Quality, Cost and Delivery, which is usually abbreviated to QCD is nothing new and has been around as the foundations of performance management for some time. QCD is usually used to measure business activity which can be further distilled into Key Performance Indicators (KPI’s).
Utilizing QCD is a good starting point when it comes to developing business measures. However when thinking about QCD, care should be taken to ensure that it is not just generically about 3 measures more the focus on the particular performance being reviewed and how QCD can be applied.

Quality:

Quality is typically used to measure performance in terms of when things are not right the first time. This measure can be placed at various positions in the supply chain such as for example
• The number of customer returns
• Manufacturing scrap
• Supplier rejects (i.e. goods not accepted due to quality issues)

Costs:

Costs can be critical to any company, so it is vital that they are kept to a minimum. However, costs are about more than simply how much an individual screw cost. You should also look at the cost and value of stock levels, the cost of transporting stock, the cost of storing the stock and so on. Ensure that any hidden costs, such as administration costs, heating and lighting and so on are all taken into account. Each and every cost must be identified and then accounted for.

Delivery:

The delivery standards are often referred to as Delivery Schedule Adherence, (DSA) this can refer to both how often suppliers adhere to the delivery schedule and how well you supply to your customer.
Delivery can be measured quite scientifically. You need to look at your overall DSA i.e. how many times your suppliers meet your schedule and then you measure each individual supplier against this. So if your overall DSA is 89%, then you would measure each individual supplier against the ranking of 89% and see who performs better and who performs worst.

The Benefits of QCD

QCD can bring a lot of benefits to an organisation simply because it is a very straightforward and relatively easy method of actively measuring processes but it is also applicable to processes that are simple or extremely complex. So it can be used in any part of the supply chain and for any business process.
It also serves as an excellent starting point for ensuring that some really functional and useful Key Performance Indicators can be established and the use of QCD should not be seen in isolation but rather as the starting point for the establishment of Key Performance Indicators

Measuring Purchasing Performance

Filed Under Blog | Comments Off on Measuring Purchasing Performance

The old saying is that you can’t manage what you don’t know. Performance Indicators for any business are critical in evaluating success and highlighting key issues, that need addressing, within the company.

One of the major problems is that there are so many things to measure, indeed you can argue that in supply chain they are virtually limitless. The key trick is ensuring that what you measure is a key determinant in the success of your business (and preferably directly linked to your business strategy and targets). This can take time to both decide upon and also to gather meaningful data.

Once you’ve have agreed upon your measures you can distil this even further to a RAG – Red Amber Green traffic light report system or reporting dashboard to ensure that you measure by exception, focus on what’s going wrong in the business and how you can address it.

The Role of QCD in supply chain

QCD stands for Quality Cost and Delivery and represents the holy trinity of measures. QCD, common in manufacturing, can not only help improve things internally but improving the results of these measures can also influence customer satisfaction.

Quality

Quality is often measured in terms of rejected goods or defects – for example if a supplier delivered 100 items on time in the month then great! But if the quality was poor and only 20 of them were usable then not so great. Many organizations will choose to employ a DPPM score (Defective Parts per Million) or simply calculate quality as a percentage of overall deliveries as a not right first time (NRFT) ratio.

Cost

Cost can be measured in a variety of ways from the cost of the part i.e. monitoring the cost trend of a given commodity over time through to measuring productivity and transactional costs. It’s often argued that productivity is a difficult nut to crack as the actual time taken to raise a purchase order might be minimal compared to the time taken to source the supplier or provide key technical information. However it’s worth persevering as understanding your transactional cost can drive key changes in your processes and organization behaviour.

Delivery

Delivery Schedule Adherence (DSA) is one of the most common supply chain metrics. It specifically measures “did the item you ordered get delivered on the day/time it was supposed to be delivered on in exactly the right quantity”. Some organizations accept a tolerance threshold – for example seven days early or seven days late. For other organizations (and automotive is a good example here) it can be measured at a more granular level.

DSA can have a direct impact on customer satisfaction as where suppliers deliver late – this can impact the manufacturing process which in turn can affect when the items can be shipped.