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1、Developing An Overview of Supply Chain Performance Metrics,Process,Recommendations,McKinseyOctober 2003,This document gives an overview of the different metrics that can be used to measure supply chain performance,The Supply Chain CoEs objective is to define a benchmarking framework capable of:Compa
2、ring generic metric performances for use on projects.Capturing further benchmarking data in a consistent format.The London Shops task:Develop an overview of the different metrics to measure supply chain performance.Select the most important metrics that can be used across industries.Discuss how the
3、most important metrics link other operational metrics within each stage of the supply chain.Suggest how the supply chain CoE should continue concerning this topic.,We used information from several sources during our project,Internal and external documents:High level benchmarking framework for supply
4、 chain performance(H.Cook):Shop Study(March 1997)accessing information from available experts and past projects.Supply chain benchmarks and best practice(Dow Polyurethane&Epoxy April 1995).Supply Chain Benchmark Assessment(March 1997).Supply chain appraisal and benchmarks:(client X September 1997).D
5、iscussions with supply chain CoE:Graham Colclough.Andrew Morgan.Lee Sherman.Deborah Huff(Cap McKinsey).,Possible data sources,CIPS(UK):Purchasing(&Supply Chain).APICS(US):Supply Chain.CAPS(US):Purchasing&Supply Chain(US&Legal):Research Benchmark Industry Listings(http:/www.capsresearch/htm).NAPM(US)
6、:Purchasing.Kaiser Associates:Benchmark Specialist Consultant.US University Research:New global initiative(investigating entryopportunitiesBob Ackerman).,Performance measurement is an important but complex subject,This documents an initial step in the right direction.,Companies see the need for metr
7、ics.,.but developing the“right”set of metrics is a challenge,“If you cant measure,you cant manage,you cant motivate”Establishing the proper measures within an organisation enhances continuous,No commonly used“model”.Business issues that warrant performance measurement:Differ between industries.Diffe
8、r within industry.Change overtime.,There is no one“right”answer,We used a generic supply chain framework as a basis for our analysis.,Supply Chain Framework,Purchasing,Information Flow,Forecasting&Production Planning,Customer Service,Inventory Management,InboundLogistics,Manufacturing,Maintenance,Ma
9、rketing&Sales,OutboundLogistics,Integrated Supply Chain Management,This framework aligns with the CoE POV and is also similar to framework for the supply chain diagnostics inventory database.,.and concluded there are three strategic objectives we should focus on when analysing the supply chain,Key m
10、etrics must give information on how a company is performing against old strategic objectives.,Supply Chain Framework,NB:BoundariesNPDISupport functions,Tailor to company specific(BSC)objectives,We began with a brainstorming session on the key drivers for quality,time and cost,The complete picture ca
11、n be found in the appendix.,We looked at the supply chain from the customers perspective.We brainstormed on“what could go wrong along the supply chain”:What are drivers of performance from a quality,time and cost point of view.,Price,Service,Product quality,Product quantity,Product delivery,Late arr
12、ival,Late delivery,Inventory cost,Product cost,Produc-tion cost,Delivery cost,Customer service cost,Quality,Time,Cost,Making their client specific warrants attention,Respect all sources of data:Understand their relationshipsthe“causal tree”:Recognised Cross-Industry;In-Industry and In-Company simila
13、rities and differences.,Making their client specific warrants attention(cont.),Recognise Cross-Industry;In-Industry;and In-Company similarities and differences.Interface the solution to the current clients measures,systems,processes and culture:.and guide migration over time.,Ensure accountability f
14、or collecting and actioning is clear.,Proposed Supply Chain KPIs,KPIs help to identify“where”the performance problem is within the supply chain,and steer towards areas to explore“why”.,Accuracy(as%of sales),Customer satisfaction,%of satisfied customers,Total cycle time,Time(for customer)from placing
15、 order to receiving goods,%of products delivered on time,Total supply chain cost as%of sales,Cost per product sold as%of sales,Cost as%of sales,%of products delivered according to customer order(quantity/quality),%of customers satisfied with service,%of products ordered already in stock,Defect rate
16、of products as%of production,%of goods delivered according to order(quantity/quality)by supplier,Time from order placement to reception of goods,Time from production order to delivery into finished product warehouse,Downtime as%of total production time,%of goods delivered on time by supplier,Cost as
17、%of sales,Cost as%of sales,Cost as%of sales,Number of stock turns/years,Total Supply Chain,Quality,Time,Cost,%of active suppliers that account for 90%of total purchase value,BEWARE of inter-relationships,Each stage of the supply chain has a variety of metrics to monitor operational effectiveness,The
