These KPIs Can't Be Overlooked in Your Supply Chain Risk Management Efforts

Published : August 2, 2016

KPIs that you can't overlook in your supply chain

Is your supply chain risk management strategy end-goal focused, or is it centered on performance in the moment? It can be tempting to set a static goal and measure each day's progress against it, but in a business climate that can change direction in a moment, it's a quick path outdated practices. KPIs are the best tools you can have to guide actionable measures in the fulfillment center, as they reflect the state of your efficiency on multiple, living levels.

Not sure you have the best supply chain KPIs for the job? Start with these practices to drive success in real time.

Inside the Warehouse

When a company works with an in-house fulfillment center, it's comparatively easy to collect information on stock levels, average time pick/pack times and other order-centric metrics. Particularly for e-commerce, these data points help inform important sales-driving considerations like free shipping thresholds, methods and discounts. That's why it's important, when working with a third party fulfillment provider, to ensure the right level of transparency is on the table before entering into a contract. Your 3PF provider should be able to:

  • Deliver automated reports with data points derived from daily operations.
  • Offer services beyond direct-to-consumer shipping, such as store fixture support.
  • Provide feedback on sales efforts, such as discounts used or items bought in a specific period.

Remember, much like a valued member of your work force, you don't want to waste time "training" a service provider that has no interest in keeping up with your pace. Your 3PF provider can — and should — be much more than a simple shipping solution. Given the important role they play for clients, they need to encourage and support their partners’ goals and strategies as well. If you have to arm-wrestle your desired KPIs out of their systems, you can — and, again, should — question what exactly you're paying for.

Outside the Warehouse

Without the reach and range of 3PF services, certain logistics goals become much harder to reach. Consider a company taking hits on its bottom line through "empty miles" — the cost of transporting an empty truck between two points. If they only have so much product to move and only so many places to move it to, this waste is unfortunately inevitable. Place a 3PF in the picture, however, and it's considerably more likely that those "empty miles" can be used to transport another client's items, thus driving down transportation costs for everyone involved. If you aren't already figuring out how much transportation costs your company from a holistic standpoint — miles, manpower, gas and so on — you can't say for sure if your shipping methods are profitable, or at the least, neutral. Decisions made from that unknown can further the negative impact of initial profit loss, and a vicious cycle of good money after bad can easily fester.

Even when a 3PF secures a logistics provider on your behalf, don't be shy about asking for feedback, such as "scorecards" for 3PL performance over time. It's your right to know as a client, and it can help determine which carrier works best for your needs. Ultimately, performance plays a heavy role in customer satisfaction, so it's in your best interests to request this information on a regular basis from your provider(s). These scorecard checkups can help improve the flow of your orders while also lowering operational costs.

Alongside Your Providers

The more intricate and widespread the supply chain, the more tolerant it tends to be for events like late or incomplete deliveries from supply chain partners. When another supplier is waiting in the wings to pick up the slack, it's common for a business to switch gears, get their shipment of goods or materials elsewhere, and go right back to the offender the next time they need to order. Just because a mistake is small, it doesn't mean the repetition isn't egregious, nor that it has no effect on supply chain efficiency. Even if your staff hasn't come to you with a big client-centered problem, it doesn't mean that one isn't brewing. Ask them frequently if they're having any issues, even minor ones, with KPIs like fill rate and overall inbound shipment times. These telltale signs will emerge when a business in your chain is struggling, be it financially or due to lack of strong leadership and organization.

Without dependable data to structure your supplier-based KPIs, your 3PF won't be able to hand over accurate data points. This can result in miscalculating things like inventory holding cost, opportunity cost, and, if you have a real time customer-facing inventory feature on your site, it may even affect consumer sales as well. The lesson here is that KPIs will often directly influence other KPIs, which is all the more reason to keep your data clean and current, no matter how innocuous the source may seem. When starting a new partnership in your supply chain, be sure to hash out concrete, numerical expectations as well as your expectations for shared data — this will prevent your KPIs from failing before they begin due to lack of concern on the part of your partner's staff.

Within Your Company

Sales and fulfillment may have once been odd bedfellows, but technology has made them literally inseparable. While looping in sales and marketing can feel like a delay or obstacle to overall operational efficiency, you need their KPIs as much as they need yours. If data sharing is not only fostered but encouraged, you'll be able to get a heads up about upcoming item pairings for discounts — enabling you or your 3PF to place these items beside each other in the warehouse for faster picking. Likewise, you'll be able to inform their departments about common item pairings in orders, allowing them to structure future marketing plans around what's already working for your customers. Rob O'Burne of Supply Chain Quarterly explains that this creates a positive, data-driven feedback loop that minimizes miscommunications and maximizes consumer satisfaction.

Bringing KPIs to the C-Suite also allows your company leadership to understand a snapshot, rather than potentially getting "lost in the weeds" of a lengthy report. Business favors fast, informed decisions, and it's hard to beat KPIs as a rapid fire language. Once you've acclimated your C-suite to target ranges and over-time performances of your selected KPI set, communication becomes considerably easier and tends to support your fulfillment center goals in the process, as well.

Even the best supply chain risk management KPIs can't make up for operational gaps in fulfillment operations, but when they're layered over an existing high-performance team, they take results from good to great in a hurry. Take the time to collect, measure and compare these data points, and it's very unlikely you'll get blindsided by sudden shifts in supply or demand. In the volatile world of business, that kind of peace of mind is one that even the highest quarterly budget can't simply buy outright. So, if you have it, keep it up! If you don't, there's never been a better time to start setting things in motion for supply chain KPI collecting.

Logistics Managers Guide

Topics: Supply Chain Logistics

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