Supply Chain Management KPIs: Metrics Inventory Performance

Assess metrics that drive business performance by examining net profit, return on capital employed, return on investment, and cash flow, and how time your money is tied up affects profitability.

Explore how supply chain kpis link net profit, roce, and cash flow. Optimize deliveries, inventory, and costs with metrics like otf, customer lead time, and inventory turns.

Define the essential areas of supply chain performance—outputs, customer satisfaction, cost, capital employed, cash flow, employee safety and satisfaction, and flexibility—and how to measure them to guide improvements.

Explore essential supply chain KPIs that measure cost, inventory, cash flow, and speed, including inventory turnover and customer lead time, to evaluate operational performance.

Define outputs as the measurable result of an operation, and explore how to choose suitable units—deliveries, litres, kilometers, or destinations—to assess supply chain performance.

Learn to measure inventory levels by quantity and value over time. The lecture covers the simple average method using start and end counts and discusses its limitations.

Explore how high-frequency sampling improves the accuracy of average inventory on hand. Compare daily snapshots to start and end measurements and learn how to compute monthly averages for inventory performance.

Learn how cost of goods sold measures direct production costs, excludes overhead, and value on-hand stock for supply chain KPIs using the COGS method.

Learn to measure inventory flow using inventory turns, turnover, and velocity by comparing sales to average inventory and applying days on hand (DCO).

Explore inventory turns and days inventory outstanding (DIO) as key metrics, comparing sales to average inventory and cost of goods sold, with industry variations and practical formulas.

Testing the balance between stock movement and inventory turns, John, a retired racing car driver, faces a manager's shock, highlighting the need to improve inventory performance.

Inventory turns equal cost of goods sold divided by average inventory, yielding ten turns per year for $200m COGS and $20m inventory, about 36.5 days per turn.

Explore inventory control charts that plot levels over time within upper and lower limits, and quantify deviations by area above and below limits to reflect duration and severity.

Learn about inventory days and throughput dollar days, two complementary metrics from the theory of constraints that manage inventory above limits and ensure sufficient production below limits.

Improve cash flow by reducing the cash-to-cash cycle time, shortening the time from spending to getting paid, and creating a lean, efficient supply chain.

Introduce the cash to cash cycle time, also known as the cash conversion cycle, by examining days inventory outstanding, days sales outstanding, and days payable outstanding, then integrate the components.

Measuring days inventory outstanding shows stock relative to the sales rate, expressed in days. For example, 20 beds on hand sold at 2 per day equals 10 days.

Explore days sales outstanding (DSO) and its impact on cash flow by analyzing accounts receivable, credit terms, and methods to reduce DSO within the cash-to-cash cycle.

Understand days payable outstanding (DPO) as the average time to pay suppliers, measured with accounts payable, cost of goods sold, and a 30-day period for cash flow insights.

Calculate the cash to cash cycle time as days inventory outstanding plus days sales outstanding minus days payable outstanding; example: 50, 25, and 60 yield 15 days.

Measure time in supply chain inventory and operations to boost cash flow, profit, and return on capital employed by shortening cash-to-cash cycle, lead time, cycle time, and delivery time.

Measure customer lead time, i.e., order fulfillment cycle time, from order placement to delivery, track every order, and compute a monthly average to assess service levels and balance inventory costs.

Define throughput time as the total time something takes to move through a system, including processing and waiting. Minimize this metric to improve cash flow and reduce customer lead time.

Explore integrated and complementary CPI concepts, and analyze flexibility, robustness, and risk in the supply chain to improve overall supply chain performance.

Balance outputs, quality, and cost with a set of three to six complementary KPIs to prevent stock outs and unintended trade-offs.

Improve supply chain robustness and flexibility by adding time, capacity, and inventory buffers to reduce disruption risk, and apply demand management with safety stock, collaborative planning, and vendor managed inventory.

Identify and apply KPIs to monitor current performance, then reduce delays, cut uncertainty, and reduce the number of decision tiers to improve a multitiered supply chain.

Finish strong by applying your business knowledge, commit to completing the course, and earn your certificate in supply chain management KPIs and inventory performance.

A retirement farewell for a 30-year deliveryman unfolds as neighbors leave gifts and a surprising romantic encounter, highlighting human factors in last-mile service and customer interactions.

Explore kpis for fulfillment and delivery, including sell-through rate, stock outs, lost sales due to stock outs, and on time in full.

Learn how fill rate measures the share of demand fulfilled from on-hand inventory, its trade-off with inventory turns, and how some definitions use fulfilled orders over total sold times 100.

Compute the sell through rate as sold divided by bought times 100, with examples like 900 of 1000 shirts sold. Explore overstock, waste, and boundary choices when planning orders.

Learn how stock-outs arise in supply chains and how to measure them by frequency, duration, and inventory availability, using ABC analysis to focus on critical items.

Explain how stock outs cause immediate lost sales and financial impact, and estimate loss by multiplying stockout duration by the item’s expected sales rate, with substitutes and KPI caveats.

Measure on time in full (otf) delivery performance as a fundamental measure for customer satisfaction by recording each order's on time and in full and calculating the percentage.

Collect regular information on customer satisfaction using low-effort feedback methods and surveys, track responses over time, and turn insights into improvements that drive loyalty and repeat purchases.

Plot demand rates and replenishment lead times over time, track variation and uncertainty with control charts, and measure lead time demand to set reorder points and safety stock.

Learn how to forecast demand amid variability and uncertainty, using historical data and techniques like weighted averages and exponential smoothing, then evaluate forecast error against actual demand.

Measure forecast accuracy by comparing forecasts to actual sales using residuals and absolute errors. Explore mean absolute error, mean absolute percentage error, and root mean squared error.

Explore how waste and costs affect the supply chain, and examine metrics such as wastage rates, dead stock inventory, holding costs, and shrinkage to drive efficiency.

Assess wastage by comparing actual revenue to maximum potential revenue from inventory, capturing discounts, storage costs, depreciation, damage, and theft to benchmark stock outs and turns.

Identify and quantify dead stock—inventory that doesn't sell—and reduce holding costs by timely discounts, alerts, and smaller initial orders informed by forecast data and market research.

Explore the true cost of inventory beyond purchase price, focusing on holding costs like storage, rent, energy, insurance, and admin, and how to identify and reduce the largest costs.

Identify shrinkage by comparing book inventory to physical counts and calculate it as a percentage of cost of goods sold, addressing theft, admin errors, and supplier fraud through regular measurement.