18、se metrics help identify“why”there is a performance problem.,Actual vs.forecasted sales%of data which can be used without modification in the planning process,%of all active suppliers that account for 90%of total purchase value%of correct orders placed#of alternative sources of supply#of suppliers i
19、nvolved in product development/innovation#of suppliers per purchasing employee(purchasing professional)#of vendors products orderedPurchasing head count as%of total head count,%of goods delivered according to order(quantify/quality)by supplier#of carrier alliances#of overshipments%of direct material
20、 purchases that are not inspected at incoming quality assurance,going from stock to dock%of direct material purchases that are not inspected at incoming quality assurance,going from stock to production%of orders delivered without unplanned communication or special attention,Defect rate of products a
21、s%of productionScrap rate as%of production#of changes per production period%of goods repackagedActual vs.production capacity,Time from order placement to reception of goods,Time from production order to deliver into finished product warehouse,%of accounts payable handled before due date%of accounts
22、payable handed in 130 days%of accounts payable handled in 3160 days%of accounts payable handled in 6190 days%of accounts payable handled in over 90 days%of suppliers connected via EDIAverage actual time to developed/negotiate a contract,%of goods delivered on time by supplierProportion of suppliers
23、who deliver dailyProportion of suppliers who deliver frequently than monthlyProportion of suppliers who deliver monthlyProportion of suppliers who deliver twice weeklyResponse time to schedule changesResponse time to unforeseen problemsTurnaround time on rejected items,Average production leadtimeCur
24、rent manufacturing leadtimeMinimum production leadtime,Downtime as%of total production timeDowntime due to parts shortage(or stock outs in general)Hours of unplanned downtime,Cost as%of sales,Cost as%of salesCost as%of total costsCost of orders purchased(rangeCost of vendor transactions(range)Cost o
25、f expedite repair materialsPurchasing spend per supplierPurchasing spend per purchasing employee(purchasing professional),Cost as%of salesCost as%of total sales,Cost as%of salesCost per saleable unitCost per unit produced,Cost as%of salesCost per unit produced,Source:H.Cook,Nos of strategies,or“upti
26、me”service-based contracts,In addition to the KPIs each stage of the supply chain has a variety of metrics to monitor operational effectiveness(cont.),Quality,Time,Cost,%of products ordered already in stockDefect rate of products as%of products leaving warehouseAccuracy of inventory recordsInventory
27、 vs.service levelItems in inventory as%of total unit purchasesObsolete vs.active inventory,%of correct orders taken#of additional sales from customer referrals#of order changes as%of orders filled%of orders handled with commitment to product/service delivery on first call,%of customers satisfied wit
28、h service#of complaints as%of total orders#of phone calls to customer service development per order shipped#of complaints due to On-time delivery;Order Entry;Packaging;Product quality;Shipping Error#of complaints as%of total orders#of customer contacts per order#of enquiries(including complaints)tha
29、t were not answered to the customers satisfaction#of information requests as%of customer orders%of calls abandoned,answered by recording,delayed%of customer contact through customer service%of customer follow-up handled by Customer Service Representative;Department Manager;Field Representative;Respo
30、nsible Manager%of invoices containing errors%of orders delivered complete and without error(order fill rate)%of orders that are damaged on arrival at customer site%of respondents that can handle complaints without handing off to other person/dept.Average%of disputed invoices,%of products delivered a
31、ccording to customer order(quantity/quality)Degree of utilisation of facilities(%)Equipment utilisationloadEquipment utilisationweight,Time from order placement to start of delivery,Customer satisfaction(rating)%of satisfied customers%of information on credit history limit available On-line%of infor
32、mation on open-order history available On-line%of information on outstanding balance available On-line%of information on pricing available On-line%of information on product history available On-line%of information on product ID code available On-line%of information on shipping points available On-li
33、neRatio of operations labour as%of passive labour,Average#of orders rejected,Average product time in warehouseNo.of days consumption in stock(A-goods)No.of days consumption in stock(B-goods)No.of days consumption in stock(C-goods)No.of days safety stock(A-goods)No.of days safety stock(B-goods)No.of
