Five essential habits for Supply Chain leaders (feat. the Supply Chain KPIs you’ll definitely want to track)

For a long time, Supply Chain professionals have been unsung business heroes. Despite making sure operations run efficiently and effectively, day in, day out, they only really stand in the spotlight when disruption strikes and they successfully avert disaster.

But the world’s changing. And so is the role of the Supply Chain manager.

Today, global supply chains weave through a volatile economic landscape. Customers increasingly expect materials to be sourced sustainably and orders to arrive yesterday. And, as businesses seek to make their processes more transparent, it’s getting even harder to ignore the correlation between organizations that are crushing their Supply Chain KPIs, and organizations that are crushing it.

This is propelling Supply Chain professionals to the very top of their businesses, where they can set the strategic agenda – both internally, and with suppliers and partners.

In this article we’ll explore what Supply Chain leadership looks like at its best, and why it goes hand-in-hand with process governance and optimization. And then we’ll share five essential habits for Supply Chain leaders, diving into some important KPIs along the way.

• Spearheading the change? Check out our guide to Supply Chain transformation

What is Supply Chain leadership?

Supply Chain leadership is the ability to successfully orchestrate and influence supply chain operations. At its best, Supply Chain leadership aligns and inspires stakeholders throughout:

• Your organization – every team, from Procurement through to Customer Service, that plays a role in your supply chain or reverse supply chain.
• Your supply chain ecosystem – from your suppliers to your downstream logistics and distribution partners.

Combining soft skills with hard data points, great Supply Chain leaders are able to bring stakeholders together around shared narratives and objectives, while continually seeking out opportunities to improve end-to-end performance.

Supply Chain leadership and process governance

Any Supply Chain leader worthy of the title knows their organization’s “how our supply chain runs” rulebook backward and forward.

They make sure everyone understands their roles, driving transparency and accountability. They make the most of the governance mechanisms at their disposal, from supplier agreements to internal policies, to keep regulators happy and operations efficient. And they drive ongoing compliance and optimization, monitoring the many processes that need to work smoothly, and in perfect harmony, to create a high-performing, highly resilient supply chain.

If that sounds like a lot – it is. But the rewards are immense. There’s a growing mountain of research to show that transformational Supply Chain leadership doesn’t just boost supply chain performance, it boosts company performance.

Here’s how to strengthen your Supply Chain leadership by developing a few simple habits.

Five essential habits for Supply Chain leaders

1 - Make smart use of Supply Chain KPIs

A single, shared key performance indicator can align Supply Chain stakeholders more effectively than any number of joint planning meetings (though they’re important, too).

Really useful Supply Chain metrics include:

• End-to-end lead time.

How long does it take you to create and prepare goods for customer orders? That’s your end-to-end lead time. It can help you to focus teams on accelerating cash conversion, building resilience, and much more. It’s also much easier to calculate than it used to be. (You’ll also want to track plain-old-vanilla lead time. It’ll help you evaluate and optimize supplier performance.)

• Perfect order rate.

A perfect order is one that’s fulfilled without any errors, from invoicing through to delivery. You can find your perfect order rate for any given period by dividing your perfect orders by your total orders. Track this over time and you’ll have a handy data point for understanding (and communicating) the success of process optimization efforts.

• Freight cost per unit shipped.

Understanding freight cost per unit shipped will help you lead productive negotiations with your logistics partners – especially if you also understand its impact on your profit margins.

• Fill rate.

Your fill rate represents the amount of customer demand you’re able to meet through your available stock. Get a high fill rate and you’re likely meeting customer expectations and losing few sales. A low fill rate, and it’s time to lead a review of your Inventory Management capabilities.

• Inventory turnover.

This is how many times you sell and replenish all your stock, in a given period. It’s also known as inventory velocity, and it’s another useful KPI for digging into Supply Chain performance. To track performance over time – and compare your inventory turnover with industry benchmarks – you’ll want to calculate your inventory turnover ratio. Just divide your cost of goods sold by the average value of your inventory.

• Cash to cash cycle time.

The time that elapses between you paying suppliers and customers paying you is critical to your company’s cash flow and overall financial health. Tracking it will also help you to surface optimization opportunities in Inventory Management, Sales, and Procurement. The formula? Your cash to cycle time = your inventory days (how long, on average, you hold stock for before selling it) + your sales outstanding (how long, on average, it takes you to collect the cash) – how long, on average, it takes you to to pay your bills and invoices.

2 - Run regular health checks for your Supply Chain processes

Some 84% of Supply Chain leaders believe they need to better understand how their business processes actually work. Even more believe their processes hold untapped value.

So, set up regular health checks by:

• Collecting and analyzing your process data
• Identifying issues at each stage of the supply chain and teasing out their root causes
• Rallying people around every Supply Chain management KPI relevant to them
• Rinsing and repeating until this becomes second nature

3 - Foster continuous, small scale improvements

When you run regular process health checks, looping in suppliers, partners, and internal teams, you also begin to embed a culture of continuous optimization throughout your supply chain.

But there’s plenty more you can do to foster the frequent improvements that quickly add up to big leaps in Supply Chain performance:

• Set a clear vision for Supply Chain transformation, then celebrate action that supports it. (Did Accounts Payable improve freight bill accuracy with some simple process automation? Trumpet their success.)
• Empower every team with the data to understand, and improve, their own performance. If seeing a particular Supply Chain metric would help someone to do their job better, let them see it.
• Encourage everyone, regardless of their seniority, to identify opportunities. Whether you create a virtual ideas box or run open forums, just make sure people’s contributions are recognized.

4 - Build internal advocacy for stronger Supply Chain governance

Transforming your supply chain will mean winning hearts and minds across the C-suite.

Having the right data at your fingertips – data that shows how Supply Chain operations impact business risk and performance – will be a great help. So will brushing up on your storytelling skills.

There’s a reason Knut Alicke reached for “Narrative” when closing out his “CHAIN” model for effective Supply Chain management. If you can tell a story that starts with your business strengthening Supply Chain governance and ends with it smashing its strategic goals, you’ll be well on your way to winning all the advocacy you need.

5 - Be a Supply Chain technophile

It’s hard to understate how profoundly technology is transforming Supply Chain management.

Object-centric process mining (OCPM) is granting extraordinary visibility into every Supply Chain process, and the supply chain as a whole. Machine learning is transforming data ingestion (here’s looking at you, computer vision). AI is powering – and even acting on – Supply Chain analytics. Consider what an LLM-powered copilot could do for you.

Why learn all these behaviors?

If you can make this stuff second nature, you’ll be well on your way to improving Supply Chain performance. You can expect to see:

• Increased Supply Chain efficiency. With engaged, empowered stakeholders, pulling in the same direction.
• Reduced Supply Chain cost. With the ability to identify and seize optimization and automation opportunities, as well as stronger relationships (and better deals) with your suppliers.
• Newfound Supply Chain agility. With the influence and insights to respond to disruption quickly and strategically.

How Celonis can help you get into the habit

The Celonis Process Intelligence Platform acts as a command center for your supply chain. Layering on top of your existing tech, it helps you see, understand, and orchestrate the many processes that make up your supply chain, end-to-end.

It allows Supply Chain stakeholders to spot bottlenecks and automate tasks. It provides intuitive dashboards that make your KPIs and Supply Chain metrics easy to track, and leaders like you able to take timely, data-driven action.

We could go on – but we’d really rather talk. That way, we can discuss your needs, ambitions, and wildest Supply Chain management dreams. And then explore how Celonis can help you to lead the way.

• Speak to a Celonis expert about transforming your supply chain (and your business)