Supply Chains: A Manager's Guide

Measuring Efficiency

Costs, although critical to supply chain performance, fail to capture an important aspect of supply chains: the efficiency with which a chain utilizes its resources. If facilities, vehicles, equipment, and other assets are not used at or near their full capacity, their indirect costs must be spread across fewer products, raising the cost of each. Similarly, supplies must be consumed as quickly as possible to minimize holding costs, which are a major component of direct cost in supply chains. The purpose of the third category of measures is to assess the efficiency with which a chain utilizes its assets (Figure 9.10).

Figure 9.10. Measuring Efficiency

Of the many assets required for supply chains, inventory usually receives ...