Week 3 - Key Supply Chain Performance Indicator Paper
ISCOM 370 - Strategic Supply Chain Management
Key Supply Chain Performance Indicator
The purpose of this paper is to review three key performance indicators within supply chain. Key performance indicators of supply chain can help businesses by satisfying customer needs as well as maintaining the capital and operational expenditure of the business through its accurate forecasting in order to minimize or even eradicate the obsolescence costs of inventories.
The first key performance indicator is customer service levels. Customer service levels can be used both internally and ...view middle of the document...
If our requirements cannot be met then that is when we can start looking for other supplier that can meet our needs.
The second key performance indicator is inventory turns. There are several factors that are involved with this indicator. How much product we are holding at our distribution centers, how much product we are producing, how much product we are purchasing, how much product we are selling, how many orders are not getting completely filled because we are out of product. The inventory turns shows how often we are cycling through our product within a given period of time. So for example, our turns are calculated monthly and with a rolling 13 month scale. An example of a goal would be for one of our product groups to turn at least 9 times during that month. The goal numbers that are created are not the same for each product group. The goals are based on actual met in prior years and then the future strategic plans are reviewed to help determine where the inventory should be in the future years.
It is important to review the inventory turns because this will help show if you have inventory that should be gone or products that should no longer be sold. If there is a goal of 9 turns per month and you are only selling one turn per month, then maybe evaluating that product and possibly eliminating the product can help save the company money in the long run. You don't want to hold product for an item that has not been selling in over 9 months. You also don't want your turns to be too high over the goal. This could be a sign of selling way too much product and in turn not being able to meet all customer orders because you are out of inventory. This is where forecast accuracy comes into play.
The third key performance indicator is forecast accuracy. Having an accurate forecast is very important, especially to Energizer because we purchase so many finished good items from 3rd party suppliers in other countries. If the forecasts are not accurate then that results in not producing enough inventory to meet customer needs. And that also means that we may not purchase enough...