If you think of your supply chain as an orchestra and you as the conductor, it’s easy to visualize its complexity. And just like an orchestra, each section of your supply chain has its individualized demands that need to be considered. To maintain a seamless supply chain, you need each section to do their piece and one breakdown can jeopardize some, or even all of your output. This can result in lost time, money and opportunity- basically, a supply chain professional’s nightmare!
Just like an orchestra, a supply chain can seem incredibly overwhelming when you start considering everything involved and all the potential problems. However, the good news is that there is a wealth of metrics available to you to make your supply chain run smoothly and efficiently. But before you dive into perfect order measurements and fill rate data, it’s best to revisit the basic characteristics that make up good performance data. Because, although every performance metric can give you a slightly different view of your supply chain, it’s important to define which metrics are best for your company and how they will be used.
Here’s is how to define which performance metrics are right for your supply chain.
Define Your Foundation
Before taking that deep dive into performance metrics, you need to revisit the very foundation of your supply chain. Consider each individualized need and how they all come together to define your complete supply chain.
We know that managing a supply chain network is an enormous task and trying to introduce improvements can be equally as challenging. Like all good business plans, outlining a clear timeline, with actionable goals and objectives will assist in breaking down one enormous task into actionable pieces.
The Human Element
The success of a supply chain extends beyond the reach and capabilities of just one organization or company. By the time your product reaches your customer, there’s a good chance it has been handled by a dozen or more people.
Thus, before you employ any performance metrics, it is critical to define which parameters will be involved and, more importantly, where that information will land. Meaning, how many managers and employees will be touching the same information and, more importantly, will it be easy for them to understand? The hallmark of any good metric is that it is easy to comprehend with immediate clarity on both what is being measured and how it was derived. And in addition to being easy to understand, your supply chain metrics must be rooted in real data and not from a subjective point of view. In doing this, you are eliminating any possible confusion in the future.
Easy to Collect
When considering which metrics make sense for your organization, don’t lose sight of the process. More sophisticated metrics can mean a prolonged period to gather and analyze. This means potentially taking personnel out of key roles, which can be counterproductive. As you map out the supply chain metrics for your organization, consider the entirety of the project with a particular focus on the execution. The metrics will only be as good as the implementation and future process improvements.
As alluded to previously, data will do little to improve process breakdowns if the data is not measuring what is important. When assessing which metrics to utilize, consider how the data, analysis of data, and final recommendations will affect larger business goals. One way to narrow the universe is to consider the Pareto Principle, which states that “…there is an unequal relationship between inputs and outputs. The principle states that 20% of the invested input is responsible for 80% of the results obtained.” If getting started seems overwhelming, consider where the bulk of your output is obtained. This will most likely allow you to address the easier pitfalls en route to more granular improvements.
Produces the desired outcome
In broad terms, the ultimate goal of utilizing metrics is to increase efficiency and performance. Assuming this is, in fact, the objective, then good performance metrics will allow users and employees alike, to quickly take corrective action. The first role of any performance metric is to help pinpoint the problem area. Moving beyond the problem, the solution should be given equal weight, which needs to manifest itself in a clear path to action and improvement. Remember, the metrics will only be as good as the implementation and eventual desired outcome.
Sample Categories to Consider
Every organization will have specific needs. However, most supply chain concerns can be bucketed into three primary categories: time, cost and quality.
As the saying goes, time is money and in our on-demand society, time is our most valuable commodity. Understanding how long it takes to produce a quality product is paramount to uncovering additional efficiencies. While time can be elusive, metrics focused on time are very telling. Analyzing time will paint a picture of how “on time” your organization is from the point of production to fulfillment to delivery.
Cost, the second category to consider, is always a factor and typically the metric most paid attention to. Cost is an important performance metric and is often much more quantifiable than time. Performance metrics around cost, whether that is cost savings through greater efficiency or better inventory management, will help uncover enhancements to improve cash flow and overall profitability.
Last but not least, quality. Just because you can produce something faster and cheaper does not necessarily equate to steady or repeat sales. Quality can relate to the integrity of your product all the way through to service after the sale and overall customer satisfaction.