance Indicator Paper
Danny Shieh
March 31th, 2012
Leon Powell

Key Supply Chain Performance Indicator Paper
The success of a company can often be represented by its performance of the supply chain element. Such performance is measured to ensure the flow and process of each element is accurate and up to standard based on the company’s goals and objectives. In this paper, author will first define supply chain and its elements, then define the meaning and importance of key performance indicators. Lastly, Author will explain three example indicators, how it is calculated, and what ...view middle of the document...

Any broken link the supply chain can cause down time and disaster to the delivery of goods and services. 

Key Performance Indicators
Key Performance Indicators (KPI) is the matrix to evaluate the effectiveness and efficiency of the flow between each supply chain elements. KPIs are quantifiable measurements that reflect the critical success factors of a business (, 2006). It provides a handful of numbers that gives the business owner an “at a glance” view of the performance, help identify problem areas that needs attention, and enable quick response to drive the business forward. Some of the major KPIs includes inventory turns, on-time delivery, and Forecast accuracy.
Inventory Turns
Inventory turns measures the number of times that on-hand inventory cycles over per year. It’s one of the most commonly used supply chain metrics to monitor the relative inventory level versus cost of sales. It’s calculated by divide the annual cost of sales by the average inventory cost. For example, if the annual cost of sales is 36 million and average inventory is 6 million, then the inventory turns is 6 turns. 6 turns means the inventory will cycle 6 times a year or every 2 month. The higher the turns are usually better, as it means better flows of goods and cash.
Manufacturing Cycle Time
There are many different types of cycle time, which includes customer order promised cycle time, customer order actual cycle time, purchasing cycle time, inventory replenishment cycle time, supply chain cycle, and manufacturing cycle time (, 2012). All of which,...

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