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1、Supply Chain Performance MetricsProcess, Recommendations-2-This document gives an overview of the different metrics that can be used to measure supply chain performanceThe Supply Chain CoEs objective is to define a benchmarking framework capable of:Comparinggenericmetricperformancesforuseonprojects.
2、Capturingfurtherbenchmarkingdatainaconsistentformat.The London Shops task:Developanoverviewofthedifferentmetricstomeasuresupplychainperformance.Selectthemostimportantmetricsthatcanbeusedacrossindustries.Discusshowthemostimportantmetricslinkotheroperationalmetricswithineachstageofthesupplychain.Sugge
3、sthowthesupplychainCoEshouldcontinueconcerningthistopic.-3-We used information from several sources during our projectInternal and external documents:High level benchmarking framework for supply chain performance(H.Cook):ShopStudy(March1997)accessinginformationfromavailableexpertsandpastprojects.Sup
4、ply chain benchmarks and best practice (DowPolyurethane&EpoxyApril1995).Supply Chain Benchmark Assessment(March1997).Supply chain appraisal and benchmarks: (client X September1997).Discussions with supply chain CoE:GrahamColclough.AndrewMorgan.LeeSherman.DeborahHuff(CapMcKinsey).-4-Possible data sou
5、rcesCIPS (UK):Purchasing (& Supply Chain).APICS (US):Supply Chain.CAPS (US):Purchasing & Supply Chain (US & Legal):ResearchBenchmarkIndustryListings(http:/www.capsresearch/htm).NAPM (US):Purchasing.Kaiser Associates:Benchmark Specialist Consultant.US University Research:New global initiative (invest
6、igating entryopportunitiesBob Ackerman).-5-Performance measurement is an important but complex subjectThis documents an initial step in the right direction.Companies see the need for metrics. . . . . but developing the “right” set of metrics is a challenge“If you cant measure, you cant manage, you c
7、ant motivate”Establishing the proper measures within an organisation enhances continuousNo commonly used “model”.Business issues that warrant performance measurement:Differbetweenindustries.Differwithinindustry.Changeovertime.There is no one “right” answerFocusAccountabilityCommunicationLinking stra
8、tegy to action Assigning accountabilityto take action when neededMeasuring progress towards goals through interactive communication and education-6-We used a generic supply chain framework as a basis for our analysis . . .Supply Chain FrameworkSuppliersPurchasingInformation FlowForecasting & Product
9、ion PlanningCustomer ServiceInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing &SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomersThis framework aligns with the CoE POV and is also similar to framework for the supply chain diagnostics inventory database.-7-. . . and
10、 concluded there are three strategic objectives we should focus on when analysing the supply chainKey metrics must give information on how a company is performing against old strategic objectives.Strategic objectives:QualityTimeCostProducts/services according to customer expectationsOn agreed timeAt
11、 reasonable costPurchasingInformation FlowForecasting & Production PlanningInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing &SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomer ServiceSupply Chain FrameworkNB: BoundariesNPDISupportfunctionsTailor to company specific
12、 (BSC) objectives-8-We began with a brainstorming session on the key drivers for quality, time and costThe complete picture can be found in the appendix.We looked at the supply chain from the customers perspective.We brainstormed on “what could go wrong along the supply chain”:Whataredriversofperfor
13、mancefromaquality,timeandcostpointofview.PriceServiceProduct qualityProduct quantityProduct deliveryLate arrival Late deliveryInventory costProduct costProduc-tion costDelivery costCustomer service costQualityTimeCost-9-Making their client specific warrants attentionRespect all sources of data:Under
14、stand their relationshipsthe “causal tree”:Recognised Cross-Industry; In-Industry and In-Company similarities and differences.Blind-sidedIntuitionOpinionDiscussionSurveyFunctionalMeasuresKPIsExternalBestPracticeQualitativeQuantitativeObjective1KPIKPIKPIKPIObjective2KPIandxxxmeasure“Dualservice”measu
15、res(cost&time)“Hardwired”andtennonsPush-pull-10-Making their client specific warrants attention (cont.)Recognise Cross-Industry; In-Industry; and In-Company similarities and differences.Interface the solution to the current clients measures, systems, processes and culture:.andguidemigrationovertime.
