Oct
1
How to achieve world class
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How many times have you been in a meeting and heard an executive say- “we need to become world class”? Excellence is a great ethos, but what does being “world class” truly mean? Corporate buzzwords can all too often be a dangerous thing – in the wrong hands they can be a vapid and meaningless mission with no defined start or end. Consider the following two statements.
1/ We want to have a world class supply chain organisation.
2/ In 24 months we want zero defects, 100% delivery on time from our suppliers and to have reduced our inventory values by 50%
Clearly articulated, with defined deliverables coupled with a high level schedule that second statement provides something tangible. The thing is world class implies that as an organisation you excel, you are top of the pile – you are better than the next guy – but if you don’t know how good the next guy is then what hope have you got?
Surely becoming world class requires some understanding of your external market and their performance – is market understanding the first step into becoming world class?
Tiger woods and world class
Few would argue against that, despite his off the pitch issues, Tiger Woods is a great golfer with measurable career wins, earnings etc. But what about the professional at my own golf club – he hits a pretty good round and is far better than me. If I state that I want to be a world class golfer which one do I measure myself against and as importantly how do I measure?
The rules are the same in business. Understanding your position in the marketplace can only be achieved by looking at those participating within it.
Benchmarking and trade associations
One of the easiest methods to use in understanding performance is to conduct a benchmarking exercise. This can really help in determining who is performing well in your industry sector and facilitate in understanding how they do it. Benchmarking can act as a conduit in absorbing both innovation and better processes into your business but without due care may still only deliver mediocrity rather than excellence. Once again – real care has to be taken in understanding your objectives and those factors that can influence it. For example if your aspiration is to increase on time delivery to 99% it’s probably unwise to look to utilise process from a company that only achieves 50%.
Benchmarking within a competitive industry in not easy – people don’t like to divulge information that could impact their market share – many business have got round this by joining trade associations which can facilitate benchmarking and sharing best practice.
Looking further afield
Perhaps one of the most over used terms in business is “thinking out of the box” – it’s used in many circumstances where the issue requires some innovative problem solving. Helping to achieve World class performance can sometimes benefit from this approach. Many organisations seek to become world class in order that they capture some competitive advantage – but by benchmarking within their own industry in many cases they merely produce a carbon copy of what already exists producing nothing exciting for prospective customers. Researching other markets or other geographies can often facilitate innovation quicker than benchmarking within your own comfort zone. Also don’t be afraid of failure but when your organisation does fail – learn from it and improve.
Clear, concise goals with a delivery schedule
Stating that you want to become world class is one thing – to do it justice you need to transcribe that goal into your expected performance results. This may include mapping in detail your future state business. Once you understand what it is you want to achieve – setting a clear schedule of activities and setting aside appropriate resource is the only way to go.
Finally, instil performance as part of your corporate DNA. It’s no good having a performance target and then keeping it a secret – a key factor in leading a market is ensuring all of the employees know the plan and what their part is implementing it – communicate often and effectively. And once your there understand what needs to be done to sustain it – markets constantly evolve – World class today may be become average all too quickly.
Oct
1
There are various metrics that can be used to measure the supply chain all of which can help to provide an overview of how the supply chain is performing, not just in terms of spend and cost, but also in terms of supplier information as well as operational aspects.
The fundamental or common metrics that are ubiquitous in most organizations are typically included to ensure that the performance of the supply chain meets the general requirements of the business. Less common metrics tend to be used to measure individual aspects of the supply chain that are relevant to that particular company or industrial sector.
Key common supply chain metrics
Delivery:
Delivery is critical to the supply chain, so on time delivery (or on time in full (OTIF)) can be a very useful metric to measure whether or not the supply chain is performing as well as it should be. Schedule Adherence can be measured for both supplier and a customer deliveries.
Cost:
Costs should be a common metric because cost is imperative to the efficacy of the supply chain. The costs need to be looked at in terms of the purchase costs, travel and transportation costs, the costs of storing items when they are delivered, the cost of administering supplies and revenue/capital costs as well.
Many organizations will utilize a material variance analysis which will look at actual vs predicted costs.
Forecast Accuracy:
Forecasting the needs for items to be supplied in the supply chain is critical if the supply chain is to operate effectively. Inaccurate forecasting will lead to a number of problems later down the line, so there is a real need for accurate forecasting and for the accuracy to be measured to ensure that it is as accurate as possible.
Quality/Defects:
Right first time is a critical feature within the supply chain. Deliveries, not just on time but also in terms of quality are vital;. Were rejects kept to an acceptable level? A standard measure is PPM or Defects in Parts Per Million.
Stock outs:
Stock outs are expensive because they cause delays in the supply chain and affect its overall performance to the customer. The number of stock outs will impact greatly in terms of costs, transportation issues etc, so it deserves to be listed as a specific metric to be used within any analysis of the supply chain.
Productivity:
Measuring the output of your organization in relation to its staff has become a key indicator that many companies measure. This might be in turns of products manufactured or even purchase order raised. Productivity indicators can be key to understanding the efficiency of your organization and help you to better understand where improvements are required.