34、days safety stock(C-goods)No.of products with duplication stockPlanned days of inventory on hand,%of accounts receivable settled before due date%of accounts receivable settled in 130 days%of accounts receivable settled in 3160 days%of accounts receivable settled in 91 days%of accounts receivable set
35、tled in6190 days,Delivery time%of products delivered early#of deliveries per manhour%of orders delivered on time(as defined by customer)%of orders delivered with an average delay of 1 monthAverage#of days delay after scheduled ship date,Total cycle timeTime(for customers)from placing order to receiv
36、ing goods%of products delivered on timeAverage customer quoted leadtimeAverage leadtime from receipt of order to shipmentAverage time taken to access informationCash to cash cycleLongest customer quoted leadtimeNew product introduction timeProduct changeover timeShortest customer quoted timeTime fro
37、m receipt of order to receipt of shipment by customerTime taken to rectify incorrect or damaged orders,Average time taken to respond to requests,Cost as%of sales#of stock turns/yearCost as%of cost of goods purchasedCarried worth of expired lotsA-goods as a percent of inventoryAverage stock levelB-go
38、ods as a percent of inventoryC-goods as a percent of inventoryInventory cost as%of total assets(gross assets)Maximum stock levelMinimum stock level,Cost as%of sales,Cost as%of salesCost per delivery#of route miles per delivery#of warehousing facilities#of warehousing of locations%of transportation u
39、nits owned by companyCost per orderCost per route,Total supply chain cost as%of salesCost per product sold as%of sales%of profit from base purchase%of profit from increased purchases%of profit from premium pricing%of revenue generated by largest customer group(top 20%)Cost per product sold as%of sal
40、esOperating profit per customer as%of operating costs per customerTotal cost per orderTotal cost per unit produced,Cost as%of sales,Source:H.Cook,Given the multitude of metrics we suggest to analyse supply chain performance using a hierarchy of measures,.digging through the causal tree to improve bu
41、siness performance.,Key KPI,SupportingMetrics,Other OperationalMeasures,Type of Measure,Example,Highest Level Use,Who Uses It,Forecasting accuracy(as%of sales),Integrated supply chainGeneric benchmarking,ConsultantTop managementSupply chain stage manager,%of suppliers connected via EDI,Supply chain
42、stage diagnostic,ConsultantSupply chain stage manager,A-goods as a%of inventory,Supply chain stage diagnostic,Supply chain stage manager,Objective,Find“where”the problem is within the supply chain,Identify the“why”within the supply chain stage,Give more in-depth information about supply chain stage,
43、For example,the quality of customer service performance can be clearly measured at three different levels,Key KPIs,Suggested Supporting Metrics,Other Operational Measures,%of customers satisfied with service,#of complaints as%of total orders,#of phone calls to customer service department per order s
44、hipped#of complaints due to:order entry,packaging,shipping error,.)%of calls abandoned,answered by recording,delayed,.%of complaints handled by:customer service rep.,department manager,.,KPIs will be measured for generic benchmarks,whilst operational metrics will be measured by a customer service ma
45、nager.,#of complaints that were not answered to customer satisfaction,Average number of orders rejected,Key KPIs,Suggested Supporting Metrics,Other Operational Measures,Outbound logistics performance.,%of products delivered according to customer order(quantity/quality),(These can often be driven by
46、customer service metrics),Degree of utilisation of facilities(%)Equipment utilisation(load/weight),Delivery time%of orders delivered on time(as defined by customer),#of deliveries/man hour%of orders delivered early%of orders delivered with an average delay of 1 month,Average number of days of delay
47、after scheduled ship date,Cost as%of sales,#of route miles per delivery#of warehousing facilities/locations%of transportation units owned by company,.,Cost per deliveryCost per orderCost per route,Key KPIs,Suggested Supporting Metrics,Other Operational Measures,For maintenance,commonly used supply c
48、hain performance metrics relate to time and cost,The quality of maintenance is commonly measured by lag measures in terms of cost or as a production measure(downtime).We suggest the use of two lead measures that proactively monitor maintenance performance.,Number of service contractNumber of trainin
49、g days for maintenance staff,Downtime as%of total production time,Cost as%of salesCost per unit produced,Downtime due to parts shortage(or stock outs in general)Hours of unplanned downtime,Just remember.,A large number of metrics exist,so be selective.A step by step approach to measuring supply chai
50、n performance should be undertaken in order to avoid being overwhelmed by data.The following segmentation gives us such an approach:23 key KPIs allow us to identify“where”the problems”exist within the supply chain.Key supporting metrics then allow us to answer“why”the problems exist.Operational metr
