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August 27, 2009
What Metrics and Data Can do For Your Supply Chain
Today, companies that manufacture are all about saving money and working on a “just in time” inventory. No one wants to have to do massive stock rotations of raw materials or discount depreciating inventory as well as pay the money it takes to manufacture, warehouse, insure, and manage that inventory. “Just in time” means that there is products to fill orders and not too much above and beyond that.
Too much inventory and you risk not being able to move it as well as having to count it at the end of each fiscal quarter and perhaps you'll have to discount it substantially as well --- when it doesn't sell.
Many companies measure their procurement and merchandising professionals on their number of inventory turns (equal to the number of times inventory is replenished annually) so analyzing sales data versus inventory reports can help a buyer determine how much material to keep in stock. This can drive an effective production schedule. The wrong number equates to either too much inventory sitting around collecting dust or at the opposite end of the spectrum, it leads to backorders and dissatisfied customers who may cancel orders in favor of a competitor who does have available stock.
How do you balance it? Data. Reporting can help you work on a “just in time” basis by telling you how much materials to buy and what production schedule you need to keep. Analyzing these trends with real time reporting tools can help you manage inventory levels and keep costs down. Variances in business can mean many things such as changes to expected volumes, changes to the cost of raw materials, etcetera. Knowledge is power, especially if you have access to it on a timely basis!
What other metrics can be used to help you measure your supply chain efficiency?
You need to know things like:
• How much money you spend on restocking fees and depreciation
• How long it takes to process an order and where delays come from
• How many misshipments happen per supplier
• What your shipment accuracy ratio is (to your end customer)
This isn't an exhaustive list but this shows you that various pieces of information are an essential part of effective supply chain management and process improvements.
How can you use this information?
Gathering data to measure your supply chain's effectiveness can help you to plan and manage your inventory and production schedule. It can also help you determine which supplier relationships are working best for you. This can be very helpful information in putting together supplier score cards so that you can ensure you have the best relationships set up. The right data can help you streamline your own processes and improve your internal policies and procedures because you can see where specific areas could be improved upon and generate accurate score cards and reports quickly.
How can you get this information?
Tracking various aspects of inventory management and sales management as well as customer satisfaction can help you put information together that is very telling about the state of your supply chain and your business overall. Today there are business intelligence solutions that can gather information from multiple sources that can enable you to get a very descriptive view of the state of your supply chain. This can help you to pinpoint exactly where problems and bottlenecks occur so you can have them fixed.
Oco Inc. can work with you in a matter of several weeks to implement a customized solution that helps you analysing usable data. This data can be used to help you figure out where there are chinks in your supply chain as well as which supplier partnerships might require some fine-tuning. Data can help you save costs and sell more products to your customers. A supplier score card could help your suppliers pull up their socks and your being able to provide your customers with data that shows how effective your order flow is, you can strengthen your customer relationships as well.
Want to learn more about managing your suppliers, downloading Peer-to-Peer Evaluations, and interact online with B2B professionals from Fortune 500 companies? Visit The Supplier Evaluations Community TODAY!
Posted by Sasha Grebenyuk at August 27, 2009 8:45 AM
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