Inventory Turns (Inventory Turnover): The number of times that your inventory cycles or turns over per year.

It is one of the most commonly used Supply Chain Metrics. Calculation: A frequently used method is to divide the Annual Cost of Sales by the Avera e Inventory !evel. "#ample: Cost of Sales $ %&'()))())). Avera e Inventory $ %'()))())). %&'()))())) * %'()))())) $ ' Inventory Turns +, Inventory Turns can be a movin number. "#ample: ,ollin -. Month Cost of Sales $ %-'()))())). Current Inventory $ %/()))())) %-'()))())) * %/()))())) $ / Inventory Turns 0ro1ected Inventory Turns: 2ivide the 3Total Cost of -. Month Sales 0lan3 by the 3Total Cost of 4oal Inventory3 "#ample: The Total Cost of -. Month Sales 0lan is %/)()))())). Total Cost of 4oal Inventory $ %5()))())) %/)()))())) * %5()))())) $ 6 0ro1ected Turns

Turns can be vie7ed usin Cost 8alue( ,etail 8alue( or even in 9nits. :ust ma;e sure that you<re usin the same 9nit of Measure in both the =umerator and the 2enominator. Althou h results vary by industry( typical manufacturin companies may have '>5 inventory turns per year. ?i h volume*lo7 mar in companies (li;e rocery stores) may have -. or more inventory turns per year or more. It is common for a company to tar et slo7ly increasin it<s turns year after year. Consult a qualified benchmar;in company to help you set your tar et for your inventory turns.
Cycle Time Measurements

?ere are 1ust a fe7 of the many Cycle Times you should consider for your Supply Chain. All of these measures should not only calculate the days (or hours) from the start and finish( but also bet7een the various steps in bet7een. Customer +rder 0romised Cycle Time: The anticipated or a reed upon cycle

time of a 0urchase +rder. It is ap bet7een the 0urchase +rder Creation 2ate and the ,equested 2elivery 2ate. This tells you the cycle time that you should e#pect (=+T the actual) Customer +rder Actual Cycle Time: The avera e time it ta;es to actually fill a customer@s purchase order. This measure can be vie7ed on an +rder or an +rder !ine level. The measure starts 7hen the customers order is sent*received*entered. It is measured alon its various steps of the order cycle. Throu h credit chec;s( pricin ( 7arehouse pic;in and shippin . The measure ends at either the time of shipment or at the time of delivery to the customer (sometimes trac;ed by usin an "2I A.-/). This 3actual3 cycle time should be compared to the 3promised3 cycle time. Manufacturin Cycle Time: Measured from the Birm 0lanned +rder until the final production is reported. It usually ta;es into account the ori inal planned production quantity versus the actual production quantity. "#ample: CD of the planned quantity must be completed on a production run or the cycle time should not be considered. 0urchase +rder Cycle Time: Measured from the creation of the 0+ to the receipt at your location (2istribution Center( ?ub etc). +ne of the ;eys here is not have your ,22 (,equested 2elivery 2ate) e#ceed the a reed to lead time. If it does( it may artificially inflate your !ead Time. Additionally( any in>bet7een points available 7ill add value to the metric. "#ample: Creation of the 0+( Shipment from the 8endor( ,eceipt at the 2C. This 7ill tell you the manufacturin time vs. the transit time. Inventory ,eplenishment Cycle Time: Measure of the Manufacturin Cycle Time plus the time included to deploy the product to the appropriate distribution center. Cash to Cash Cycle Time: The number of days bet7een payin for ,a7 Materials and ettin paid for product. Calculated by Inventory 2ays of Supply plus 2ays of Sales +utstandin minus Avera e 0ayment 0eriod for Material. Supply Chain Cycle Time: The total time it 7ould ta;e to satisfy a customer order if all inventory levels 7ere Eero. It is calculated by addin up the lon est lead times in each sta e of the cycle.

20M+: 2efects 0er Million +pportunities 20M+ is a Si# Si maF calculation used to indicate the amount of defects in a process per one million opportunities. To calculate: Total =umber of 2efects * Total =umber of +pportunities for a 2efect. Then multiply the ans7er by - Million. The challen e here is determinin e#actly 7hat qualifies as a defect. Some defects can pass throu h a quality inspection and have little impact on the end product. +ther defects can result in re>7or; or scrap. 20M+ is sometimes used instead of 2efect per 9nit to allo7 for comparison bet7een processes 7ith different levels of comple#ity. FSi# Si ma uses statistical analysis to measure a company@s performance by identifyin defects in a manufacturin process. The oal of Si# Si ma is to reduce process output variation to G or > si# standard deviations. This results in no more than &./ defects per million opportunities. FILL RATE Bill ,ate definitions and calculations can vary reatly. In the broadest sense( Bill ,ate calculates the service level bet7een . parties. It is usually a measure of shippin performance e#pressed as a percenta e of the total order. Sample Bill ,ate Metrics: !ine Count Bill ,ate: The amount of order lines shipped on the initial shipment versus the amount of lines ordered. This measure may or may not ta;e into consideration the requested delivery date (see +n Time 2elivery) e#ample> AHC Company orders -) products (one order line each) on its 0urchase +rder A-.&/. The manufacturer ships out I line items on March - and the remainin & items on March -). The Bill ,ate for this 0urchase +rder is I)D. It is calculated once the initial shipment ta;es place. Calculation: =umber of +rder !ines Shipped on the Initial +rderF * Total =umber of +rder !ines +rdered (I*-) $ I)D) SJ9 Bill ,ate: The number of SJ9<s (Stoc; Jeepin 9nits) ordered and shipped is ta;en into consideration. Above( 7e consider each +rder !ine to have an equal value (- ). ?ere( 7e count the SJ9<s per +rder !ine. e#ample: If on !ine -( the order 7as for &) s;us of product 3AH3 and on line .( they ordered -) s;us of item 3AC3. If !ine - ships on April - and line . on

April .)( the SJ9 Bill ,ate is I6D Calculation: =umber of SJ9s Shipped on the Initial Shipment * Total =umber of SJ9s +rdered (&)*/) $ I6D). Case Bill ,ate: The amount of cases shipped on the initial shipment versus the amount of cases ordered. e#ample>AHC Company orders ' products that total .)) cases. The manufacturer ships out -/) cases on &*-*)- and the remainin ') cases on &*-)*)-. The Bill ,ate for this 0urchase +rder is I)D. It is calculated once the initial shipment ta;es place. The number of +rder !ines is not considered in this calculation. This Bill ,ate measure ives 37ei ht3 to the order lines that are shipped out. Calculation: =umber of Cases Shipped on the Initial +rder * Total =umber of Cases +rdered. (-/)*.)) $ I)D) 8alue Bill ,ate: Same as above( e#cept the order line value is used instead of cases. Calculation: 8alue of +rder !ines Shipped on the Initial +rder * Total 8alue of the +rder (%/))*%6)) $ 5)D) Khat happens if a customer orders -) products( but then decides to e#pedite out 1ust one of themL Should the other M products be counted as a Bill ,ate 3miss3L (- shipped * -) ordered $ -)D). The ans7er is no. Nou should factor rushed lines out of your Bill ,ate calculation. This can usually be done by identifyin the routin code (as in an SA0 system) or by the carrier (B"2C). F=+T": 3Shipped on the Initial +rder3 > usually refers to the first shipment out of the primary 7arehouse. Therefore( if an order line ships out of an alternate shippin facility and it ships out on*before the first shipment out of the primary 7arehouse( then it is considered a G to the Bill ,ate.