In the world of supply chain management, efficiency and cost savings are key. Amplio has developed a BOM analytics suite that helps procurement teams source electronic components more efficiently.
In this blog post, we'll explore the role of Key Performance Indicators (KPIs) most important to supply chain management, how to use those KPIs to improve supply chain results, and how Amplio's analytics capabilities can help customers improve their own supply chain performance.
Understanding KPI of Supply Chain
Supply chain KPIs (key performance indicators) are metrics used to track performance against specific goals. In supply chain management, KPIs can be used to track performance across a range of metrics, such as on-time delivery, inventory turnover, and cost savings. By using KPIs in the supply chain, procurement teams can track performance against specific goals, identify areas for improvement, and measure progress over time.
The Most Important Supply Chain KPIs
What metrics are most important to track and understand for a supply chain professional?
When evaluated together, the KPIs below will provide a comprehensive picture of a company's supply chain performance and can help supply chain professionals identify areas for improvement and make data-driven decisions to optimize their operations.
Cost of goods sold (COGS):
This KPI measures the direct costs associated with producing and delivering a product. Keeping COGS low is important for maintaining profitability and competitiveness in the market. Electronics procurement professionals should also track Purchase Price Variance (PPV), which measures the difference between expected price and actual price for components. COGS provides an overall snapshot of input costs, while PPV describes how much higher or lower COGS should have been with optimal purchasing.
Supplier performance:
This KPI measures the performance of suppliers in terms of quality, delivery, and cost. It is important for supply chain professionals to track supplier performance in order to identify areas for improvement and to maintain strong relationships with key suppliers. Electronics manufacturers should keep a close eye on how well their suppliers meet delivery targets. Shortages and delays have become more common, and suppliers that consistently miss deadlines threaten production schedules and create a drag on all of the following critical KPIs.
On-time delivery performance:
This KPI measures the percentage of orders that are delivered on or before the promised delivery date. This is a critical KPI for supply chain professionals, as late deliveries can result in lost sales and decreased customer satisfaction.
Inventory turnover:
This KPI measures how quickly a company is able to sell and replace its inventory. High inventory turnover is generally considered a positive indicator, as it means that a company is able to quickly convert its inventory into cash.
Order lead time:
This KPI measures the time it takes from when an order is placed to when it is delivered to the customer. Short lead times are generally preferred, as they allow companies to respond quickly to customer demand.
Order accuracy:
This KPI measures the percentage of orders that are shipped accurately and without errors. High order accuracy is important for maintaining customer satisfaction and minimizing returns and exchanges.
The Role of Analytics in Supply Chain Management
Analytics can provide powerful insights into supply chain performance. Predictive analytics can help procurement teams forecast demand and plan inventory levels, while data visualization tools can make it easier to identify patterns and trends. By using analytics for supply chain management to improve supply chain performance, companies can reduce costs, increase efficiency, and improve customer satisfaction.
Here are some of the most powerful ways that analytics can positively impact business results:
- Forecast demand: By analyzing historical sales data and market trends, supply chain professionals can use analytics to forecast future demand. This can help them to optimize inventory levels and ensure that they have enough products on hand to meet customer demand.
- Optimize inventory: Analytics can be used to determine the optimal inventory levels for each product, taking into account factors such as demand, lead times, and production costs. This can help to minimize the amount of capital tied up in inventory while still ensuring that there is enough inventory to meet customer demand.
- Improve supplier performance: By analyzing supplier performance data, supply chain professionals can identify areas for improvement and work with suppliers to address any issues. This can help to improve the quality and reliability of the supply chain.
- Reduce lead times: Analytics can be used to identify bottlenecks and inefficiencies in the supply chain that are causing delays in delivery. By addressing these issues, supply chain professionals can reduce lead times and improve customer satisfaction.
- Identify cost savings opportunities: By analyzing data on production costs, transportation costs, and inventory holding costs, supply chain professionals can identify opportunities to reduce costs and improve profitability.
Overall, analytics can be a powerful tool for improving electronics supply chains by providing supply chain professionals with the insights they need to make informed decisions and optimize their operations. By leveraging data and analytics, supply chain professionals can create more efficient and effective supply chains that deliver high-quality products to customers in a timely and cost-effective manner.
Using Amplio to Improve Supply Chain Performance with KPIs in Supply Chain
Amplio's analytics capabilities help customers improve supply chain performance in a number of ways. We compare production needs to current inventory levels, price levels, and restock dates to intelligently guide procurement professionals to purchase components ahead of potential delays.
Think of Amplio as your personal supply chain watchtower; our software and experts keep an eye on your BOM and your sourcing needs for you, continually analyzing the market and your production plans to ensure that the line runs smoothly.
By leveraging KPIs in the supply chain, Amplio's analytics provide data-driven insights to continuously improve supply chain performance.
Understanding Supply Chain KPIs
Analytics are a powerful tool for improving supply chain performance. By tracking, understanding, and acting off of supply chain KPIs, procurement teams can track performance, identify areas for improvement, and measure progress over time.
Amplio's analytics capabilities can help customers improve supply chain performance by providing insights into supplier performance, helping customers manage their BOMs more effectively, and identifying cost savings opportunities in the primary and secondary markets. For any hardware electronics manufacturers, engineers, product managers, and supply chain managers, Amplio is the perfect partner to help unlock the full potential of your supply chain.
