The Supply Chain is a complex, integrated web of relationships among suppliers, distributors, and customers that a company relies on, to make and sell their products. Many of these relationships are difficult to measure or assess in terms of usefulness, quality of performance or value added. The Supply Chain should be viewed in terms of coordination with the Enterprise Resources Planning (ERP) environment.

This article identifies some key metrics that can be used to help measure performance in managing the Supply Chain, in an ERP environment.

Properly managing the supply chain provides a number of tangible benefits including: reduced inventory requirements, greater inventory turns, ability to deal with shorter product/service life cycles, reducing product costs and improving customer satisfaction. Companies that properly manage their supply chain find themselves at a competitive advantage. It enables the creation of leaner, more nimble organizations that can respond more quickly to an ever-changing environment.

To provide accurate and timely top-level management information, it is necessary to code key files properly, at the individual record level. Examples of this include part commodity coding, product coding and structure, and customer segmentation. Assigning commodity codes (resistors, wood, sheet metal, etc.) to purchased parts provides the dual benefit of categorizing your purchases by type, as well as providing the ability to assign parts by commodity to specific buyers, streamlining the purchasing process. Finished goods items can be used to "send" product coding down the entire product structure, so that all part numbers have product coding. Widely used components and subassemblies can be coded as "universal" for reporting purposes.

Parent product grouping techniques allow reporting of multiple individual product codes, as corporate-level lines of business. This allows for general ledger accumulation of costs of goods sold, inventory value, purchase price variance, and invoiced dollars, by product code. Product structure relates to the identification of finished goods, buy-furnished, expense parts, components and other types of material. If you have multiple warehouses, your "Finished Goods" dollars should relate to product structure (i.e., Part Use Code), rather than to inventory code, in terms of dollar value.

Accurate customer coding provides the ability to measure business, and profitability, by sales channel, geography, customer class (or groups of classes), price code, territory, etc.

Your database currently contains information, which can yield data useful for measurements and statistics. To maximize your company’s reporting and analysis ability, additional tools may be required. Periodic reporting and historical maintenance of key statistical measures can be useful. Let’s identify a few examples of these areas of metrics:

What-if simulations of future requirements/shortages – this capability allows a pre-analysis of resource requirements, in both capacity and dollars, for the Forecast or MPS. Forecast future inventory dollars by month, using scheduled receipts and requirements. Measure inventory turns each month.

Vendor dollars received by month, by vendor and/or commodity code, as well as PPV (Purchase Price Variance) history. How many suppliers are you dealing with for the same commodity? Which demonstrate the best performance, in terms of on-time delivery, and quality? Which parts are covered by Contracts? Which can bypass inspection?

Cycle time/lead time analysis. In a high-speed Supply Chain, it is absolutely critical to reduce lead times for production, as well as the time required to "message" up and down the Supply Chain. Use Pareto techniques to isolate the "showstoppers" amongst your MRP requirements, if you have to handle a large group of Part Numbers.

Analysis of obsolete inventory per usage/future demand. Why hold inventory that you won’t need? Check Open PO’s against MRP requirements. Clean up negative inventory balances.