Most of us in supply chain management realize that tracking the right key performance indicators (KPI) related to their suppliers, staffing and operational performance is mission critical. The same as baseball tracks the KPIs of batting averages, pitcher’s earned run average (ERA) and even attendance at their ballpark to understand if they are winning or losing the game. Considering the importance of KPIs, here’s a few KPIs you might want to consider measuring that can contribute to your supply chain success :
- Supplier Related KPIs
- Number of suppliers: The aggregate number of suppliers you are dealing with is a good indicator of how much administrative work is required to maintain them. The smaller the number the more efficient your supply chain department will be.
- On-time delivery by supplier: If your suppliers are missing their delivery dates, they can cause you stockouts and poor customer service.
- Spend: Money spend with all suppliers, the amount spent with direct and indirect suppliers, spend within specific commodity groups and spend per supplier.
- Quality Rating: This KPI will show you if your suppliers have quality problems that your need to address.
- Staffing Related KPIs
- Spend per SC employee and/or PO Line Items Per Employee: It will enable you to understand the workload of your buyers so you can plan for adequate staffing.
- Cost savings/avoidance: Your buyers and value analysis director need to maintain and report monthly on their cost savings/avoidance they have generated.
- Purchase order cycle time: This KPI measures the efficiency or how fast your buyers are processing requests on a daily, weekly and monthly basis.
- Operational Related KPIs
- Payment to suppliers as per terms: You need to track this KPI to ensure that your vendors are being paid on time in order to continue a strong relationship with them.
- Inventory accuracy: Poor inventory accuracy leads to shortages, stock-outs, and ultimately spotty customer service.
- Inventory turnover: Inventory turns is a measure of velocity and has a direct impact on your healthcare organizations cost flow.
- Value analysis Related KPIs
- Attendance at VA meetings: Poor attendance to your VA meetings is an indicator that your value analysis team members don’t see the value of your VA process.
- GPO Conversions/Renewals: Your value analysis managers need to keep track of this KPI and report on it monthly.
- Recalls/Product failures: Your value analysis managers need to keep track of this KPI and report on it monthly.
- Cost Savings/Avoidance: Your value analysis managers need to keep track of this KPI and report on it monthly.
I’m sure you have heard the phrase “what is measured, happens”. This phrase is the genesis or reason for creating and then measuring your individual KPIs. Without KPIs you will never know if your supply chain department is being steered on the correct course or is off course and heading for a disaster. Lastly, “there are no right and wrong KPIs; they just need to measure the important aspects of your (supply chain) business” according to Rich Weissman.
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