Supply Chain Metrics: 4 Phase Approach to Measure What Matters
July 7, 2016
It’s clear that in today’s world, supply chains are more dynamic and are rapidly evolving leading to increased complexity.With the volume of data now available,systems need to be put in place to accurately measure and analyse supply chain processes, so you can quickly adapt to changes in the market. You can’twave a magic wand and deliver supply chain success. Success is driven by measuring the most important supply chain metrics such as; inventory returns, predictive landed cost analysis, demurrage costs, transport costs and global footprint.Accurately measuring metrics such as these,in real-time, provides data-driven insightsinto how to optimize key areas of your supply chain.
Supply chain executives are often seeking new tools and techniques to measure their supply chain performance against key metrics. And, there are countless metrics that could be used to measure your supply chain excellence, so we have provided a quick 4 phase approach to help you measure what matters for your business.
Phase 1 – Identify key metrics for your business
With so many metrics to measure, identifying the most important ones to focus your attention is paramount.This means you have to narrow down your KPIs, and begin with fewer metrics to track and analyse in the long run. Avoiding the condition of analysis paralysis is key here.Whilst it’s important to ensure you maintain performance in the strongest areas of your supply chain, you needn’t check them as frequently as the weaker areas that you identify in this phase.
Phase 2 –Set goals based on identified improvements
Once you know what needs improving, you need to set your goals. As with any business target, it’s important to ensure that your goals are SMART: Specific, Measurable, Achievable, Realistic and Time-bound. They should also align with your company strategy and have an owner who will take ultimate responsibility for ensuring they’re met. For example, a company objective to become the low-cost manufacturer within your industry will need to have an associated goal to reduce the cost of your raw materials by ‘X’ amount in a 12-month period.
Phase 3: Put corrective action plans in place
As goals are set, you need to plan and execute them. Identify key people within your organisation who will lead the charge on these goals.Set a corrective action plan in response to a situation that is problematic for your organisation.For example, if the problem identified is poor inventory tracking, the corrective action plan will state how this situation will be improved.
Phase 4: Monitor results
In order to really manage your supply chain goals, you’ll need to agree a timeline by which you will check your progress and report back to the teams responsible for actioning the changes. Set milestones and stick to them to ensure all departments are pulling in the same direction. Be ready to support the stakeholders in achieving their goals and report findings to board members. It’s important to be able to flag obstacles early, so ensure that reporting is frequent enough to identify those bumps in the road before the whole strategy blows off course.
When done correctly, supply chain tracking and measurement can be made relatively simple. Setting goals that align with the overall business strategy, that have buy-in from the board and from the key stakeholders is key. Understanding the metrics that are important to your organisation is critical, but it isn’t as complicated as it first seems. Going back to basics and reviewing your strategy will ensure you select the right success measurements and that every business unit is on the same track. Measuring for measuring sake is pointless. Understanding the reason behind them will help you achieve your goals successfully.
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Customer Success Stories
We have found them to be an excellent business partner. Through the implementation of both their supply chain and sourcing software they have more than proven themselves in giving us a product that functions the way we need it to. LIMA has been a fantastic supply chain visibility tool, calculating real accurate landed cost position throughout the order lifecycle. The LIBERTY software matches our product sourcing business needs perfectly. PLM systems I’ve previously used, often bring lots of issues through implementation, but these guys managed this and I’ve got highly satisfied users.John Amm - GM Global Sourcing, Myer
The solution has realised more benefits than we initially thought possible. Claims notifications are being handled in a fraction of the time. Suppliers are making fewer calls into the office and quality scores have increased dramatically. All of this can only have had a positive impact on the customer experienceMartin Ashfield, head of commercial property claims, AXA
The system alerts us to exceptions against our plan, allowing us to focus our attentions on solving the real issues in the supply chain. Having a comprehensive audit trail of events for everyone to see has resulted in significantly improved service levels from our suppliers and agents.Darren Walker, head of generics buying and UK trading, Alliance Healthcare
Now our buyers can exchange photographs with suppliers and have a real-time dialogue as they develop styles, while buyers out in the Far East can send detailed and accurate information back to their teams in the UK. It has certainly cut lead times and reduced errors.Maxine Walter, supply chain co-ordination manager, New Look
The time it takes to compile reports has been significantly reduced; a report which used to take five whole days to complete is now accomplished within a single day!Sam Brown, Responsible Sourcing Co-ordinator - John Lewis.