A fast cycle time is critically important to manufacturers in an era where 2-day deliveries have become the normal customer expectation. Cycle time and lead time are frequently confused. Cycle time represents the time it takes from the start of production to when an order is complete, while lead time starts at the time the order is placed by the customer and ends when the order is delivered. Therefore, reducing cycle time allows for a shorter lead time, thus increasing customer satisfaction.
| KPI | Definition |
| Order Cycle Time | Represents the time from the moment the company starts the manufacturing of an order until the order is ready for shipment to a customer. Best in class in denotes 54 days and the competitive range denotes 55-85 days. |
| Gross Margin | Percentage of revenue after cost of goods sold. This metric signifies how efficiently your company uses its resources to deliver products profitably. The higher the percentage, the better. |
| Inventory Turnover | Ratio showing how many times your company’s inventory is sold and replaced over a period of time. The days in the period can then be divided by the inventory turnover formula to calculate the days it takes to sell the inventory on hand. A low turnover ratio signifies weak sales and excess inventory. A high ratio suggests either strong sales or large discounts. |
| Order Fill Rate | Percentage of customer or consumption orders satisfied from stock at hand. It’s a measure of an inventory’s ability to meet demand. A higher fill rate indicates a better ability to meet sales requests, influencing higher customer satisfaction. |
| Cash Flow Adequacy Ratio | The cash flow adequacy ratio is used to determine whether the cash flows generated by the operations of a business are sufficient to pay for its other ongoing expenses. In essence, cash flows from operations are compared to the payments made for long-term debt reductions, fixed asset acquisitions, and dividends to shareholders. |
| Cash to Cash Cycle | The cash to cash cycle is the time period between when a business pays cash to its suppliers for inventory and receives cash from its customers. The concept is used to determine the amount of cash needed to fund ongoing operations, and is a key factor in estimating financing requirements. |
| Days Sales Outstanding | How many days, on average, it takes your customers to pay invoices. Also called DSO or Days Receivable, it is a financial ratio that illustrates how your receivables are being managed. The lower this number is, the better. |
| eCommerce Growth | This metric indicates the rate at which your company’s e-commerce revenue is growing. |
| Liquidity ratios | One of the commonly used liquidity ratio is the cash ratio. This ratio compares just cash and readily convertible investments to current liabilities. As such, it is the most conservative of all the liquidity ratios, and so is useful in situations where current liabilities are coming due for payment in the very short term. |
| Debt service coverage ratio | Calculated by dividing total net annual operating income by the total of annual debt payments. This measures the ability of a business to pay back both the principal and interest portions of its debt. |
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