In the supply chain, it's easy to get overwhelmed by data. The data is present but lacks value due to a simple inability to act on the right data and make sense of its sheer volume. In doing so, part of the battle comes down to the executability of finance supply chain KPIs. Why? Mike Griswold, Vice President Analyst at Gartner, had this to say about the value supply chain KPIs and metrics.
"Supply chain metrics provide the vehicle to 'look at the results' and gauge the effectiveness of an organization's execution strategy. Companies are often overwhelmed with too many supply chain metrics, and struggle to focus on the metrics that matter. Often, targets are set and metrics are viewed in functional silos, leading to sub-optimized supply chain performance." Let's give you nine more finance supply chain KPIs to measure through shipping analytics applications.
Tracking damage rates is a critical factor in supply chain management. Damaged freight or packages effectively results in an extra expense on the supply chain. That's why it is among the most critical finance supply chain KPIs for shippers to measure. It also has a direct correlation to cargo loss. And for unforeseen events, such as theft or major disruptions that result in refunds due to service guarantees, tracking damage rates and cargo loss in tandem provides insight into the performance of logistics service providers.
Another of the leading finance supply chain KPIs derives from damage rates and cargo loss management. Claims' management timeliness and validity are essential measures of business health. Faster claims processing amounts to better customer experiences. And validity on claims submitted is critical to keeping the timeline under control.
When freight or packages arrive, it is still subject to potential changes in landed cost. This is specifically discussing the loading and unloading face of transportation management. If the driver arrives at the facility early or late, extra time on the truck results in lost money for the driver and carrier. That matures in the form of added dwell time. Tracking dwell time is another of the leading finance supply chain KPIs that all shippers should track.
In today's world, unnecessary delays can begin anywhere. That applies to inbound and outbound ocean freight as well. Extra time between docking at a port and loading or unloading can amount to added demurrage charges and costly per-diem rates. There is a similar charge that exists for shippers, detention charges, resulting from excessive dwell time. Tracking that shipping data is critical to avoiding overspend and managing lead times too.
It's also important to track the percent of invoices paid digitally through EDI or APIs. Automated, digital freight settlement processes and invoicing are more cost-effective. They shorten the payment clock and help companies maintain a positive cash flow.
Things go wrong in the supply chain. Some shipments are subject to unplanned needs. For example, a driver needs to use additional equipment to load a pallet, or fuel charges could go through the roof. These added expenses are known as accessorials. Knowing the transportation spend percentage that accessorials form helps companies understand when their current booking and processing standards may have issues. As the percentage increases, it indicates a need to reevaluate shipment details before tendering a load and planning spend.
Measuring the average cost per order, including all transportation and carrying costs, also provides insight into overall profitability. As the average cost per order increases, it also alludes to a need to potentially increase price points or expand transportation networks to capture better deals.
Even the best of times, mistakes can happen in accounting. Of the finance supply chain KPIs, tracking accounting validity and accuracy is essential. When accounting mistakes occur, they can have serious consequences throughout the supply chain. Errors in invoicing, driver scheduling, order tendering, and more results in added complexities and managing accounting. As a result, all companies and shippers must track accounting accuracy and productivity.
Shippers must also track the transportation spend to total revenue ratio. This is another of the finance supply chain KPIs that can directly provide insight into the need to reevaluate transportation processes. It is comparable to the average cost per order. However, it isolates those costs to transportation costs. In turn, companies can better understand if their carrier and LSP relationships are adding value and moving in a positive direction. At the same time, increasing ratios indicate that it may be time for a renewed RFP process or additional carrier expansion to secure better rates.
Of all the finance supply chain KPIs, they lack value if a company cannot get and apply the data. That's for having an expert in your corner becomes more important. An expert can compile, cleanse, normalize, and share the right data. Expert guidance goes a long way in understanding how those metrics translate into action in the supply chain. Intelligent Audit can help your company achieve that goal. Request a consultation with Intelligent Audit now to get started.
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