Canada/United States Manufacturing Perspective

Inventory Management and Just-in-Time Key Performance Indicators

While inventory turns is the main KPI for evaluating Lean supply chain agility, logistics cost KPI allow firms to evaluate the efficiency of their logistics and SCM operations. The combination of supply chain agility and efficient SCM practices are key to the long term competitiveness and prosperity of Canadian firms in the emerging GSC context.

Logistics costs occur internally within firms, are outsourced to logistics service providers and occur via inventory carrying costs. The sum of these three components enable firms to evaluate their sector’s total costs and benchmark themselves against their own sector, U.S. counterparts, and other key sectors that share similar logistics and SCM processes.

The mix of internal, outsourced and inventory carrying costs will also allow firms to evaluate their own logistics and SCM cost structure while enabling them to rethink their business model, if deemed necessary. However, it is important to keep in mind that inventory carrying costs cannot be used to compare the size of the economic activity of a sector since it mainly represents accounting based costs.