Business Intelligence Blog from arcplan

The Case for Supply Chain Quality Management: Part 4 – Sample Performance Metrics


In our previous post in this series, we talked about the ingredients needed to create a fact-based culture among your internal supply chain teams and your external constituents (suppliers). Today we're giving you the goods – sample metrics for your Quality Dashboards and Supplier Scorecards.

There are three critical performance drivers in the supply chain – Cost, Quality, and Time – all of which must be objectively managed. Some lend themselves to quantifiable metrics while others are more qualitative. In either case, supplier quality teams need a dashboard and scorecard(s) that makes all required information accessible and easy to consume. Let's talk a bit more about cost metrics.


As much as 60% of the cost of production is purchased material content and 67% of the cost of poor quality is in the non-materials cost. With the proportionately large amount of money being spent on business processes that support production, both the cost of parts and processes must be managed with metrics such as:

Cost-Related Metric How It's Measured Where Data Often Reside Impact
Total Spend Sum of dollars spent with a supplier ERP system Potential consolidation and unit price reductions by improved supplier negotiations
PPV (Purchase Price Variance) Measure delta between contract price and actual price ERP system Allows producer to understand and correct reasons for variances, which may be caused by internal process breakdowns such as “rush orders”
Handling cost – paperwork errors Number of errors in paperwork ERP or logistics system Paperwork errors cause processes to slow or stop
Shipping costs Total dollars spent on shipping ERP or Financial System Control shipping costs by consolidating suppliers, ordering more efficiently and better forecasting demand for inputs

Do you find these cost metrics helpful? Leave us a comment if you'd like to receive a white paper with even more sample metrics for measuring quality and time.

Next time, we'll explore a supply chain quality management success story from one of arcplan's clients!

Kathleen Rohrecker

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