16、Ensure accountability for collecting and actioning is clear.-11-Proposed Supply Chain KPIsKPIs help to identify “where” the performance problem is within the supply chain, and steer towards areas to explore “why”.Accuracy(as%ofsales)Customer satisfaction% of satisfied customersTotal cycle timeTime (
17、for customer) from placing order to receiving goods% of products delivered on timeTotal supply chain cost as % of salesCost per product sold as % of salesCostas%ofsales%ofproductsdeliveredaccordingtocustomerorder(quantity/quality)%ofcustomerssatisfiedwithservice%ofproductsorderedalreadyinstockDefect
18、rateofproductsas%ofproduction%ofgoodsdeliveredaccordingtoorder(quantity/quality)bysupplierTimefromorderplacementtoreceptionofgoodsTimefromproductionordertodeliveryintofinishedproductwarehouseDowntimeas%oftotalproductiontime%ofgoodsdeliveredontimebysupplierCostas%ofsalesCostas%ofsalesCostas%ofsalesNu
19、mberofstockturns/yearsTotal Supply ChainForecastingPurchasingInbound LogisticsManufacturingMaintenanceInventory ManagementMarketing & SalesCustomer ServiceOutbound LogisticsQualityTimeCost%ofactivesuppliersthataccountfor90%oftotalpurchasevalueNeedtoidentifyM&SKPIsBEWARE of inter-relationships-12-Eac
20、h stage of the supply chain has a variety of metrics to monitor operational effectivenessThese metrics help identify “why” there is a performance problem.ForecastingPurchasingInbound LogisticsManufacturingMaintenanceQualityTimeCostActualvs.forecastedsales%ofdatawhichcanbeusedwithoutmodificationinthe
21、planningprocess%ofallactivesuppliersthataccountfor90%oftotalpurchasevalue%ofcorrectordersplaced#ofalternativesourcesofsupply#ofsuppliersinvolvedinproductdevelopment/innovation#ofsuppliersperpurchasingemployee(purchasingprofessional)#ofvendorsproductsorderedPurchasingheadcountas%oftotalheadcount%ofgo
22、odsdeliveredaccordingtoorder(quantify/quality)bysupplier#ofcarrieralliances#ofovershipments%ofdirectmaterialpurchasesthatarenotinspectedatincomingqualityassurance,goingfromstocktodock%ofdirectmaterialpurchasesthatarenotinspectedatincomingqualityassurance,goingfromstocktoproduction%ofordersdeliveredw
23、ithoutunplannedcommunicationorspecialattentionDefectrateofproductsas%ofproductionScraprateas%ofproduction#ofchangesperproductionperiod%ofgoodsrepackagedActualvs.productioncapacityTimefromorderplacementtoreceptionofgoodsTimefromproductionordertodeliverintofinishedproductwarehouse%ofaccountspayablehan
24、dledbeforeduedate%ofaccountspayablehandedin130days%ofaccountspayablehandledin3160days%ofaccountspayablehandledin6190days%ofaccountspayablehandledinover90days%ofsuppliersconnectedviaEDIAverageactualtimetodeveloped/negotiateacontract%ofgoodsdeliveredontimebysupplierProportionofsupplierswhodeliverdaily
25、ProportionofsupplierswhodeliverfrequentlythanmonthlyProportionofsupplierswhodelivermonthlyProportionofsupplierswhodelivertwiceweeklyResponsetimetoschedulechangesResponsetimetounforeseenproblemsTurnaroundtimeonrejecteditemsAverageproductionleadtimeCurrentmanufacturingleadtimeMinimumproductionleadtime
26、Downtimeas%oftotalproductiontimeDowntimeduetopartsshortage(orstockoutsingeneral)HoursofunplanneddowntimeCostas%ofsalesCostas%ofsalesCostas%oftotalcostsCostoforderspurchased(rangeCostofvendortransactions(range)CostofexpediterepairmaterialsPurchasingspendpersupplierPurchasingspendperpurchasingemployee
27、(purchasingprofessional)Costas%ofsalesCostas%oftotalsalesCostas%ofsalesCostpersaleableunitCostperunitproducedCostas%ofsalesCostperunitproducedSource:H.CookNosofstrategies,or“uptime”service-basedcontracts-13-In addition to the KPIs each stage of the supply chain has a variety of metrics to monitor op
28、erational effectiveness (cont.)Inventory ManagementMarketing and SalesCustomer ServiceOutbound LogisticsTotal Supply ChainQualityTimeCost%ofproductsorderedalreadyinstockDefectrateofproductsas%ofproductsleavingwarehouseAccuracyofinventoryrecordsInventoryvs.servicelevelItemsininventoryas%oftotalunitpu
29、rchasesObsoletevs.activeinventory%ofcorrectorderstaken#ofadditionalsalesfromcustomerreferrals#oforderchangesas%ofordersfilled%ofordershandledwithcommitmenttoproduct/servicedeliveryonfirstcall%ofcustomerssatisfiedwithservice#ofcomplaintsas%oftotalorders#ofphonecallstocustomerservicedevelopmentperorde
30、rshipped#ofcomplaintsduetoOn-timedelivery;OrderEntry;Packaging;Productquality;ShippingError#ofcomplaintsas%oftotalorders#ofcustomercontactsperorder#ofenquiries(includingcomplaints)thatwerenotansweredtothecustomerssatisfaction#ofinformationrequestsas%ofcustomerorders%ofcallsabandoned,answeredbyrecord
