| Supply chain metrics are important for company | | | | identified as one of the key areas in the supply chain. |
| executives to have a better understanding of how | | | | For many companies, keeping inventories are |
| their company operates within a period of time. By | | | | expensive but necessary costs as they have to |
| regularly monitoring the critical areas in the supply | | | | maintain separate raw products inventories (RPI), |
| chain, they can be assured of efficient performance. | | | | inventories for products that are used in production |
| A supply chain is defined as the network of units | | | | and finished goods inventories (FGI). Consequently, it |
| that obtain raw materials, units that transform these | | | | is the objective of companies to keep their |
| materials to intermediate goods and final products, | | | | inventories at low levels. |
| and business units that bring the products to | | | | Flexibility, meanwhile, is the ability of a company to |
| customers through a distribution system. The main | | | | respond to any change in the external environment |
| objective of logistics or supply chain management is | | | | that could affect company operations. For |
| to obtain the right products at the right place in the | | | | manufacturing companies, this reflects their ability to |
| right quantities at the right moment at minimum | | | | change output levels depending on the changes of |
| costs. Modern supply chains have become too | | | | customer demand on products and services. Among |
| complicated that managing them requires more than | | | | the three success factors, flexibility is hardest to |
| just intuition. Statistical data would have to be | | | | assimilate because it is largely affected by lengthy |
| accessed, monitored and analyzed to ensure the | | | | lead times, unforeseen external events and |
| efficient performance of the entire network. | | | | uncertainties. |
| In line with this, metrics have been set in place as the | | | | A critical aspect in measuring supply chain |
| standard of measuring supply chain performance. | | | | performance is the identification of relevant metrics. |
| These measurements allow managers to track the | | | | Modern application of supply chain management in |
| development of the network. In supply chain | | | | companies saw the incorporation of balanced metrics |
| management, three key success factors have been | | | | in all functional areas of a supply chain to aid in |
| identified namely, customer satisfaction, inventories, | | | | decision-making. When choosing supply chain metrics |
| and flexibility. Customer satisfaction is an essential | | | | for standardization, the following characteristics |
| factor since satisfying customers is the ultimate goal | | | | should be considered: reliability, accessibility, relevance, |
| of virtually all management strategy. Often, customer | | | | and validity. The chosen metric should be reliable that |
| service is also discussed along with customer | | | | it can manifest a consistent result. Likewise, it should |
| satisfaction as the former is identified to be the | | | | be accessible that it can be obtained by investing |
| primary driver of the latter. | | | | only reasonable effort and cost. Retrievable |
| Some of the customer service measures that could | | | | information from a metric should also be relevant to |
| potentially affect the supply chain are the ability to fill | | | | company stakeholders. Lastly, the metric should be |
| orders promptly and the ability to deliver products or | | | | valid that it can measure performance in terms of a |
| services promptly as promised. Inventories are also | | | | particular business context. |