HOW TO MEASURE SUPPLY CHAIN PERFORMANCE

16 | R i g h t S c o r e s ™ Inventory Policy Cost™ is a term we coined a few years ago. Inventory Policy Cost™ (IPC) is the sum of inventory carrying cost (ICC) and lost sales cost. Inventory Carrying Cost (ICC) is the product of Average Inventory Value and Inventory Carrying Rate (ICR). Lost Sales Cost (LSC) is the product of True Demand, Unit Selling Price, Unfill Rate, and Shortage Factor. Unfill Rate is computed as 1 less the unit fill rate percentage. The Shortage Factor is the percentage of the selling price lost when demand is unfillab F le i . gure 2.x below is a total supply chain cost computation for a major retailer. Figure 2.x below is a total supply chain cost computation for a major healthcare company. Retailer Total Supply Chain Cost The total supply chain cost computations for one of the world’s largest retailers is illustrated in Figure 2.x below. The rows correspond to the locations of their major distribution centers.