Measurement of Supply Chain Performance:

Supply-chain management involves managing the flow of material that creates inventories in
the supply chain. This flow of materials and involves various financial measures of concern of
the firm. So managers closely monitor inventories to keep them at acceptable level.

Inventory Measurement:

All methods of measuring inventory begin with a physical count of units, volume or weight.
Measures of inventory are reported in three basic ways:

1. Average Aggregate Inventory Value

2. Weeks of Supply
3. Inventory Turnover

• Average Aggregate Inventory Value (AAIV):

The value of all items held in inventory for a firm

Average aggregate inventory value: [No: of units of item A typically on hand] *[value of each
unit of item A] +
[No: of units of item B typically on hand]*[value of each
unit of item B]

• Weeks of supply:
An inventory measure is obtained by dividing the average aggregate inventory value by sales per
week at cost.
Weeks of supply: Average aggregate inventory value/weekly sales (at cost)

• Inventory turnover:
An inventory measure obtained by dividing annual sales at cost by the average aggregate
inventory value maintained during the year.
Inventory turnover: Annual sales (at cost)/ average aggregate inventory value