Performance Metrics
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Another useful tool is analytics. Analytics falls under the business catch-phrase business intelligence. This field collects data on customer behavior and / or company operations; and through the use of models…find problems or attempt to predict the future.
Companies such as Google, Marriot, FedEx make extensive use of customer analytics. This would make sense. Customer behavior in the past should not be that different from behavior in the future. Unless of course you drastically change your product.
Predictive modeling uses data to anticipate inventory needs, capacity planning, financing, as well as the effect on demand should prices be raised 5%.
Any function that you can observe or measure can be benchmarked. To make the best use of information for a process about to be measured, management should decide:
How are we doing now and what are we trying to achieve.
What are the goals.
What is the best path to take to achieve the goals. What are the options.
What metrics are we going to compare ourselves against. How do we measure success.
Not every manager who gets the results will be able to understand them. Let’s get real. You can hand a logistics manager a ream of paper and say “Here are your delivery times for the past three months. I've noticed a reversion to the mean with travel time to Chicago." And he can stare back not knowing what the heck you are talking about.
Visuals help. Comparisons help. Analytic or business intelligence software has graphic options that make it easy to identify a trend. When you’re deciding whether to buy Google stock you look at the chart. Not six months worth of prices on an excel spreadsheet.
All activities must be recorded as numbers. The data collection must be consistent and complete.
Number of deliveries per person, miles driven, units produced per day and sales calls are all recordable figures. What if you need to measure customer service quality or management ability? Here, you would design a form that would rate 1- for poor and 5- for excellent.
If you’ve gone through the trouble of collecting metrics, what do you compare them against?
• Previous Years : Has productivity increased from this year over last?
• Comparing your office to another location : If your group is responsible for deliveries in Idaho, how do you stack up your London office? I know they drive on the wrong side of the road. But if they move more deliveries per day than your office, what are they doing different.
You want to identify the most effective work processes in different parts of your organization and share them, so they become widely used throughout the organization
• Competitors : Asking a competitor to share benchmark statistics may not seem all that far fetched. They may be curious to share yours as well. It’s not like you’re asking for company secrets.
You may have an easier time sharing metrics with a company in a different industry but has the same supply chain functions. If your company delivers newspapers you should have an easy time comparing your stats with a company that delivers milk.
Many companies consider their supply chain to be a competitive advantage. Look at Dell, Amazon.com and 1-800 Flowers. Unless you are measuring performance, how would you know what to improve?
When you compare your metrics with other companies its like a light goes on. If your competitor is consistently purchasing materials at 15% less than your company, you need a new supplier. Without this comparison, purchasing might not have ever known.
For data to be valuable it must: 1) Be correct, 2) Be complete, 3) It is current 4) Consistent, 5) Within context and 6) It is controlled.
Data must be accurate and free of gaps, or the decisions based on it will be flawed.
Organizations must continually improve their supply chain logistics. Managers of each group must ensure that data is collected and metrics analyzed. This is the best way to find areas that need improvement and measure that improvement has taken place.
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