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When it comes to supply chain management, effectively tracking and optimizing performance is critical for maintaining efficiency and competitiveness, and Key Performance Indicators (KPIs) are indispensable tools for measuring success and identifying potential risks across various aspects of production and logistics.
In this masterclass, we will provide an overview of some of the most essential KPI’s related to order placement, supplier performance, logistics performance, cash flow, and Environmental, Social, and Governance (ESG) criteria. Additionally, we'll explore how Vintly’s innovative platform automates KPI tracking, streamlining your data collection and analysis.
Essential KPI’s
Essential KPI’s are those that can help identify potential issues throughout operations. They are preferably regulated in your supplier agreement and SOP’s, and should be reviewed frequently, at least annually. For each KPI, it is important to set a reasonable but ambitious target and to provide a clear definition (in agreement together with the supplier). KPI targets can be complemented with acceptable intervals, e.g. margins of error.
Moreover, KPI’s do not just produce themselves, but are dependent on careful data collection, data validation and review, calling for robust tools and efficient processes that can help eliminate repetitive data collection tasks and automate the analysis part.
Order placement KPI’s
- Order Placement to Confirmation Time
Efficient order processing is key to enable proactiveness and flexibility during production. A shorter time frame indicates efficient order processing, helping to avoid delays further down the supply chain.
Definition: The time elapsed between placing an order and receiving confirmation from the supplier.
Target: As short as possible
- Order Change Frequency
Frequent changes can signal issues with order accuracy or communication, impacting overall efficiency and delivery timeline.
Definition: The number of modifications made to an order after it has been placed.
Target: As few as possible
Supplier Performance KPIs
- On-Time Delivery Rate
Ensures that production schedules are met and customer commitments are honoured.
Definition: The percentage of orders delivered by suppliers on (and maybe before) the agreed delivery date, i.e. ETA vs actual delivery.
Target: As close to 0 as possible, but it is common to work with intervals, e.g. On target = within +/- 7 days of ETA
- Supplier Defect Rate
Identifies reliable suppliers and helps maintain product quality.
Definition: The percentage of delivered items that do not meet quality standards.
Target: As low as possible. A high rate of defects is a strong indicator of quality issues.
- Cost of Goods Sold (COGS)
COGS is essential when it comes to financial planning, pricing strategies, and overall profitability analysis.
Definition: The total cost of manufacturing or acquiring the products sold during a specific period. COGS = Beginning Inventory + Purchases During the Period − Ending Inventory
Target: A low COGS can indicate efficient supply chain and purchasing strategies. However, there can be reasons for accepting a higher COGS, such as emphasis on quality and brand prestige or R&D.
Logistics Performance KPIs
- ETD/ETA Adherence
Ensures reliability in delivery schedules and minimizes supply chain disruptions. This can also be measured against supplier contracts to negotiate better terms and delay fees.
Definition: The accuracy of Estimated Time of Departure (ETD) and Estimated Time of Arrival (ETA) against actual times.
Target: As low discrepancy as possible
- Delivery Accuracy
Reduces the need for returns and corrections, enhancing customer satisfaction.
Definition: The percentage of deliveries that match the order specifications and arrive as expected.
Target: As low discrepancy as possible
Cash Flow KPIs
- Money Spent per Supplier
Helps monitor spending patterns and identify opportunities for cost-saving.
Definition: The total expenditure on each supplier over a specific period.
Target: Dependent on supplier size and risk. Intervals are appropriate.
- Order Status and value per Supplier
Provides visibility into supplier performance and order fulfillment progress, but also provides important insight in terms of cash flow analysis.
Definition: The current status and values of orders with each supplier, including ‘pending’, ‘in progress’, and ‘completed’.
Target: Target: Dependent on supplier size and risk
ESG KPIs
- Certificate Management
Ensures compliance with ESG standards and supports sustainability goals.
Definition: Tracking and managing supplier certifications related to environmental, social, and governance standards.
Target: No un-audited suppliers. In terms of acceptable results, this often varies depending on the certification in question.
- Carbon Footprint
Reducing the carbon footprint helps combat climate change and can lead to cost savings through improved energy efficiency and waste reduction.
Definition: The total greenhouse gas emissions generated by the supply chain activities.
Target: As low as possible, but important to benchmark within your industry
- Energy Consumption
Monitoring energy consumption allows companies to implement energy-saving measures, reducing costs and environmental impact.
Definition: The amount of energy used in the supply chain, including production, transportation, and warehousing.
Target: As low as possible, but important to benchmark within your industry
- Waste Reduction
Reducing waste minimizes environmental harm and can lower disposal costs.
Definition: The amount of waste generated by the supply chain processes, including manufacturing by-products and packaging waste.
Target: As low as possible, but important to benchmark within your industry
How Vintly facilitates KPI Management
Vintly’s advanced SaaS tool revolutionizes KPI management by automating data collection and analysis, allowing businesses to focus on strategic decision-making. Here’s how Vintly helps:
- Automated Data Collection: Vintly continuously gathers data from various sources, ensuring real-time updates and accuracy.
- Customizable Widgets: The platform features customizable dashboard widgets that provide instant access to critical KPIs, such as order placement times, delivery accuracy, and supplier performance metrics.
- Data Exports: Users can easily export data for detailed analysis and customized reporting, enabling deeper insights into supply chain operations.
- ESG Tracking: Vintly simplifies ESG management by automatically tracking certifications and compliance, helping businesses meet sustainability targets.
By leveraging Vintly’s capabilities, companies can streamline their KPI management processes, enhance operational efficiency, and drive sustainable growth. Vintly not only saves time but also provides comprehensive insights that are crucial for maintaining a competitive edge in today’s fast-paced market.
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