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​Best Practices For Defining Supply Chain Metrics

Posted by Rebecca Wilson on Aug 30, 2016 10:00:00 AM
defining-supply-chain-metrics-why

Simon Sinek has a great TED talk you might have seen floating around your office more than once. The talk, "How Great Leaders Inspire Action," bases itself on the idea of starting with "why" when solving a problem. This practice can be applied to any aspect of life, but we especially find it powerful when applying it to our metrics.

Find the "Why" Behind Your Metrics

Your metrics should mean something—they should be backed by a "why," or meaning to their value. When creating a "why," or building a definition behind your metrics, we suggest bucketing metrics—with your company's focus in mind when creating these core segments.

For example, Kenco focuses on six buckets of metrics: Safety, Quality, Delivery, Productivity, Cost, and Morale. We can break down the very specific and niche metrics in each bucket or look at them from a higher perspective. However, at the end of the day, every metric we analyze and act upon should fall under one of the before mentioned buckets (or categories).

Keep it Consistent

When calculating something like cost per unit, what do you use to calculate the cost or the unit? Is the unit an individual piece or a part of a group? Just like every metric has to have a "why" behind examining the value, it must also have the same definition each time you use it to make sure comparisons are fair across the board.

Small nuances––such as the type of equipment you use or how often the data is collected—are important when creating consistency across multiple sites. If you are not paying attention to everything that goes into a metric, there's a chance that you will receive bad data in the future.

For example, let's take a subjective metric: warehouse employee morale over time. We had to find a way to quantify and analyze this metric over a set period of time. To do so, we issued a company-wide questionnaire from Gallup that gave us a quantity to measure over the course of one year. This tool allowed us to quantify morale with a consistent metric and test across all of our warehouses. From there, we knew comparisons between each warehouse would be like comparing apples to apples, and we could make real analysis and decisions based on our warehouse leaders with the happiest, most fulfilled employees.

You can't compare apples to apples unless you put regulated and consistent measurement systems in place.

What Happens When You Don't Follow These Practices?

Use Study 1:

A few months ago, we had one of our clients approach us with a problem. To solve it, we had each site bring in their metrics: delivery time, cost per unit, etc. We identified the poorest-performing site and began to brainstorm solutions for improved metrics. But suddenly, we realized each site had a different way of defining each metric. They lacked consistency. Once we aligned the metric, we could see the site we had originally identified as the poorest-performing, actually was not.

Though we were able to correct the inconsistent metrics, what would have happened if we acted on the original information?

You always have to make sure the data and metrics are correct before making decisions. Our client could have spent hundreds of thousands of dollars and resources on solving a nonexistent problem. Luckily, we were able to use only 4 hours of our time!

Use Study 2:

In another instance, we were very early into a project to help our client reach a certain best-in-class category. Our problem? Based off the numbers our sites reported, we did not qualify––but we were quite close.

When we dug into the numbers, it turns out we were even further away from a best-in-class rating than we originally thought.

The way the metrics were being measured and documented was not consistent, halting our progress and skewing our assessment of the situation. Once we realized the issue, we were able to adjust our strategy to better suit the actions we needed to take to get that best-in-class rating.

To Sum It All Up

Proper supply chain metrics help you see where (and how big) your gaps in service are. However, if your bridge is not big enough, you won’t make it across the gap. You cannot solve a problem without knowing its full extent.

To make sure you have the time, resources, and strategy to build a bigger bridge, you must have consistent, realistic metrics in place that truly have a "why" behind them.

Once you understand the "why" behind your metrics, it's time to dive into the metrics and KPIs themselves. What are the critical metrics in the supply chain? How do you compare to other industry leaders? Are you measuring the right metrics for your vertical?

For some answers, check out our whitepaper: Top Metrics from DC Measures 2016. It's a comprehensive guide to distribution metrics and includes best-in-class benchmarks to compare against. 

WERC-DC-Measures

 

Rebecca Wilson

Written by Rebecca Wilson

As the Director of Technical Services, I am responsible for all functions pertaining to the development, implementation, and maintenance of all technical services at Kenco. Specifically, I have overall responsibility for technical training, six sigma, project management, and both internal/external engineering services