A well-functioning supply chain depends on understanding its critical aspects. From selecting key systems to monitoring the right KPIs, the success of your operations hinges on these decisions.
Are you confident your business is set up with the right tools?
Watch the video to learn how to optimize and strengthen your supply chain.
Unpacking Supply Chains Part 2: Systems and KPIs
In the first part of our series, we explored the physical aspects of supply chains. Now, let’s shift gears to discuss the systems and KPIs that drive operational success. Whether you’re stepping into a new supply chain role or assessing an organization’s operations, understanding these components is crucial.
Demand Planning and Forecasting
A strong supply chain starts with accurate demand planning. Are sophisticated tools in place, or is everything managed on spreadsheets? Forecasting is challenging, especially in industries with seasonal peaks or erratic demand patterns. Regardless of the approach, accuracy is non-negotiable—poor forecasting impacts the entire supply chain.
Supplier Management
Equally critical is how suppliers are managed. Many organizations overlook supplier performance tracking, but it’s a fundamental area to evaluate. Systems that monitor adherence and reliability can significantly enhance upstream operations.
Warehouse Management Systems (WMS)
The warehouse is a supply chain hub, and its efficiency often hinges on the right WMS. Basic systems work for smaller operations, while more complex businesses may require advanced features like batch tracking, expiration tracking, or multi-temperature controls. Whatever the scale, the system must align with the organization’s operational needs.
Transport Management Systems (TMS)
Transportation is another cornerstone. A TMS ensures cost-efficient logistics by optimizing carrier selection or managing in-house fleets. It can track utilization, maintenance, and capacity, making it indispensable for streamlining deliveries.
Routing and Scheduling Systems
For businesses handling multi-drop routes, routing and scheduling tools are essential. They optimize delivery plans, improve fleet efficiency, and reduce operational costs.
KPIs: Measuring What Matters
When it comes to key performance indicators, simplicity is key. Too many metrics can overwhelm teams, so it’s best to focus on a few critical ones tailored to the management level. For example, executives might monitor high-level outcomes like overall delivery performance, while warehouse managers would track operational specifics such as order accuracy or productivity rates.
SIFOT (Supply In Full On Time) is an essential KPI for monitoring supplier reliability. When suppliers deliver as expected, the rest of the operation runs more smoothly. Another crucial KPI is DIFOT (Delivery In Full On Time), which assesses the organization’s ability to meet customer expectations. Inventory record accuracy plays a major role in operational efficiency, as inaccurate stock records can disrupt fulfillment processes. Financial measures like cost per case or throughput help evaluate cost efficiency, while productivity metrics, such as picks per hour, provide insight into warehouse performance.
Focusing on these systems and KPIs ensures that supply chains are not only efficient but also adaptable to change.
Here’s the link to the Part 1: Understanding Supply Chains Part 1- Physical Processes
Related articles on this topic have appeared throughout our website, check them out:
Editor’s Note: The content of this post was originally published on Logistics Bureau’s website dated January 25, 2023, under the title “Understanding Supply Chains Part 2- Systems & KPIs“.
