Supply Chain metrics

Metrics for measuring the performance of the supply chain are helpful. Today, a lot of businesses rely on a lot of data to function. Finding the most beneficial metrics to enable effective visibility in one’s supply chain is the main goal of employing this data. Key performance indicators (KPIs) show development maybe towards a predetermined objective or in comparison to a constrained set of performance standards. The practical KPIs enable an organization to measure the expenses and efficiency of its supply chain (In Sabri, 2015). A business owner must create and monitor KPIs that provide the best visibility of the entire operations that relate to the supply chain in order to do this. The main areas that require KPIs include Warehousing, inventory management, manufacturing, transportation, and purchasing.

One of the most important KPIs is the customer service which entails supply and demand variability. It aims at managing the customer service and the delivered cost against the set objectives of the business. Another is the inventory which determines its quality and the performance to plan KPI which measures the effectiveness of a company to perform proper procurement, warehousing, manufacturing, distribution, and transportation schedules and follow them. Metrics such as record accuracy, total inventory, working and non-working inventory, and the item availability support the inventory KPI (In Sabri, 2015). Other parameters include time such as lead time, queue time, delivery time, and receiving time, which is vital in supply chain performance. Importance of the metrics and KPIs in an organization are to help business owners understand how to operate efficiently over a given period. These measurements and indicators also assist in the optimization of one’s supply chain. For instance, managers may identify areas prone to risks or uncertainties in the chain and allows for comparison between companies mostly using industry benchmarking approach.

Zara Company

Zara is a retail company in the fashion industry. It is a well-performing company, and its success stems from its supply chain (Mangan & Lalwani, 2016). The company emphasizes on operating smoothly by ensuring it controls the supply chain and its production processes that are how its rivals in the market do as shown in the following table illustrating its metrics in the supply chain:

SCOR Attribute

Metrics

Description

Responsiveness

Order Accuracy, Centralized Logistics

Quick delivery of goods to clients

Reliability

Inventory turns, Delivery quality, inventory management

Provision of requested orders at stipulated time

Asset Efficiency

Just in time

Work efficiency

One of the metrics used by Zara to improve its supply chain performance is the centralized logistics and order accuracy. That is, the decisions are made in a well-coordinated way. The company maintains a strict predictable and fast pace approach regarding the order fulfillment to its outlet stores. Every of its store requests for two orders weekly on set times and the shipment arrives at the stipulated time (Mangan & Lalwani, 2016). Such a defined way of operation that involves well aware staff right from procurement, production to distribution allows for zero delays and activities flow just as other interconnected functions. It makes Zara business prosper even more since customers get new brands each time they order and know when new shipments arrive before going to the stores. The other metric is the inventory management, in which the company designed inventory optimization models that stipulate the right amounts for distribution hence avoiding excess stock (Mangan & Lalwani, 2016). The company limits its delivery by making sure that every store receives the requested amount with no excesses or deficits. Such strategy allows the firm to plan and is the reason for the development of its brand image. That it, it avoids dead stock and introduces new stock every time customers come into the stores. Another metric is the just in time approach of integrating different tastes of the brands. It reserves a significant amount of its production in-house. The firm also ensures that its stores receive over 85% of reserves to cater for in-season fluctuations (Mangan & Lalwani, 2016). In-house manufacturing enables it to produce a variety of the brands, flexible amounts and in different durations. Zara usually stores excess inventory to meet demand that changes. The scenario here is that of opportunity and scarcity since the requirements relate to the frequency of its shipments and the increase in the number of clients. Hence, the company benefits by selling the goods at higher prices to meet the scarcity demands.

KPIs that track ethical performance

These KPIs help the business by reducing challenges related to non-adherence to ethical standards, for instance, safety, quality, and privacy. The company can come up with such KPIs by identifying key areas, for example, the role of senior managers, employees, and the supervisors. The business needs to also concentrate on employee performance indicators, and appraisal methods to come up with these KPIs (Mangan & Lalwani, 2016). The KPIs focus on cultural practices influence in the work place and compliance. The importance of such KPIs is to ensure the implementation of the firm’s code of operations in enhancing performance and proper decision making. Hence, the need for regular performance evaluations which prove to be hectic. Also, they help in ensuring senior management, for instance, carry’s out proper communication through proper channels and foster ethics-related components in the company’s plans. Due to the increased need for eliminating corruption and enhancing ethics in the workplace, Zara could benefit from such measurements especially those with inspirational components.

References

In Sabri, E. H. (2015). Optimization of supply chain management in contemporary organizations. Hershey, PA: Business Science Reference

Mangan, J., & Lalwani, C. (2016). Global logistics and supply chain management. Southern Gate, Chichester, West Sussex, UK: Wiley.