We often ask this to the experts and sometimes remain silent in a meeting just because we do not know the exact definition of the acronyms used in the business and does not want to be seen as idiots among the elite. These acronyms are in almost business areas and since this blog is focused on few areas like SCM, ERP and Logistics - I thought of sharing with the readers some of the definitions that will help us understanding the discussions better and the meetings will have more ideas generated which were buried just because the idea man was not exactly sure. Some of them are:
.
Perfect Order: An order that is complete, on time, accurate and in perfect condition. The conditions that prevent a Perfect Order are:
.
1) Orders not delivered on time due to
- Stock Out or Manufacturing/Procurement Delay
- Late Shipment
- In transit or delivery delays
2) Order not meeting meeting requirements due to:
- Inaccurate shipment
- Poor quality of finished goods
- Damage to finished goods in transit
Forecast Accuracy: It is the difference between forecast and actual demand. This is also the inverse of the mean absolute percent error (MAPE) between forecast and actual demand
Cash to Cash cycle time: The length of time between when an organization spends money to buy raw material to the time money flows back into the company from its customers. This generally includes the metrics like:
- Ship to Customer Delivery - Time taken from shipment of finished goods from company warehouse to delivery at customer's address
- Raw material receipt to payment - Time from receipt of raw material to payment to supplier. This is called Days payable outstanding or DPO
- Inventory Days - Average days of inventory on hand
- Days Sales Outstanding - Measurement of the average collection period from invoicing to cash receipt
Supply Chain Management Cost - This is a general cost that have multiple factors like:
- Direct purchasing operating cost
- Manufacturing operating cost
- Transportation Cost
- Warehouse/Distribution center operating cost
- Inventory holding cost
- Customer service operating cost etc.
.
Aah! Finally a place to see the SCM Metrics definitions. I am sure if you decide to take on the full list of metrics and define them in this blog....it will take years to complete ;-)
ReplyDeleteAppreciate the effort.
Bill M
Everytime, I think that now I know the intricacies of Supply Chain, I come across something new. Puneesh - Thank You for well articulated definitions. I handle supply chain of hollywood movies and on the face of it, it looks so different but deeper inside, it is all the same for movies too.
ReplyDelete"Thanks Puneesh for clarifying the Supply Chain Metrics definitions. It certainly will help people like me who have changed the field to larger SCM from just Distribution earlier. If I may ask you a little further here,these metrics are fine but how will you relate these metrics like perfect order and cash to cash cycle time with real measurement of Supply Chain maturity or performance level? Are they tied with higher level attributes in the supply demand train and if yes, then what are those attributes. Lastly, how exactly we should proceed scientifically to do a status check on our Supply Chain?
ReplyDeleteEdward