Key Performance Indicators

Controlling in Supply Chain Management



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Falling IT budgets, difficult economic circumstances, unavailability of raw materials and economic crisis are some of the factors that could put pressure on a business. SCM can considerably alleviate this and provide tools (key performance indicators) to help with responding to these challenges.

Changes in key performance indicators

Studies show that the appropriate use of IT Tools and SCM in particular, has a positive effect on the competitiveness and success of a company. It has been proven that key performance indicators such as net profits rose sharply, detailed forecasts led to a significant reduction in costs and to an increase in turnover. Warehousing costs were decreased through the reduction of old inventories, and the launch of new products was subsequently much simpler.

Key performance indicators (KPIs) describe sensitive areas that are sometimes difficult to measure and may indicate both positive and negative changes early on. In SCM, for example, costs are used as key performance indicators together with delivery time, turnover within the warehouse and manufacturing time. IM&C looked into the approach and methods adopted by several well-known companies and concluded that Key performance indicators that take into account costs, (e.g. overall costs and total cost of ownership), are the most frequently used. The next most popular KPIs are the return on investment (ROI) and the measure of the efficiency of logistics processes expressed by key figures such as delivery capacity and sales performance. Companies named pre-production cost reduction and production reliability as key performance indicators for manufacturing processes.

"Supply Chain Management continues to demonstrate
positive results related to cost reduction and financial
performance in general. With the continuing spread
between leaders, followers and laggards, the missed
opportunities have to spell the difference between
financial success and failure."

_{The sixth annual global survey of supply chain progress (2008)}

The use of supply chain management software is decisive in the success or failure of a company.

At the end of the chain the customer will benefit from short delivery times, competitive prices as well as excellent service that will result in increased customer's loyalty.