31、ing,delayed%ofcustomercontactthroughcustomerservice%ofcustomerfollow-uphandledbyCustomerServiceRepresentative;DepartmentManager;FieldRepresentative;ResponsibleManager%ofinvoicescontainingerrors%ofordersdeliveredcompleteandwithouterror(orderfillrate)%ofordersthataredamagedonarrivalatcustomersite%ofre
32、spondentsthatcanhandlecomplaintswithouthandingofftootherperson/dept.Average%ofdisputedinvoices%ofproductsdeliveredaccordingtocustomerorder(quantity/quality)Degreeofutilisationoffacilities(%)EquipmentutilisationloadEquipmentutilisationweightTimefromorderplacementtostartofdeliveryCustomersatisfaction(
33、rating)%ofsatisfiedcustomers%ofinformationoncredithistorylimitavailableOn-line%ofinformationonopen-orderhistoryavailableOn-line%ofinformationonoutstandingbalanceavailableOn-line%ofinformationonpricingavailableOn-line%ofinformationonproducthistoryavailableOn-line%ofinformationonproductIDcodeavailable
34、On-line%ofinformationonshippingpointsavailableOn-lineRatioofoperationslabouras%ofpassivelabourAverage#ofordersrejectedAverageproducttimeinwarehouseNo.ofdaysconsumptioninstock(A-goods)No.ofdaysconsumptioninstock(B-goods)No.ofdaysconsumptioninstock(C-goods)No.ofdayssafetystock(A-goods)No.ofdayssafetys
35、tock(B-goods)No.ofdayssafetystock(C-goods)No.ofproductswithduplicationstockPlanneddaysofinventoryonhand%ofaccountsreceivablesettledbeforeduedate%ofaccountsreceivablesettledin130days%ofaccountsreceivablesettledin3160days%ofaccountsreceivablesettledin91days%ofaccountsreceivablesettledin6190daysDeliver
36、ytime%ofproductsdeliveredearly#ofdeliveriespermanhour%ofordersdeliveredontime(asdefinedbycustomer)%ofordersdeliveredwithanaveragedelayof1monthAverage#ofdaysdelayafterscheduledshipdateTotalcycletimeTime(forcustomers)fromplacingordertoreceivinggoods%ofproductsdeliveredontimeAveragecustomerquotedleadti
37、meAverageleadtimefromreceiptofordertoshipmentAveragetimetakentoaccessinformationCashtocashcycleLongestcustomerquotedleadtimeNewproductintroductiontimeProductchangeovertimeShortestcustomerquotedtimeTimefromreceiptofordertoreceiptofshipmentbycustomerTimetakentorectifyincorrectordamagedordersAveragetim
38、etakentorespondtorequestsCostas%ofsales#ofstockturns/yearCostas%ofcostofgoodspurchasedCarriedworthofexpiredlotsA-goodsasapercentofinventoryAveragestocklevelB-goodsasapercentofinventoryC-goodsasapercentofinventoryInventorycostas%oftotalassets(grossassets)MaximumstocklevelMinimumstocklevelCostas%ofsal
39、esCostas%ofsalesCostperdelivery#ofroutemilesperdelivery#ofwarehousingfacilities#ofwarehousingoflocations%oftransportationunitsownedbycompanyCostperorderCostperrouteTotalsupplychaincostas%ofsalesCostperproductsoldas%ofsales%ofprofitfrombasepurchase%ofprofitfromincreasedpurchases%ofprofitfrompremiumpr
40、icing%ofrevenuegeneratedbylargestcustomergroup(top20%)Costperproductsoldas%ofsalesOperatingprofitpercustomeras%ofoperatingcostspercustomerTotalcostperorderTotalcostperunitproducedCostas%ofsalesSource:H.Cook-14-Given the multitude of metrics we suggest to analyse supply chain performance using a hier
41、archy of measures. . . digging through the causal tree to improve business performance.Key KPISupportingMetricsOther OperationalMeasuresType of MeasureExampleHighest Level UseWho Uses ItForecasting accuracy (as % of sales)Integrated supply chainGeneric benchmarkingConsultantTop managementSupply chai
42、n stage manager% of suppliers connected via EDISupply chain stage diagnosticConsultantSupply chain stage managerA-goods as a % of inventorySupply chain stage diagnosticSupply chain stage managerObjectiveFind “where” the problem is within the supply chainIdentify the “why” within the supply chain sta
43、geGive more in-depth information about supply chain stage-15-For example, the quality of customer service performance can be clearly measured at three different levelsQualityKey KPIsSuggested Supporting MetricsOther Operational Measures% of customers satisfied with service# of complaints as % of tot
44、al orders# of phone calls to customer service department per order shipped# of complaints due to: order entry, packaging, shipping error, . . .)% of calls abandoned, answered by recording, delayed, . . .% of complaints handled by: customer service rep., department manager, . . .KPIs will be measured
45、 for generic benchmarks, whilst operational metrics will be measured by a customer service manager. . .# of complaints that were not answered to customer satisfactionAverage number of orders rejected-16-Key KPIsSuggested Supporting MetricsOther Operational MeasuresOutbound logistics performance . .
