1、LONDONSHOPTHEDeveloping An Overview of Supply Chain Performance MetricsProcess,RecommendationsMcKinseyOctober 2003This 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 capabl
2、e 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.Select the most important metrics that can be used across industries.Discus
3、s 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.We used information from several sources during our project Internal and external documents:High level benchmarking framework f
4、or supply 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 Septembe
5、r 1997).Discussions 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).
6、NAPM(US):Purchasing.Kaiser Associates:Benchmark Specialist Consultant.US University Research:New global initiative(investigating entryopportunitiesBob Ackerman).Performance measurement is an important but complex subjectThis documents an initial step in the right direction.Companies see the need for
7、 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 between industries.Dif
8、fer 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 educationWe used a generic supply chain framework as a b
9、asis for our analysis.Supply Chain FrameworkSuppliersPurchasingInformation FlowForecasting&Production PlanningCustomer ServiceInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomersThis framework aligns with the CoE POV
10、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 chainKey metrics must give information on how a company is performing against old strategic objectives.Strategic object
11、ives:QualityTimeCostProducts/services according to customer expectationsOn agreed timeAt reasonable costPurchasingInformation FlowForecasting&Production PlanningInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomer Serv
12、iceSupply Chain FrameworkNB:BoundariesNPDISupport functionsTailor to company specific(BSC)objectivesWe 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 brai
13、nstormed on“what could go wrong along the supply chain”: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 costQualityT
14、imeCostMaking their client specific warrants attention Respect all sources of data:Understand their relationshipsthe“causal tree”:Recognised Cross-Industry;In-Industry and In-Company similarities and differences.Blind-sidedIntuitionOpinionDiscussionSurveyFunctional MeasuresKPIsExternal Best Practice
15、QualitativeQuantitativeObjective 1KPI KPI KPI KPIObjective 2 KPI and xxx measure“Dual service”measures(cost&time)“Hard wired”and tennons Push-pullMaking their client specific warrants attention(cont.)Recognise Cross-Industry;In-Industry;and In-Company similarities and differences.Interface the solut
16、ion to the current clients measures,systems,processes and culture:.and guide migration over time.Ensure accountability for collecting and actioning is clear.Proposed Supply Chain KPIsKPIs help to identify“where”the performance problem is within the supply chain,and steer towards areas to explore“why
17、”.Accuracy(as%of sales)Customer satisfaction%of satisfied customersTotal cycle timeTime(for customer)from placing order 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 ord
18、er(quantity/quality)%of customers satisfied with service%of products ordered already in stockDefect rate of 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
19、product warehouseDowntime as%of total production time%of goods delivered on time by supplierCost as%of salesCost as%of salesCost as%of salesNumber of stock turns/yearsTotal Supply ChainForecastingPurchasingInbound LogisticsManufacturingMaintenanceInventory ManagementMarketing&SalesCustomer ServiceOu
20、tbound LogisticsQualityTimeCost%of active suppliers that account for 90%of total purchase valueNeed to identify M&S KPIsBEWARE of inter-relationshipsEach stage of the supply chain has a variety of metrics to monitor operational effectivenessThese metrics help identify“why”there is a performance prob
21、lem.ForecastingPurchasingInbound 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 su
22、pply#of suppliers 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%
23、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 attentionDefect r
24、ate 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 before due dat
25、e%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 supplierProportion
26、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 itemsAverage production
27、 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(rangeCost of vendor transactions(ran
28、ge)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 producedSource:H.CookNos of strategies,or“
29、uptime”service-based contractsIn addition to the KPIs each stage of the supply chain has a variety of metrics to monitor operational effectiveness(cont.)Inventory ManagementMarketing and SalesCustomer ServiceOutbound LogisticsTotal Supply ChainQualityTimeCost%of products ordered already in stockDefe
30、ct rate of products as%of products leaving warehouseAccuracy of inventory recordsInventory 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 hand
31、led 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 development per order shipped#of complaints due to On-time delivery;Order Entry;Packaging;Product quality;Shipping Error#of complaints
32、 as%of total orders#of customer contacts per order#of enquiries(including complaints)that 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
33、handled by Customer Service Representative;Department Manager;Field Representative;Responsible 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 withou
34、t handing off to other person/dept.Average%of disputed invoices%of products delivered according to customer order(quantity/quality)Degree of utilisation of facilities(%)Equipment utilisationloadEquipment utilisationweightTime from order placement to start of deliveryCustomer satisfaction(rating)%of
35、satisfied customers%of information on credit history limit available On-line%of information 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 o
36、n product ID code available On-line%of information on shipping points available On-lineRatio of operations labour as%of passive 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 s
37、tock(C-goods)No.of days safety stock(A-goods)No.of days safety stock(B-goods)No.of 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
38、 in 3160 days%of accounts receivable settled in 91 days%of accounts receivable settled in6190 daysDelivery 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 sc
39、heduled ship dateTotal cycle timeTime(for customers)from placing order to receiving 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 produ
40、ct introduction timeProduct changeover timeShortest customer quoted timeTime from receipt of order 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
41、 worth of expired lotsA-goods as a percent of inventoryAverage stock levelB-goods as a percent 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 delive
42、ry#of warehousing facilities#of warehousing of locations%of transportation units 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
43、generated by largest customer group(top 20%)Cost per product sold as%of salesOperating profit per customer as%of operating costs per customerTotal cost per orderTotal cost per unit producedCost as%of salesSource:H.CookGiven the multitude of metrics we suggest to analyse supply chain performance usin
44、g 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 management Supply
45、 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”within the supply cha
46、in stage Give more in-depth information about supply chain stageFor example,the quality of customer service performance can be clearly measured at three different levelsQualityKey KPIsSuggested Supporting MetricsOther Operational Measures%of customers satisfied with service#of complaints as%of total
47、 orders#of phone calls to customer service department per order shipped#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,whil
48、st operational metrics will be measured by a customer service manager.#of complaints that were not answered to customer satisfaction Average number of orders rejectedKey KPIsSuggested Supporting MetricsOther Operational MeasuresOutbound logistics performance.%of products delivered according to custo
49、mer order(quantity/quality)(These can often be driven by 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 ave
50、rage delay of 1 month Average number of days of delay 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 delivery Cost per order Cost per routeQualityTimeCostKey KPIsSuggested Supporting Metrics
