How well do you know your supply chain? It’s more than just managing logistics—it’s about having the right systems in place and tracking meaningful KPIs.
But with so many options, what’s truly essential for your business?
The video below dives into these questions and offers actionable insights to help you stay competitive and ensure your supply chain is ready for the future.
In the first part of this series, we discussed the physical elements of supply chains. This time, we are diving into the systems and KPIs that are crucial for optimizing operations. Whether you’re stepping into a new role or evaluating a company’s supply chain, having a clear understanding of these components can make all the difference.
Systems: The Backbone of Operational Success
Demand Planning and Forecasting
Accurate demand forecasting is one of the most critical aspects of supply chain management. A major question to ask is whether the organization uses a formal system or relies on spreadsheets for this vital process. The complexity of forecasting varies across industries. Some businesses face static demand with sporadic surges, while others experience steady demand with predictable peaks during holidays. A proper demand planning tool helps manage these fluctuations effectively, but it’s important to ensure that the system is tailored to the company’s specific needs. It’s also crucial to examine the accuracy of the forecasting. Even the best tools won’t be effective if they aren’t reliable in predicting demand.
Supplier Management
Efficient supplier management is often overlooked, but it plays a pivotal role in maintaining a smooth flow of goods and materials. Assessing how well suppliers are managed is a key part of any supply chain review. Are supplier performance, delivery adherence, and overall efficiency being tracked? If an organization isn’t using a system to monitor these elements, it can lead to inconsistent supply, delays, and increased costs. Implementing effective supplier management tools helps ensure that suppliers meet expectations consistently, which, in turn, leads to better overall supply chain performance.
Warehouse Management Systems (WMS)
The warehouse is often the heart of a supply chain, so the system in place to manage inventory, storage, and order fulfillment is paramount. Basic warehouse management systems may suffice for smaller operations, but larger organizations may need more sophisticated solutions. These advanced systems provide functionalities like batch tracking, multi-temperature control, and the ability to manage product recalls, which are vital in industries such as pharmaceuticals or food. The goal is to ensure that the WMS is robust enough to support the specific needs of the business, regardless of its size. Whether the company is handling a small volume or large quantities, the system must be designed to ensure operational efficiency and accurate tracking of inventory.
Transport Management Systems (TMS)
Transport management plays a critical role in the supply chain, particularly when it comes to managing deliveries. A TMS helps optimize routes, manage costs, and improve carrier selection, particularly in businesses dealing with numerous outbound orders, like in e-commerce. In addition, if the organization has its own fleet of vehicles, the TMS can track key metrics such as capacity utilization, maintenance schedules, and driver performance. These systems not only ensure that goods are transported in the most cost-effective way but also enhance fleet efficiency. With effective TMS implementation, companies can significantly improve their logistics operations, reduce delays, and save on transportation costs.
Routing and Scheduling Systems
For organizations that handle multiple deliveries across various locations, routing and scheduling systems are essential. These tools allow businesses to plan delivery routes with maximum efficiency, ensuring that vehicles follow the most time- and cost-effective paths. Particularly in industries with high-volume deliveries, such as FMCG or e-commerce, optimizing delivery routes can make a significant difference. These systems consider factors like traffic, delivery windows, and customer locations to create a seamless, efficient delivery process. Routing and scheduling tools improve not only the productivity of the fleet but also customer satisfaction by ensuring timely deliveries.
KPIs: What to Measure and How
When it comes to KPIs, it’s crucial to focus on a few key metrics that align with strategic goals. Different management levels need different measures—executives focus on high-level KPIs, while warehouse managers track operational metrics.
SIFOT (Supply in Full On Time) is an important KPI for monitoring supplier performance. If suppliers fail to deliver on time or in full, it disrupts the entire supply chain, affecting production and customer satisfaction. Similarly, DIFOT (Delivery in Full On Time) measures how well the company meets customer delivery expectations.
Inventory Record Accuracy (IRA) is critical for avoiding stockouts or overstocking, ensuring products are available and orders are fulfilled correctly. Financial metrics like cost per case or cost per pallet help assess cost-effectiveness, while productivity metrics, such as picks per hour, gauge warehouse efficiency. These KPIs provide insights for continuous improvement in operations.
In summary, focusing on systems and KPIs helps optimize supply chain operations. Regular evaluation ensures efficiency, cost-effectiveness, and adaptability to market changes. Understanding these components is essential for maintaining a competitive edge. What systems or KPIs do you prioritize in your supply chain? Let’s continue the conversation and share insights!
If you missed the Part 1, here’s the link: 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“.
