Choosing the Right Performance Indicator

Supply Chain Strategy Proposal:
Performance Indicators
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A proposal on the warehouse location strategy is laid out in the last paper. It shows the process and steps to follow in choosing a strategic warehouse location for a distribution center. The proposal follows Kalinowski's (2016) study on locating a warehouse. The study offered the process, the factors to be considered, outsourcing, and inventory. In addition to the proposal, this paper aims to list the suitable performance indicators that can be applied in supply chain management.
Choosing the Right Performance Indicator
Performance indicators or Key Performance Indicators (KPI), as most commonly known in the business, is a measuring system that serves as a guide to the business. They lead an establishment to improvement and progression that helps the business grow. These indicators measure the performance of business-like sales, inventory, expenses, billing, and others (Badawy et al., 2016). One example of a performance indicator is customer order cycle time. This indicator provides the time table of an order from order placement to delivery. It is measured by adding the "source cycle time", "make cycle time", and "delivery cycle time (Profit: Customer Order Cycle Time, 2020).”
In choosing performance indicators for a business plan, according to Georges (2013), the indicators must have relevance to the goal that the business is tiring to reach. With that in mind, performance indicators for the supply chain management were chosen according to how they can help run the distribution center. Also, as a starting distribution center, basic performance indicators advisable for supply chain management are chosen.
Source of Information
For the definition and formula description, this paper chooses Profit.co as a reference. Profit.co is a software company that specializes in objectives and key results tracking. It is run by entrepreneurs and engineers.
Performance Indicators, Formulas, and Ideal Solutions
The first performance indicator to be applied in the distribution center is Inventory Days of Supply. This performance indicator (PI) tracks the company's sale or consumption of supply. Supplies can either be sold to customers or consume as a raw material for the product they produce. This inventory calculates the average time between the purchase of goods to selling or consumption (Profit: Customer Order Cycle Time, 2020).
In calculating this inventory, identify first the variables which are the average inventory, the COGS (cost of goods sold), and the accounting period (e.g. 365 days/ 1 year). Average inventory is the sum of beginning inventory and ending inventory, divided by two. COGS can be calculated by dividing the cost of goods by 365 days. When all the variables are identified, the average inventory should be divided by COGS and their quotient is to be multiplied to 365. If this PI puts the business in a worse scenario, the variables should be checked if the inventory is done properly. The amount of supply shall be monitored as well (Profit: Customer Order Cycle Time, 2020).
The second PI is perfect order measurement which, as the name suggests, sees through the orders and makes sure that they are error-free. This indicator gives a picture of how the service or production runs. The formula for this PIS is multiplying the percentages of orders that are delivered on time, completed, and are damage-free; then it is to b multiplied to 100. In this PI, checking the right number of percentages must be done first if anything goes wrong in the process. The means of delivery or handlin...