Time compression and speed are vitally important elements in supply chain success, especially for organisations operating in more competitive markets. Therefore, knowing how long your process cycles take to complete, should be a high priority among your KPI measurements.
There are a number of ways in which you can measure performance with cycle times. Here are a few suggestions for metrics which, if tracked continuously, can help you identify ways to speed up your supply chain performance.
Customer Order Promised Cycle Time: This cycle time performance measure tells you the expected time from a customer order being placed to the time of its delivery. The cycle time will remain fairly constant—only changing when you know you can promise a (hopefully) reduced time from order to delivery.
The customer order promised cycle time will be the benchmark against which you monitor the following metric in this list—customer order actual cycle time.
Customer Order Actual Cycle Time: If you want to measure this cycle time metric, you need to capture the average time taken from when a customer places an order, until it is delivered. Customer order actual cycle time performance includes the time taken to complete all stages in the fulfillment process, including for example, credit checks, picking in the warehouse and shipping time.
Cash to Cash Cycle Time: This is the length of time elapsed between paying for raw materials and getting paid for the end product. The faster your cash to cash cycle time performance, the more profitable and lean your supply chain is likely to be.
Supply Chain Cycle Time: An all-encompassing cycle time performance measure, supply chain cycle time is the sum of the longest lead time for each stage in the cycle. It represents the total time taken to fulfill a customer’s order if all inventory levels in your supply chain are at zero. For your supply chain to become efficient and agile, this cycle time should be shortened as much as possible.
In order to avoid analysis paralysis, your organization should stick to monitoring a select range of the most relevant KPIs. In fact, less is often more when it comes to performance metrics. In deciding what to include in your KPI reporting suite though, you shouldn’t overlook the importance of monitoring cycle time performance.