Supply chain management liability indicators and metrics

By Mark Zetter

Supply chain management liability becomes more complex when companies outsource to a contract manufacturer.

Extended supply chains emphasize the need for executives to understand how to profit from global operations and how to leverage the knowledge associated with the added depth and wider scope.

Below are just a few of the many supply chain liability indicators and metrics executives should consider when evaluating and managing the performance of extended supply chains or, global operations.

On-time delivery

to request
to commit

Order fulfillment lead time

customer signature/authorization to order receipt
order receipt to order entry complete
order entry complete to start manufacture
start manufacture to order complete manufacture
order Complete Manufacture to Customer Receipt
customer receipt to field/installation complete

Upside production flexibility

material
labor
capacity (note current/ongoing capacity utilization)

Total supply chain management costs

order management cost
material acquisition / purchasing cost
inventory carrying cost
supply chain related finance and planning costs
supply chain related information technology costs

Cash-to-cash cycle time (cash conversion cycle)

days of inventory - raw, WIP, finished goods inventory (FGI)
days sales outstanding
days payables outstanding

Forecast accuracy

unit forecast accuracy
dollar forecast accuracy

Material returns

returns processing cost as % product revenue
returns inventory status
return cycle times

cycle time to process excess product returns for resale, days
cycle time to process obsolete and end of life (EOL) product returns for disposal (in days)
cycle time to repair or refurbish returns (reverse logistics) for Use (in days)

percent actual achievement versus published contract service agreement cycle time (in %)
# of repairs performed as % total # units shipped annually
# of repairs performed internally (OEM) as a % total # repairs performed
# of Repairs performed by the contractd manufacturer as a % of total # repairs Performed
Cost of units repaired or refurbished internally as a % of total
Cost of units repaired or refurbished by the contract manufacturer as a % of total

Financial metrics