@ Supply Chain Management


Supply Chain Metrics – A first cut

If you’ve come across the term KPIs or Fill Rate or Inventory turns, chances are that you’re aware that all these terms fall (not exclusively though) under the rubric of a topic called Supply Chain Metrics. In this first post about Supply Chain Metrics (of what I will be hoping is a series of posts), I want to assemble an intersection of the most common Supply Chain Metrics as might be observed in practice. Beware, there is no uniform standard for these metrics across firms and so terms that mean one thing in one firm might mean something approximately the same with slight differences.
Here’s an initial list of metrics that I have assembled
1. Back orders
2. Cycle Time
3. Fill Rate
4. Inventory Classification (ABC)
5. Inventory Turns
6. On time shipping and delivery
7. Perfect Order
The Power of Metrics (DMReview)
DMReview organizes supply chain metrics using the following four dimensions:

1. Response-Time Metric (timeliness dimension)
2. Visibility Metric (process efficiency dimension)
3. Productivity Metric (productivity dimension)
4. Shrinkage Metric (profitability dimension)

Building and leveraging Metrics Framework to drive Supply Chain Performance (Infosys)
They outline the key characteristics of the right metric as including – Reliability, Validity, Accessibility and Relevant. They also elaborate that:

• Metrics are most useful when embedded in a metrics model that represents a business process
• The criticality of a metric is determined by the process performance insight that it provides
• Metrics need to be assigned to roles that have process execution, monitoring and tracking responsibilities

Supply Chain Benchmarking (AMR Research)
AMR Research focuses on 8 high-level operational processes:

* Request to quotation
* Order to delivery/cash
* Perfect order fulfillment
* Inventory management
* Source and make (with cash to cash)
* Operational planning
* New product development time
* Supply chain management costs

SCDigest reports on how Chevron setup its real-time Supply Chain Dasboards and Metrics (HT: beyondthemba)
The objectives of the exercise:

Brooks’ challenge was to provide a visual dashboard system that would enable refinery executives to quickly, easily and clearly access supply chain and production information that could help them make decisions and meet operating goals.

* What information can really drive improved, real-time decision-making?
* Understanding that, how can the information be presented in a way that maximizes usefulness?

As beyondthemba post wonders – Should the metrics be developed as top-down approach or as a bottom-up approach depending on who needs to do what, when and how?

Alright, I think I have run through a few supply chain metrics approaches that I find representative of a few key points of how to structure one’s thinking about supply chain metrics (or for that matter any metrics related thinking). The next step is to see if there are any generalizable ideas that fall out of these wide-ranging directions that the above thinking leads in. For example, is on-time delivery really that important? I would answer – Yes and No. If on-time delivery is always important then what is the scope (and thus advantage) of collaboration between a supplier/producer and a customer? Where is the room for any negotiation, for joint planning etc? I’m sure that there are critical activities that depend on on-time delivery but a time stamp entered in a producer’s ERP system based on a order two weeks ago is different from the ‘now’ that the customer is experiencing at this moment. Has the order’s definition of on-time delivery changed in the ‘now’? Are there key customers whose situation has changed and thus the very meaning of on-time delivery itself?
The question(s) I want to answer based on some abstracted notion of the producer/plant/creative activity/activity is what are the critical related metrics that a decision maker would just have to know? Can it even be answered without a particular context?

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Category: Logistics, Supply Chain Management


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February 2007