Transforming Supply Chain Management Using BI Solutions
Can you drive your car without fuel or if the brakes fail? It is unlikely to happen and even if you do, you are going to encounter challenges along the way. Moreover, you are putting yourself at risk of an accident. Supply chain management, in some ways, works similarly – just that you are dealing with operations management, procurement, software, logistics, etc. and you need to keep them functioning seamlessly.
But massive data from disparate sources and the inability to process it timely is one of the major reasons why your vehicle isn’t functioning the way it is supposed to.
That’s when business intelligence solutions come into play. Implementation of Business Intelligence in Supply Chain Management (SCM) is one of the ways to handle large data sets and turn them into actionable insights.
An inefficient supply chain can cause triggers in different business areas – mismanaged inventory, stock fluctuations, high warehouse cost, poor vendor relations, increased warehouse costs, and lack of customer satisfaction.
94% of companies, according to SupplyChainDive, do not have full visibility into their supply chain and logistical operations. Poor supply chain visibility has a negative impact on a company's revenue, efficiency, productivity, and customer experience.
Business Intelligence lets organizations track relevant KPIs like turnover, client order cycle time, days of supply, inventory velocity etc. and dive deeper into data to find insights that matter. In order to optimize the supply chain, today's complex and constantly changing supply network requires strong supply chain analytics and reporting capabilities.
Real-time insights into the health of the company's operations from all data sources can aid in the development of an effective supply chain by enabling data-driven decisions on stock management and delivery timeliness.
While there is a long list of supply chain KPIs, we have listed below a few crucial KPIs to monitor your supply chain performance:
#1 Customer Order Cycle Time: The customer order cycle provides crucial information on the responsiveness of the supply chain and the service provided to customers. It shows the time span between when a consumer submits a purchase order and when it is successfully delivered to the customer.
The customer order cycle is not increasing while the cash-to-cash cycle time is, which brings in challenges with the former. You can determine the cause by looking at other crucial data like invoicing times, account payables, and account receivables.
#2 Inventory Days of Supply: The number of days your inventory can last between restocking is the inventory days of supply. Supply chain KPI helps in keeping tabs on the stock levels in your warehouse so you may restock it before demand spikes or in the event of a stock-related crisis, protecting your reputation and financial investments. Daily monitoring and analysis of this data will allow you to take timely action to replenish stocks.
By reducing the inventory days of supply, you can minimize the risks of surplus and outdated inventory. If you see that this metric is decreasing, it means that less of your operating capital is tied to inventory (to put it in simple words, your business is getting financially leaner)
#3 Ideal Order: The Perfect Order KPI, which comprises numerous crucial indicators and is unquestionably the most crucial metric to gauge the efficiency of a supply chain, provides you with information on several aspects of your order fulfillment process. Additionally, it can assist you in cost management, customer satisfaction research, and the tracking of storage and delivery operations.
We’ve listed below a few key elements of a perfect order KPI:
a. Punctual delivery (hyperlink with on-time delivery dashboard): Calculate the proportion of sales delivery on time.
b. In-full delivery: Keep track of the percentage of sales that were delivered correctly, indicating that the right customer received the right products.
c. No damage delivery: Its goal is to figure out how many of the sales that were requested came in fine condition. This is sometimes seen as being the same as in-full delivery.
d. Accurate record keeping: Calculate the proportion of sales deliveries that included accurate paperwork and were made to customers. Commercial invoices, labels, packing lists, and advanced shipment notifications are the most common types of these documents (ASNs).
Customer satisfaction can be determined with the use of the Perfect Order KPI. For instance, if your ontime or damage-free delivery rate is low, it means that your consumers aren't receiving their products as soon as they are supposed to. These elements will also show additional expenses related to customer returns and reimbursements.
The Perfect Order KPI can be calculated as follows:
Total Orders / ((Total Orders - Number of Error Orders)) Orders * 100
When the important factor (on-time, in-full, damage-free, or proper paperwork delivery) is referred to as the "number of error orders," that is what you are monitoring.
#4 Fill Rate: The percentage of client demand that is satisfied through stock availability, without backorders or missed sales, is known as the fill rate or demand satisfaction rate. It is imperative to understand your fill rate as it indicates the sales that, with improved inventory efficiency, you may recover.
One way to improve this is easy access to inventory data. You and your sales staff will be better able to ship accurate, complete, and on-time orders, increasing customer satisfaction along the way, the better informed you are about the available inventory. For example:
a. Order fill - Calculates the proportion of orders that are successfully fulfilled on the initial shipping.
b. Line fill - Indicates the proportion of order lines that were successfully fulfilled during the initial shipment.
c. Unit fill - Calculates the proportion of successfully supplied goods.
Fill rate provides information on the effectiveness of your delivery service and helps in gauging client satisfaction.
#5 Cash to Cash Cycle: It may appear to be a purely financial ratio, but it also offers valuable information about your supply chain's activities. It displays how many days pass between when you pay for raw materials and when you receive payment for the goods you sell.
This supply chain KPI's low value denotes improved profitability and leanness. Because your operating capital is tied up for a shorter period, it also demonstrates the soundness of your delivery and storage operations.
The efficiency and efficacy of your supply chain assets, such as shelves, workstations, and trucks, can also be ascertained using this KPI.
The cash-to-cash cycle shows how long it takes your company to pay its material suppliers before it receives payment from customers. The quicker, the better.
Concluding Note:
Leaders must carefully consider the metrics that will enable them to accomplish the supply chain goals of their organization. In order to optimize the supply chain, KPIs with solid historical data must be identified and presented through an attractive supply chain dashboard.
At Polestar Solutions, we help organizations strengthen their supply chain process by integrating business intelligence solutions. From BI consulting to full-fledged BI solutions, we are there to help you! Get in Touch with our BI Experts today!