10 Supply Chain Metrics You Should Be Monitoring

An effective supply chain is essential to survive in today’s competitive business environment and increase your revenue. According to a survey by Deloitte, 79% of companies with high-performing supply chains achieve revenue growth superior to the average within their industries. One way you can determine if your supply chain performance is satisfactory is by monitoring your supply chain metrics (or KPIs), which are a set of parameters used in quantifying and defining  the performance of your supply chain. Here are the 10 key performance indicators you should monitor to optimize your supply chain management.

1. Inventory Turnover

Inventory turnover measures the number of times inventory is sold in a specified period.

To calculate inventory turnover, use the following formula:

Cost of Goods Sold / Average Inventory

A high turnover indicates that your products sell out quickly, that there is high demand for your products. If your inventory turnover rate is below industry benchmarks, you may be overstocking. To improve your inventory turnover, invest in proper forecasting, and inventory automation software.

2. Inventory Accuracy

This metric measures the accuracy of your inventory by comparing physical inventory with what’s recorded in your database. Maintaining inventory accuracy can help reduce inventory carrying cost and stock outages. 

To calculate inventory accuracy follow this formula: 

Database Inventory Count / Physical Inventory Count

Your goal is to get an inventory accuracy rate between 95% and 99%. Ways to increase inventory accuracy include establishing good inventory naming and labeling practice. You can also leverage warehouse management and inventory management systems to eliminate manual data entry and reduce human error.