In the quest to track supply chain performance, output and value are important Key Performance Indicators (KPIs). You might be thinking… aren’t output and value the same thing? Well, they should be, and this is why it’s important to track them to make sure that all output is generating value for customers.

In this article we’ll define the output metric and value metric, and consider the important difference between these two key performance indicators for supply chain management (SCM).

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What is “output” in a supply chain?

“Output” in a supply chain represents the measurable value produced and provided to customers. Every organization will have one or more outputs, which could be attributed to either the entire supply chain or specific segments of it.

The output metric is crucial for evaluating the performance of supply chain and operations, because the creation and delivery of value to customers translates into revenue for the business.

Examples of output in a supply chain

• A postal service – the number of letters and packages correctly delivered
• An oil importing company – the quantity of crude oil delivered to the refineries
• A national dairy company – the number of liters of milk delivered to supermarket distribution centers every day

What is “value” in a supply chain?

“Value” in a supply chain is tied to customer perception of the product or service, and what they are willing to pay for. 

What is the difference between “value” and “output”?

“Output” and “value” should be the same thing, but there is a subtle difference. A company making and delivering goods to-stock is producing an output, but if there is no customer demand for these goods then it has no value. Output without value doesn’t generate revenue, and filling up warehouses incurs significant costs, definitely not creating profit.

Supply chain management KPIs: How to measure output and value

For a general supply chain, output can be measured in various different ways. There’s no right answer; it depends on your particular supply chain.

A national dairy delivering milk from farms to supermarket distribution centers might record the number of liters of milk delivered as the primary measure of output. They might also keep track of the weekly number of lorry trips, as this will be needed to keep track of vehicle utilization.

A postal service might record the number of houses delivered to or number of letters delivered each week. A solo delivery driver delivering takeaway food in the city might record the total distance traveled on paid jobs each week.

Ways of measuring “output”:

• Number of deliveries made (per time period)
• Number of kilometers driven (per time period)
• Number of items delivered (per time period)
• Number of box-kilometers (per time period)
• Number of different delivery or collection destinations (per time period)

Output is the primary metric of any supply chain or operation. Creating and delivering value is the entire purpose of the supply chain, and so everything else should be balanced or moderated against it. 
Want to learn more about supply chain management KPIs? Deepen your understanding with Rowtons Training KPIs for Supply Chain online training course.