Explainer: Typical supply chain metrics

It is not enough for vendors to let retailers measure their supply chain performance and react when they get a bad report card. Vendors should be proactively monitoring themselves and assessing their own software systems and operations, making corrections before letting bad situations get worse.

Vendors can use retailers’ own performance metrics (and chargebacks) to guide them on what they should be on the lookout for, not just within their own enterprises, but as they monitor their contract manufacturers and suppliers too.

Related: The Perfect Order: Conclusion

Some typical supply chain metrics that retailers use to judge vendors on their performance, usually by calendar month, are:

• Orders accepted vs. canceled. The number of purchase orders accepted and canceled.
• Order lines accepted vs. canceled. The number lines within a purchase order accepted and canceled, and the overall number of purchase order lines accepted and canceled.
• Orders backordered vs. fulfilled complete the first time. The number of purchase orders backordered (if allowed) and how many shipments are required to fulfill the backordered purchase order compared to the number of purchase orders fulfilled the first time complete.
• Late shipments. The number of purchase orders shipped late; the number of purchase orders received late. The latter may be an indication that the correct ship service (e.g., overnight versus second-day versus standard ground) was not used.
• Early shipments. Retailers actually do consider this a problem, especially for B2B. Shipping early in a B2B model—if the routing request doesn’t prevent it—can cause a truck traffic problem at the distribution center due to loading dock availability. Even shipping too early in a B2C situation can be a problem in the view of some retailers, e.g., when consumers specify expected ship dates.
• Incorrect data in EDI. An error in an EDI segment (record) is one that is missing or out of sequence or exists when it shouldn’t be there. An error in an EDI element (field) is one that is missing, exists when it should not, is erroneously placed, or is an incorrect or invalid value.
• Missing or unusable carton barcode labels. A label on a shipping carton or pallet that is not placed correctly or is not able to be scanned because it was not printed properly or did not survive the handling and shipping process. Or the label may not contain all the correct or required information. Or you forgot to affix a label in the first place.
• Damages (carton or item). Which can be due to insufficient cardboard construction of the shipping carton, too little or insufficient packing material (leaving too much empty space surrounding the item).
• Late EDI (PO Acknowledgement, Advance Ship Notice). Which can result when business operations are not synchronized with software systems like EDI and ERP, or when software systems lack automation and must rely on human intervention.

The data to support these metrics should be acquirable from the audit logs of most ERP and EDI systems. Granted, something like damages would only be known based on the physical receipt of shipped goods by the customer. But most of the technical and operational metrics are likely within reach. Vendors should focus on understanding their own supply chain performance and ensure that their internal report cards reflect what their retailer customers are informing about them.

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