Financial Measures

There are several fixed and operational costs associated with a supply chain. Ultimately, the aim is to maximize the revenue by keeping the supply chain costs low. Costs arise due to inventories, transportation, facilities, operations, technology, materials, and labor. The financial performance of a supply chain can be evaluated by looking into the following items [#!bagchi98!#]:

• cost of raw material
• revenue from goods sold
• activity-based costs such as material handling, manufacturing, assembling, etc.
• inventory holding costs
• transportation costs
• cost of expired perishable goods
• penalties for incorrectly filled or late orders delivered to customers
• credits for incorrectly filled or late deliveries from suppliers
• cost of goods returned by customers
• credits for goods returned to suppliers

Typically, the financial performance indices can be put together using the following major modules: activity based costing, inventory costing, transportation costing, and inter-company financial transactions.

Every company has a critical number- a financial figure that has the biggest impact on their success. For every company it is different. It is dependent on a number of factors. It could be industry related, economy related, financially related, or business cycle related. Whether it is gross revenue, profit before taxes (PBT), debt to equity ratio, or cost of goods to sold (COGS) this number could make or break your company.

Identifying your critical numbers is essential. It clarifies where you should focus your efforts, what business processes need to be improved and identifies the weakness of your organization. Do you know your critical number?

Although many CEOs may think they know the answer, our research begins to uncover the truth behind the impact of key financial measures on bottom line results. Certain financial information has a greater impact than most executives think. Success Profiles' Integrated Performance Measurement and Ratio Analysis identify and track critical numbers that have the greatest impact on financial performance.