How To Come Up With Effective Supply Chain Metrics
The world of business is a complex universe of service and product channels. These are interlinked with four of the most common organizational elements in distributing goods and services: transportation, warehousing and inventory, global logistics and supply chain. Of the four, supply chain scores to be the most multifaceted. This area involves a web of time-conscious and resource-hungry activities like pickups, transmission, freight costs, and inventory control. Supply chain metrics exist to help managers measure how supply chain costs affect business profitability.
Measuring relevance of the supply chain units to profitability is ultimately the main purpose why managers embrace the use of metrics for rating supply chain performance. But there is actually more to just knowing how profitable the supply chain activities are. Scorecards and other supply chain measuring applications are implemented to control company service delivery and related aspects. By using such system, managers are able to know the performance of the warehouse and delivery points, manufacturing, customer satisfaction which should all be seen from both financial and marketing viewpoints.
Among the most commonly used supply chain measurements are customer order promised cycle time, on time line count, transit time, on time pick ups, freight cots, claims percentage, monthly inventory and supply, and defects per million opportunities. Knowing only about a single good performance of any of the supply chain departments such as customer service, transportation, inventory, warehousing, distribution, productions, and procurement is utterly insufficient. The manager must make sure that all of these supply chain unites are producing good results.
But opting to know how many of these supply chain units is doing good is only half of the real challenge. What managers basically should do is identify the most appropriate metrics to use. The managers may apply all the given metrics but not all of these may be helpful, in fact, not all my show the performance of all the units. The process actually starts by making careful considerations and setting goals
Before choosing any metrics for measuring the performance of all supply chain units, here are the most important things to bear in mind. Managers should only consider indicators that will keep them track of supply chain optimization, indicators that identify challenging areas and allows for relationship comparison through industry benchmarking. Managers should also consider the customizability of the metrics. Some metrics like inventory turns are more generic while others like backorders are customizable, allowing you to change the factors based on the logistics or industry business model,.
Managers should also remember that metrics are not the solutions to the problem but rather means to help them solve a crisis. It is how managers digest and translate the data that aid them in coming up with sane and effective decisions. And lastly, managers should delegate the metrics to all supply chain units. For example, the “customer order promised cycle time” metric should be owned by the customer service unit. In short, supply chain measurements should have their own owners.
Supply chain metrics are generally classified into four: inventory months of supply, inventory rationalization, material value, and upside flexibility. But these metrics would go to waste without the goal. Managers therefore, should see to it that the company goals are specific, measurable, achievable, practical, and time-bound.
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Tags: supply chain dashboard, supply chain kpi, supply chain metrics, supply chain roi, supply chain scorecard
