This paper explains the key metrics that most companies use in the management of supply chain. It is essential to note that management of supply chain requires the managing of multifaceted dependence between groups, sectors and companies that have partnerships across global boundaries; therefore it is seen as an expected zone for metrics. There are many forms of metrics, which can be utilized to measure the performances of an effective supply chain management system. They are include return on product launch and time to value the total supply chain costs as well as perfect order rate (Hugos, 2011). For a person to fully understand why this metrics are considered important, it would be necessary to determine their uses in the supply chain cycle. Considering the demand driven principle of supply chain, it is necessary that there are correlations between the demand, supply and the products in the company for the business to swiftly respond to increasing opportunities. To add on that, dimensions of measurements have to be considered, that is operational excellence as well as innovation excellence.
In order for one to measure the dimensions, hierarchies of metrics have to be used. This is where one considers which metrics are suitable for the company with respect to the type of business and products or services offered. Perfect order rate combined together with total supply chain costs provide the correct approach for measuring operational excellence, while, on the other hand, innovation excellence can be quantified using time to value, followed by return on product launch (Chopra & Meindl, 2012). The two dimensions are used because they best explain the benefits and vales of the supply chain while at the same time identifying the best performing business. Perfect order rate elaborates on the calculation of orders in the company that lack any error, and captures every phase in the ordering process. Upon identification of the errors, corrective measures are put in place which optimizes the performances in the supply chain. This explains why it is most important form of metrics in many organizations.
Return on product elaborates on the revenues earned from the sale of the product; it compares the profit margins from the product and those of the costs used in producing it. It is mainly used to measure the company’s profitability rate. Total supply chain elaborates on the time taken to fulfill a consumers order when the levels of the inventories were nil. It mainly shows the efficiencies of the supply chain and helps in identifying situations that have competitive advantages in the market (Hugos, 2011). Time to value measure elaborates on the percentages of orders that reach the customers on or before the requested time frame. This helps in promoting customer satisfaction and signposts an effective supply chain. These four metrics elaborates on the overall performances of the supply chain, and identifies opportunities that exist for the company to increase its effectiveness, investor and customer values in the supply chain.
In conclusion, it is evident that a well-designed system of supply chain metrics can increase the probabilities of a company’s success by aligning procedures across numerous firms, assist in targeting the most cost-effective market segments and obtaining a positive competitive advantage through distinguished services and lower expenditures (Chopra & Meindl, 2012). Inefficient metrics in the supply chain will eventually result in failures to meet the company’s desired expectation, missed opportunities while trying to outdo the competition and conflicts in the supply chain division.
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