Mkt445 - Key performance indicators (KPIs) are important aspects of any organization. For each function of an organization there are different indicators to consider. For instance in the supply chain three important indicators to consider are customer service levels, forecast accuracy, and inventory carry cost. These indicators help measure the success of the supply chain and allow managers to make adjustments as needed. To utilize these performance indicators correctly an organization must collect both current and past data in the form of surveys, reports, and calculations to determine whether the supply chain is operating correctly.
The Importance of KPIs Mkt 445 - When an organization needs to measure the performance of their supply chain they can choose a few key performance indicators to determine if their current system is successful. A supply chain exist because there is a need for a product by a customer, therefore customer service levels can tell an organization if they are meeting that need. If the customer’s needs are not being met this could result in a reduction of sales and a permanent loss of customers to other sellers.
To ensure there are enough products for all customers, an organization will usually forecast the demand of the item.
Iscom373 - This makes the forecast accuracy indicator important to ensure there isn’t a shortage of stock or an overage. Monitored forecast accuracy can also alert management of a potential problem with demand forecast or other problems in the chain.
Iscom 373 - A product overage in the warehouses can lead to higher carrying cost, especially when holding the products for an extended time to meet the next demand, or a reduction in price to clear the stock. Carrying cost take into account all expenses an organization incurs to operate the holding facility as well as order cost and any other cost associated with the inventory.
Required Information to Utilize KPIs