Drivers METRICS

FACILITY-RELATED METRICS
1. Capacity measures the maximum amount a facility can process.

2. Production cost per unit measures the average cost to produce a
unit of output. These costs may be measured per unit, per case, or
per pound depending on the product
3. Quality losses measure the fraction of production lost due to
defects. Quality losses hurt both financial performance and
responsiveness
4. Product variety measures the number of products/product families
processed in a facility. Processing costs and flow times are likely to
increase with product variety.
5. Average production batch size measures the average amount
produced in each production batch. Large batch sizes will decrease
production cost but increase inventory
INVENTORY-RELATED METRICS
1. Average inventory measures the average amount of inventory

carried. Average inventory should be measured in units, days of
demand, and financial value.
2. Inventory turns measure the number of times inventory turns
over in a year. It is the ratio of average inventory to either the
cost of goods sold or sales
3. Average replenishment batch size measures the average
amount in each replenishment order. The batch size should be
measured by SKU in terms of both units and days of demand. It
can be estimated by averaging over time the difference
between the maximum and the minimum inventory (measured
in each replenishment cycle) on hand
4. Fraction of time out of stock measures the fraction of time
that a particular SKU had zero inventory. This fraction can be
used to estimate the lost sales during the stock out period.
TRANSPORTATION-RELATED METRICS
1. Average incoming shipment size measures the average number of
units or dollars in each incoming shipment at a facility.
2. Average inbound transportation cost per shipment measures the
average transportation cost of each incoming delivery. Along with the
incoming shipment size, this metric identifies opportunities for greater
economies of scale in inbound transportation.
3. Average outbound transportation cost measures the cost of
sending product out of a facility to the customer. Ideally, this cost
should be measured per unit shipped, but it is often measured as a
percentage of sales. It is useful to separate this metric by customer.
4. Average outbound shipment size measures the average number of
units or dollars on each outbound shipment at a facility
INFORMATION-RELATED METRICS
1. Forecast horizon identifies how far in advance of the actual event a

forecast is made. The forecast horizon must be greater than or equal
to the lead time of the decision that is driven by the forecast
2. Frequency of update identifies how frequently each forecast is
updated. The forecast should be updated somewhat more frequently
than a decision will be revisited, so that large changes can be flagged
and corrective action taken.
3. Forecast error measures the difference between the forecast and
actual demand. The forecast error is a measure of uncertainty and
drives all responses to uncertainty such as safety inventory or excess
capacity
4. Variance from plan identifies the difference between the planned
production/inventories and the actual values. These variances can be
used to raise flags that identify shortages and surpluses. Ratio of
demand variability to order variability measures the standard
deviation of incoming demand and supply orders placed. A ratio less
than one potentially indicates the existence of the bullwhip effect.
SOURCING-RELATED METRICS
1. Days payable outstanding measures the number of days between
when a supplier performed a supply chain task and when it was paid.
2. Average purchase price measures the average price at which a
good or service was purchased during the year. The average price
should be weighted by the quantity purchased at each price.
3. Range of purchase price measures the fluctuation in purchase price
during a specified period. The goal is to identify if the quantity
purchased correlated with the price
4. Average purchase quantity measures the average amount
purchased per order. The goal is to identify whether a sufficient level
of aggregation is occurring across locations when placing an order.
PRICING-RELATED METRICS
1. Profit margin measures profit as a percentage of revenue. A firm

needs to examine a wide variety of profit margin metrics to optimize
its pricing, including dimensions such as type of margin (gross, net,
etc.), scope (SKU, product line, division, firm), customer type, and
others.
2. Days sales outstanding measures the average time between when
a sale is made and when the cash is collected.
3. Incremental fixed cost per order measures the incremental costs
that are independent of the size of the order. These include
changeover costs at a manufacturing plant or order processing or
transportation costs that are incurred independent of shipment size at
a mail-order firm
4. Average sale price measures the average price at which a supply
chain activity was performed in a given period. The average should
be obtained by weighting the price with the quantity sold at that price

Drivers METRICS

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Drivers METRICS

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FACILITY-RELATED METRICS

1. Capacity measures the maximum amount a facility can process.

1. Average inventory measures the average amount of inventory

1. Forecast horizon identifies how far in advance of the actual event a

1. Profit margin measures profit as a percentage of revenue. A firm

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