What is a common indicator of supply chain performance?

Inventory turnover is a key metric used to assess supply chain performance, as it reflects how efficiently a company manages its inventory. This indicator measures the number of times inventory is sold and replaced over a specific time period, highlighting how well a business is at converting its inventory into sales. A high inventory turnover rate often signals effective inventory management practices, as it implies that the company is selling products quickly and maintaining lower holding costs. Conversely, a low turnover rate may suggest overstocking, obsolescence, or declining demand for products, which can negatively impact overall supply chain efficiency.

Other potential indicators like employee retention rate, advertising effectiveness, and supplier diversity do play important roles in a company's overall success, but they do not directly measure aspects of supply chain performance in the same way that inventory turnover does. Employee retention is more related to workforce stability and satisfaction, advertising effectiveness focuses on marketing outcomes, and supplier diversity speaks to ethical sourcing and market reach rather than the operational efficiency of inventory management. Therefore, inventory turnover stands out as a direct indicator of how well a supply chain is functioning.