46、.% of products delivered according to customer order (quantity/quality)(These can often be driven by customer service metrics)Degree of utilisation of facilities (%)Equipment utilisation (load/weight)Delivery time% of orders delivered on time (as defined by customer)# of deliveries/man hour% of orde
47、rs delivered early% of orders delivered with an average delay of 1 monthAverage number of days of delay after scheduled ship dateCost as % of sales# of route miles per delivery# of warehousing facilities/locations% of transportation units owned by company. . .Cost per deliveryCost per orderCost per
48、routeQualityTimeCost-17-Key KPIsSuggested Supporting MetricsOther Operational MeasuresQualityTimeCostFor maintenance, commonly used supply chain performance metrics relate to time and costThe quality of maintenance is commonly measured by lag measures in terms of cost or as a production measure (dow
49、ntime).We suggest the use of two lead measures that proactively monitor maintenance performance. . .Number of service contractNumber of training days for maintenance staffDowntime as % of total production timeCost as % of salesCost per unit producedDowntime due to parts shortage (or stock outs in ge
50、neral)Hours of unplanned downtime-18-Just remember . . .A large number of metrics exist, so be selective.A step by step approach to measuring supply chain performance should be undertaken in order to avoid being overwhelmed by data.The following segmentation gives us such an approach:23keyKPIsallowu
51、stoidentify“where”theproblems”existwithinthesupplychain.Keysupportingmetricsthenallowustoanswer“why”theproblemsexist.Operationalmetricsallowustogoanalysethesupplychainstageinmoredetail.The “right” set of metrics does not exist for a given industry or even a specific company. The “right” set of metri
52、cs is dynamic like the business it measures and will change with the type of industry/problem and over time. . .-19-Next Steps for the Supply Chain CoEAgree on how you will go forward after this project.Agreeonobjectives,scopeandaccountabilities.Eg.DiscussifeachGMTneedsitsownsupplychainmetrics.Furth
53、er populate the supply chain benchmarking framework.SeeexampleforPurchasing.Championing (S. Beck/Disc. Heads). . . and roll-out.Continuous improvement process.-20-AppendixKPI Definitions.Causal Trees:QualityTimeCost-21-Purchasing Data: KPIs & Benchmarksa:CAPSResearch:ChemicalPurchasingBenchmark1997;
54、H.Cookshopresearch.Industry SectorBenchmarking Range/Best Practice(Validate source)Average Manufacturing(Validate source)Chemicals Best Practice(Validate source)Global Chemical Purchasinga0.06%3.0%0.30%MeasureQUALITYTIMECOSTAutomotive (Global)aPharma. (Global)aEng./Constr. (Global)a%ofcorrectordersp
55、laced#ofalternativesourcesofsupply#ofsuppliersinvolvedinproductdevelopment/innovation#ofactivesuppliersperpurchasingprofessional#ofvendorsproductsordered%ofallactivesuppliersthataccountfor90%oftotalpurchasevalue%ofpurchaseshandledbypurchasingdepartmentPurchasingheadcountas%oftotalheadcount%purchases
56、handledbypurchasingfunction%spendonlong-termbasis(2yrs)%firmsusingconsortiumbuyingTrainingperpurchasingprofessional%ofaccountspayablehandledbeforeduedate%ofaccountspayablehandedin130days%ofaccountspayablehandledin3160days%ofaccountspayablehandledin6190days%ofaccountspayablehandledinover90days%ofsupp
