Mar
7
Can You Over Analyze Your Supply Chain?
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When it comes to performance management, there are definitely two answers to this question. The first is that you can (obviously) over analyze your supply chain. While the old adage of “you cant manage what you don’t measure” holds especially true for the world of material supply – all too often businesses devote far too much time to measuring the wrong thing or worse measuring the right thing and then doing nothing about it when the results obtained show underperformance against objectives.
While its vital that you do assess your supply chain (both in terms of it meeting the business need and performance) there can be a real tendancy to devote too much time in analyzing and producing report after report (which often serve little purpose) as opposed to undertaking other more value add tasks.
Understanding performance is only one aspect – we wouldn’t expect, for example for staff to simply sit carrying out assessments all day. But realistically that isn’t going to happen is it? Perhaps this may be an extreme suggestion –but in your own supply chain function – do you ensure that the parts of the supply chain you analyze contribute and add value to your business – and where the results suggest a change in strategy or deploying an improvement activity you act on it – or do you just “count numbers”.
A crude example is one of supplier performance to schedule – most (but disappointingly not all!) businesses analyze delivery schedule adherence- many choose to put together a top 10 worst performing suppliers list – but how many then go the next step and actually investigate what’s going wrong with those suppliers? Obviously most organizations will investigate underperformance but put a formal improvement programme together?
The second answer to this “can you over analyze” query is a resounding No – but lets taper that with “as long as your analyzing what’s important”. What’s your strategy/Goals (do they add real demonstrable value) and THEN comes the analysis part. How will you analyze/measure your business to assess achievement?
The supply chain is perhaps the most insecure and unstable part of any business, when things go wrong the results can be catastrophic – both in terms of cost and customer satisfaction so assessments are important. If your strategy is to simply leave the supply chain to operate and then not investigate issues, then it will not be long before it descends into chaos. The supply chain can be vulnerable in terms of commodities, the prices of items, transportation issues and so on.
It is important to know where the areas of vulnerability are and these can really only be discovered by analysis.
Only through analyzing what is happening with the supply chain reacting and developing and implementing appropriate strategies can you have any chance of ensuring that the supply chain meets your business need. Some of these issues can be global and many can be wholly unforeseen (implying a requirement for risk management and mitigation).
Simply analyzing in itself is a complete waste of time. It is the actions taken to remedy potential areas of vulnerability that will be important and will actually make a difference. And for those of you still developing ideas about what to measure and assess – spare a thought for the simple principle of QCD (Quality Cost and Delivery). Whilst it won’t cover everything QCD can get you off on the right track – implementing the foundation of a performance management system.
The increasingly complex (and global) nature of many supply chains means that analysis and performance management is here to stay. Your supply chain is precious; so everything possible needs to be done to nurture it and cherish it, if the future viability of the supply chain is to be maintained. Ignore supply chain analysis at your peril!
Feb
16
Measuring supply chain management performance
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Measuring the supply chain management performance is an essential task when attempting to optimize the supply chain for your business. Supply chain management is a melting pot of different business functions and through utilizing Key performance indicators (KPIs), measurements or metrics used by management, issues can be captured and efficiencies targeted.
The American Production and Inventory Control Society (APICS) defines Supply Chain Management as an intertwined business processes that involves the “ design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand and measuring performance globally.’’ It covers a wide array of business functions and work with the objective of long term improvement in the processes to make it more efficient and viable. This involves measurement and analysis of key performance indicators of different aspects involved in the supply chain.
Schedule Adherence
Delivery of goods from the supplier is measured and analyzed using the Delivery Schedule Adherence (DSA) metrics. It is commonly included in the quality, cost, and delivery groups of performance indicators of the supply chain. This metric is a percentage representation of the goods delivered on time versus the total deliveries. It indicates the percentage of on time deliveries of the supply chain. Management uses this metric to rank the different contributors within the supply chain and plays an important role in decision making.
Quality Performance
Performance of the supply chain can be measured and analyzed using key performance indicators or metrics on its ability to adhere on the customers’ requirement and value. Although, mathematical indicators tends to show superficial values, quality of supply chain’s performance can be represented by numerical metrics based on the critical processes, customers’ requirements, ability to correct mistakes and adherence to target. Percentages based on the total performance of the supply chain can be computed and used by the customers for their selection.
Cost Reduction
Cost as metrics is highly measurable and can be analyzed as a key performance indicator of the supply chain’s purchase cost, transportation costs, inventory storage cost, administrative cost, and capital cost. This is probably the most important factor in the management’s evaluation of a supply chain. Comparing the actual and predicted cost through material variance analysis, can establish the efficiency of a supply chain. Cost as a common metrics among the supply chains is essential in establishing the business’ viability.
Productivity of manpower
Production output in relation to number of employees of the supply chain is a key performance indicator to determine the efficiency of the supply chain’s manpower.
The turns of product manufactured and purchased order raised are part of the performance indicators considered. The management uses this KPI to determine the supply chain’s performance, and also serve as an indicator to instill improvements.
Forecast accuracy
Forecast of materials required by the supply chain is metric that can be measured and can be used as a key performance indicator. Wrong or inaccurate forecasting can result in so many issues down the line and management ensures that this is as accurate as possible. It is a critical piece of the puzzle supply chain management has to address.
Key performance Indicators are the metrics that management use in analyzing the processes within the supply chain. It is important indicator for management uses to create a cost effective supply chain.