1、LONDONSHOPTHEDeveloping An Overview of Supply Chain Performance MetricsProcess, RecommendationsMcKinseyOctober 2003- 2 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialThis document gives an overview of the different metrics that can be used to measure supply chain performanceThe Suppl
2、y Chain CoEs objective is to define a benchmarking framework capable of: Comparing 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. Sele
3、ct the most important metrics that can be used across industries. Discuss how the 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.- 3 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and
4、 ConfidentialWe used information from several sources during our projectInternal and external documents: High level benchmarking framework for supply chain performance (H .Cook): Shop Study (March 1997) accessing information from available experts and past projects. Supply chain benchmarks and best
5、practice (Dow Polyurethane & Epoxy April 1995). Supply Chain Benchmark Assessment (March 1997). Supply chain appraisal and benchmarks: (client X September 1997).Discussions with supply chain CoE: Graham Colclough. Andrew Morgan. Lee Sherman. Deborah Huff (Cap McKinsey).- 4 -LShop/Ldn/22Oct97Rp-fc/kf
6、McKinsey Proprietary and ConfidentialPossible data sourcesCIPS (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):Purchasing.Kaiser Associates:Benchmark Specialist Consu
7、ltant.US University Research:New global initiative (investigating entryopportunitiesBob Ackerman).- 5 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialPerformance measurement is an important but complex subjectThis documents an initial step in the right direction.Companies see the need
8、 for metrics. . . . . 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
9、between industries. Differ within industry. Change overtime.There is no one “right” answerFocusAccountabilityCommunicationLinking strategy to action Assigning accountabilityto take action when neededMeasuring progress towards goals through interactive communication and education- 6 -LShop/Ldn/22Oct9
10、7Rp-fc/kfMcKinsey Proprietary and ConfidentialWe used a generic supply chain framework as a basis for our analysis . . .Supply Chain FrameworkSuppliersPurchasingInformation FlowForecasting & Production PlanningCustomer ServiceInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing &Sal
11、esOutboundLogisticsIntegrated Supply Chain ManagementCustomersThis framework aligns with the CoE POV and is also similar to framework for the supply chain diagnostics inventory database.- 7 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and Confidential. . . and concluded there are three strategic o
12、bjectives we should focus on when analysing the supply chainKey metrics must give information on how a company is performing against old strategic objectives.Strategic objectives:QualityTimeCostProducts/services according to customer expectationsOn agreed timeAt reasonable costPurchasingInformation
13、FlowForecasting & Production PlanningInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing &SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomer ServiceSupply Chain FrameworkNB: BoundariesNPDISupport functionsTailor to company specific (BSC) objectives- 8 -LShop/Ldn/22Oct
14、97Rp-fc/kfMcKinsey Proprietary and ConfidentialWe began with a brainstorming session on the key drivers for quality, time and costThe complete picture can 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 ch
15、ain”: What are drivers of performance from a quality, time and cost point of view.PriceServiceProduct qualityProduct quantityProduct deliveryLate arrival Late deliveryInventory costProduct costProduc-tion costDelivery costCustomer service costQualityTimeCost- 9 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Pro
16、prietary and ConfidentialMaking their client specific warrants attentionRespect all sources of data:Understand their relationshipsthe “causal tree”:Recognised Cross-Industry; In-Industry and In-Company similarities and differences.Blind-sidedIntuitionOpinionDiscussionSurveyFunctional MeasuresKPIsExt
17、ernal Best PracticeQualitativeQuantitativeObjective 1KPI KPI KPI KPIObjective 2 KPI and xxx measure “Dual service” measures (cost & time) “Hard wired” and tennons Push-pull- 10 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialMaking their client specific warrants attention (cont.)Recog
18、nise 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 for collecting and actioning is clear.- 11 -LShop/Ldn/22Oct97Rp-fc/kfMcKinse
19、y Proprietary and ConfidentialProposed Supply Chain KPIsKPIs 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 customersTotal cycle timeTime (for customer) from placing ord
20、er to receiving goods% of products delivered on timeTotal supply chain cost as % of salesCost per product sold as % of salesCost as % of sales% of products delivered according to customer order (quantity/quality)% of customers satisfied with service% of products ordered already in stockDefect rate o
21、f products as % of production% of goods delivered according to order (quantity/quality) by supplierTime from order placement to reception of goodsTime from production order to delivery into finished product warehouseDowntime as % of total production time% of goods delivered on time by supplierCost a
22、s % of salesCost as % of salesCost as % of salesNumber of stock turns/yearsTotal Supply ChainForecastingPurchasingInbound LogisticsManufacturingMaintenanceInventory ManagementMarketing & SalesCustomer ServiceOutbound LogisticsQualityTimeCost% of active suppliers that account for 90% of total purchas