57、liersconnectedviaEDIAverageactualtimetodeveloped/negotiateacontract%goodsdeliveredontimebysupplierTimefromorderplacementtoreceiptofgoodsCostas%ofsalesCostas%oftotalcostsCostoforderspurchased(rangeCostofvendortransactions(range)CostofexpediterepairmaterialsPurchasingspendpersupplierPurchasingspendper
58、purchasingPurchaseDept.expense(per$sales)65%29%4%1%1%9weeks59%$24.8m31/10018 cos 12bn226weeks50%42%6%1%1%61%26.515/100!0 cos $23bn508720%110%61829267575%0.3%4.5%1657.9%(18%xxx)821.4%82%50%22261%97%2720.4%27%26%42hrs30215.5%11%79%33%1%19%2610/10019 cos $3.5bn459/100-22-ServiceProductDeliveryWrongInfo
59、.HigherPricesThanCompetitorsHigherMarginThanCompetitorsBadlySetCustomerExpectationsWrongOrderInformationUnabletoMeetCustomerDemandProducedFaultyGoodsProductsDamagedAfterMfgPriceProductQuantityProductQualityDeliveredFaultyGoodsQuality-23-DidNotHavetheRightMaterialsForecastsIncorrectInformationFailure
60、HumanFailureTechnicalFailureLateArrivalLateDepartureLateArrivalInformationFailureInfrastructureFailureProductFailureWrongInformationInfo.SenttoWrongPersonInformationSentLateProductNotinStockFaultyProductHumanFailureTechnicalFailureUn-controllableFactorsInformationFailureInfrastructureFailureHumanFai
61、lureDidNotProduceAnymoreDidNotProduceEnoughInformationSystemFailureTechnicalFailureHumanFailureCouldNotProduceToCapacityTotalCapacityTooSmallOtherProductionPrioritiesMaterialsNotDeliveredWrongMaterialsDeliveredMaterialsDeliveredLateSuppliersForgotWeDidNotOrderSuppliersGotOrderWrongWeGotOrderWrongSup
62、pliersDeliveredLateWeOrderedLateTime-24-PurchasingCostCustomerServiceCostInventoryCostDeliveryCostProductionCostTooMuchStockWrongTypeofProductsObsoleteStockInfrastructureStockHumanResourcesCostsUsedMoreExpensiveMaterialsMaterialsArrivedLateHumanFailureTechnicalFailureHumanResourceCostMaintenanceCost
63、ComplaintsWastagePlanningUsedMoreRawMaterialsHigherCostThanCompetitorOrderedLateDifferentMaterialsPeopleSystemsSameSuppliersWorseDealDifferentSuppliersSkillsProductMOTPromotionSalesVolumesLowerDontKnowHowtoNegotiateManySuppliersCost-25-Definitions for the Supply Chain KPIsForecasting:Accuracy(as%ofs
64、ales).Purchasing:%activesuppliersfor90%spend.Timefromorderplacementtoreceipt.%ofgoodsdeliveredontime.Costas%sales.Inbound Logistics:%ofgooddeliveredaccordingtoorder(quantity/quality)bysupplier.Timefromorderplacementtoreceptionofgoods.%ofgoodsdeliveredontimebysupplier.-26-Back Up Panels-27-Drivers an
65、d KPIs are however linked throughout the supply chainThey form a “causal tree” along the supply chain which varies between industries and over timeThey do not simply drive and explain just quality, time or cost, they may drive or explain all threeWe have simplified the tree in this presentation:Weha
66、veleftoutthelinksandkeptthemodelonagenericlevelWe have not developed a “perfect” modelFunction/Process StageQualityTimeCost-28-These operational metrics should be used with careIdeally they should support key KPIs by explaining why performance is meeting/below expectations.They should also give an i
67、n-depth picture into how well each supply chain stage is performing.However, their use calls for judgement:Theyvaryacrosscompaniesandindustries(whichexplainsthelargequantityofmetricsavailable).ManyarenotdirectlylinkedtokeyKPIsbutareusefulsecondaryindicatorsofperformance.Theydonotnecessarilylinktoperformanceatjustonestageinthesupplychain(butaccountabilitymustbeassignedtosomeonewithinonestage).Forexample:inaccurateordermakingcouldleadtomoretimebeingspentonpuchasing,suppliersdeliveringthewronggoodsand/orsuppliersdeliveringthegoodslate.
