August 9, 2011

Supply Chain – Measuring for Success: 1

Filed under: supplyline — Tags: , , — admin @ 2:03 pm

This series “Measuring for Success” is taken from a presentation I gave at the SCL Conference in Toronto on 10th May 2011:

Well used and well constructed measures are a feature of successful supply chains, but what does success look like? To answer this question let’s look at who can legitimately call “success” in a supply chain.
Customers can of course and we must take the opportunity to listen to a customer at each link in our supply chain.
To do this we simply measure the effectiveness of our processes whenever one link hands over to the next, all the way through to the final customer.
Each link will typically signify the end of one process and the beginning of another and it is here where supply chains either succeed or require corrective action.
Measures are usually reported from a Customer Perspective and on a day-to-day basis our customers, operators and sales team will want visibility into them particularly with regard to process timeliness and process accuracy.
Other internal stakeholders will be interested in the Customer Perspective too. These stakeholders will also want a wider view of the business and of its people. For example, your CFO will want to know about costs and revenues, your HR team may want to see measures of employee turnover and employee engagement and your employees themselves will want to know about the operations safety record and progess towards incentive payments.
“Success” therefore is defined by all customers and by all organisational stakeholders.
It should be self evident when we look at our KPIs whether we have succeeded or not. The KPIs should tell us how our supply chain is performing against customer and stakeholder expectations by comparing “How am I doing?” with “Customer and stakeholder expectations”.
Our choice of KPIs will give messages to our customers, stakeholders and employees about which aspects of the supply chain we regard as the most important, we must remember to engage with them, to listen and respond to them and involve them as much as is sensible, this will encourage them to have a stake in the success of the supply chain and ultimately work towards common goals.
At this juncture it’s crucial to recognise that part of our responsibility as supply chain professionals is to manage customer and stakeholder expectations, to ensure they are realistically set for the given situation and timeframe. In this context it is vital that all parties agree on a common set of measures and there are commonly agreed expectations.
Third Party Logistics companies (3PLs) often have success strictly defined in contractual agreements with their clients and for them success may mean more than simply achieving the desired supply chain outcomes. The 3PL could be incentivised to attain certain “success” targets and in the future success may well result in the renewal of the contract. For the V.P. Supply Chain who drove the outsourcing, success will combine a vindication of that decision along with a whole bunch of satisfied customers and stakeholders.

Next in this series of articles I’ll continue by looking at how to set up a measurement and reporting system and how to get the most from it so that your customers and stakeholders are happy to declare “success”.