23、e valueNeed to identify M&S KPIsBEWARE of inter-relationships- 12 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialEach stage of the supply chain has a variety of metrics to monitor operational effectivenessThese metrics help identify “why” there is a performance problem.ForecastingPur
24、chasingInbound LogisticsManufacturingMaintenanceQualityTimeCostActual 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 sup
25、pliers involved 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%
26、of direct material 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 attentionDefe
27、ct rate of products as % of productionScrap rate as % of production# of changes per production period% of goods repackagedActual vs. production capacityTime from order placement to reception of goodsTime from production order to deliver into finished product warehouse% of accounts payable handled be
28、fore due date% of accounts 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 s
29、upplierProportion of suppliers 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
30、Average production leadtimeCurrent manufacturing leadtimeMinimum production leadtimeDowntime as % of total production timeDowntime due to parts shortage (or stock outs in general)Hours of unplanned downtimeCost as % of salesCost as % of salesCost as % of total costsCost of orders purchased (rangeCos
31、t of vendor transactions (range)Cost of expedite repair materialsPurchasing spend per supplierPurchasing spend per purchasing employee (purchasing professional)Cost as % of salesCost as % of total salesCost as % of salesCost per saleable unitCost per unit producedCost as % of salesCost per unit prod
32、ucedSource: H. CookNos of strategies, or “uptime” service-based contracts- 13 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialIn addition to the KPIs each stage of the supply chain has a variety of metrics to monitor operational effectiveness (cont.)Inventory ManagementMarketing and S
33、alesCustomer ServiceOutbound LogisticsTotal Supply ChainQualityTimeCost% of products ordered already in stockDefect rate of products as % of products leaving warehouseAccuracy of inventory recordsInventory vs. service levelItems in inventory as % of total unit purchasesObsolete vs. active inventory%
34、 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 with service# of complaints as % of total orders# of phone calls to customer service deve
35、lopment 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) that were not answered to the customers satisfaction# of information requ
36、ests 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; Responsible Manager% of invoices containing errors% of orders de
37、livered 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 according to customer order (quantity/quality)Degree
38、of utilisation of facilities (%)Equipment utilisationloadEquipment utilisationweightTime from order placement to start of deliveryCustomer satisfaction (rating)% of satisfied customers% of information on credit history limit available On-line% of information on open-order history available On-line%
39、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-lineRatio of operations labour as % of passiv
40、e labourAverage # of orders rejectedAverage 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 days safety stock (C-goods)No.
41、 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 settled in6190 daysDelivery
42、 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 dateTotal cycle timeTime (for customers) from placing order to receiving goods% of pro
43、ducts 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 from receipt of ord
44、er to receipt of shipment by customerTime taken to rectify incorrect or damaged ordersAverage time taken to respond to requestsCost 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-goods as a perc
45、ent of inventoryC-goods as a percent of inventoryInventory cost as % of total assets (gross assets)Maximum stock levelMinimum stock levelCost as % of salesCost as % of salesCost per delivery# of route miles per delivery# of warehousing facilities# of warehousing of locations% of transportation units
46、 owned by companyCost per orderCost per routeTotal 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 %
47、of salesOperating profit per customer as % of operating costs per customerTotal cost per orderTotal cost per unit producedCost as % of salesSource: H. Cook- 14 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialGiven the multitude of metrics we suggest to analyse supply chain performance
48、 using a hierarchy of measures. . . digging through the causal tree to improve business performance.Key KPISupportingMetricsOther OperationalMeasuresType of MeasureExampleHighest Level UseWho Uses It Forecasting accuracy (as % of sales) Integrated supply chain Generic benchmarking Consultant Top man
49、agement Supply chain stage manager % of suppliers connected via EDI Supply chain stage diagnostic Consultant Supply chain stage manager A-goods as a % of inventory Supply chain stage diagnostic Supply chain stage managerObjective Find “where” the problem is within the supply chain Identify the “why”
50、 within the supply chain stage Give more in-depth information about supply chain stage- 15 -LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialFor example, the quality of customer service performance can be clearly measured at three different levelsQualityKey KPIsSuggested Supporting Metr
