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 Supply C
2、hain 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.Select the
3、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 Confidenti
4、alWe 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 practice(Dow Polyu
5、rethane&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/kfMcKinsey Proprietary and Confide
6、ntialPossible 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 Consultant.US University Research:New global init
7、iative(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 for metrics.but developing the“right”set of me
8、trics 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.Differ within industry.Change overtime.There i
9、s no one“right”answerFocusAccountabilityCommunicationLinking strategy to action Assigning accountabilityto take action when neededMeasuring progress towards goals through interactive communication and education-6-LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialWe used a generic supply
10、chain framework as a basis for our analysis.Supply Chain FrameworkSuppliersPurchasingInformation FlowForecasting&Production PlanningCustomer ServiceInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomersThis framework al
11、igns 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 objectives we should focus on when analysing the supply chainKey metrics must give info
12、rmation on how a company is performing against old strategic objectives.Strategic objectives:QualityTimeCostProducts/services according to customer expectationsOn agreed timeAt reasonable costPurchasingInformation FlowForecasting&Production PlanningInventory ManagementInboundLogisticsManufacturingMa
13、intenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomer ServiceSupply Chain FrameworkNB:BoundariesNPDISupport functionsTailor to company specific(BSC)objectives-8-LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialWe began with a brainstorming session on the ke
14、y 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 chain”:What are drivers of performance from a quality,time and cost point of view.PriceServiceProd
15、uct qualityProduct quantityProduct deliveryLate arrival Late deliveryInventory costProduct costProduc-tion costDelivery costCustomer service costQualityTimeCost-9-LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialMaking their client specific warrants attentionRespect all sources of data:
16、Understand their relationshipsthe“causal tree”:Recognised Cross-Industry;In-Industry and In-Company similarities and differences.Blind-sidedIntuitionOpinionDiscussionSurveyFunctional MeasuresKPIsExternal Best PracticeQualitativeQuantitativeObjective 1KPI KPI KPI KPIObjective 2 KPI and xxx measure“Du
17、al 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.)Recognise Cross-Industry;In-Industry;and In-Company similarities and differences.Interface the solution to the curren
18、t clients measures,systems,processes and culture:.and guide migration over time.Ensure accountability for collecting and actioning is clear.-11-LShop/Ldn/22Oct97Rp-fc/kfMcKinsey Proprietary and ConfidentialProposed Supply Chain KPIsKPIs help to identify“where”the performance problem is within the su
19、pply chain,and steer towards areas to explore“why”.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 sale
20、s%of products delivered according to customer order(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
21、 from production order to delivery into finished 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 LogisticsManufacturingMaintenanceInve
22、ntory ManagementMarketing&SalesCustomer ServiceOutbound LogisticsQualityTimeCost%of active suppliers that account for 90%of total purchase 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
23、 variety of metrics to monitor operational effectivenessThese metrics help identify“why”there is a performance problem.ForecastingPurchasingInbound LogisticsManufacturingMaintenanceQualityTimeCostActual vs.forecasted sales%of data which can be used without modification in the planning process%of all
24、 active suppliers that account for 90%of total purchase value%of correct orders placed#of alternative sources of supply#of suppliers involved in product development/innovation#of suppliers per purchasing employee(purchasing professional)#of vendors products orderedPurchasing head count as%of total h
25、ead count%of goods delivered according to order(quantify/quality)by supplier#of carrier alliances#of overshipments%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 assura
26、nce,going from stock to production%of orders delivered without unplanned communication or special attentionDefect 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 go
27、odsTime from production order to deliver into finished product warehouse%of accounts payable handled before 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 conne
28、cted via EDIAverage actual time to developed/negotiate a contract%of goods delivered on time by supplierProportion of suppliers who deliver dailyProportion of suppliers who deliver frequently than monthlyProportion of suppliers who deliver monthlyProportion of suppliers who deliver twice weeklyRespo
29、nse time to schedule changesResponse time to unforeseen problemsTurnaround time on rejected itemsAverage production leadtimeCurrent manufacturing leadtimeMinimum production leadtimeDowntime as%of total production timeDowntime due to parts shortage(or stock outs in general)Hours of unplanned downtime
30、Cost as%of salesCost as%of salesCost as%of total costsCost of orders purchased(rangeCost 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 salesC
31、ost per saleable unitCost per unit producedCost as%of salesCost per unit producedSource: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 monito
32、r operational effectiveness(cont.)Inventory ManagementMarketing and SalesCustomer 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 inv
33、entory 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 with service#of complaints as%of t
34、otal 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)that were not answered to the cust
35、omers 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;Responsible Manager%of invoices cont
36、aining 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 according to customer order(quant
37、ity/quality)Degree 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 avail
38、able 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-lineRatio of operations labour as%of
39、 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 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.of prod
40、ucts 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 time%of prod
41、ucts 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 products delivered on time
42、Average 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 order to receipt of shipme
43、nt 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 percent of inventoryC-goods as a
44、 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 owned by companyCost per orderCost per
45、 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%of salesOperating profit per customer as%of operat
46、ing 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 using a hierarchy of measures.digging through the causal
47、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 chain stage manager%of suppliers connected via EDI S
48、upply 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 chain stage Give more in-depth information about supply
49、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 MetricsOther Operational Measures%of customers satisfied with service#of complaint
50、s as%of total 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 be
