How To Measure Supply Chain Effectiveness

Supply Chain Management

Managing your supply chain effectively has never been more important for businesses than in today’s challenging economic conditions. Effective measurement of a supply chain is impossible without hard data, so having the right physical and technical systems in place for accessing information is the crucial starting point when analysing the effectiveness of any supply chain. Remember, too, that it is vital to look at every aspect of your supply chain, from purchasing and suppliers to internal activities and product/service delivery.

An integrated approach

A successful supply chain should fulfill a number of criteria in order to ensure its effectiveness. It should be fully integrated with the other aspects of the business – from finance and planning to sales and organisation. Management of these functions should share common goals and an understanding of the overall objectives of the business, not just of their individual business area. The chain should be effectively resourced and requires a single champion at the most senior level to ensure its success. It should be dynamic and able to respond to changing economic conditions that put stress on supply and demand and it requires the right technology systems and innovations to ensure effective planning, monitoring and control.

Start by looking at the financial aspects of your supply chain to assess whether cost savings are being made where they can and should be in order to obtain an indicator of the effectiveness of your purchasing and sourcing activities. How many suppliers are you using? Should this number be reduced? And can more sourcing be done using electronic systems rather than manpower time? These aspects should be looked at in conjunction with efficiency questions in order to gain the best understanding of the impact your supply chain has on your business.

Make sure your measurement is effective

Most organisations have some form of measuring system in place to assess the effectiveness of their supply chains, but how good these systems are varies from highly effective to deeply cumbersome. Designed badly, they can be complicated to navigate, time-consuming to implement and costly to maintain whilst delivering results of little value. Designed well however, and they can be the key to competitive advantage. It is essential to ensure that you are measuring the right things and that the information you glean is fed back into the system at a senior strategic level.

Developments in technology have revolutionised supply chain management, and well-structured technological systems have huge capabilities for informing management decisions as well as improving supply chain processes. Web-based technology offers new ways of receiving information more quickly and in a more comprehensive format and can offer excellent forecasting and purchase information.

Keep it simple

Do ensure that your measurement system is easy to use and makes sense for your business and remember the mantra – keep it simple. If you cannot answer the question “why are we monitoring this?” then the chances are it is unnecessary to do so.


Author BioAlastair is a freelance writer who provided this post on behalf of 2touch who are leaders in providing order fulfillment services.

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