1、LONDONSHOPTHEDeveloping An Overview of Supply Chain Performance MetricsProcess,RecommendationsMcKinseyOctober 2003-2-This document gives an overview of the different metrics that can be used to measure supply chain performanceThe Supply Chain CoEs objective is to define a benchmarking framework capa
2、ble 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.Disc
3、uss 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-We used information from several sources during our projectInternal and external documents:High level benchmarking framewo
4、rk 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 Polyurethane&Epoxy April 1995).Supply Chain Benchmark Assessment(March 1997).Supply chain appraisal and benchmarks:(client X Sept
5、ember 1997).Discussions with supply chain CoE:Graham Colclough.Andrew Morgan.Lee Sherman.Deborah Huff(Cap McKinsey).-4-Possible data sourcesCIPS(UK):Purchasing(&Supply Chain).APICS(US):Supply Chain.CAPS(US):Purchasing&Supply Chain(US&Legal):Research Benchmark Industry Listings(http:/www.capsresearch
6、/htm).NAPM(US):Purchasing.Kaiser Associates:Benchmark Specialist Consultant.US University Research:New global initiative(investigating entryopportunitiesBob Ackerman).-5-Performance measurement is an important but complex subjectThis documents an initial step in the right direction.Companies see the
7、 need 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 between indus
8、tries.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-We used a generic supply chain fram
9、ework as a basis for our analysis.Supply Chain FrameworkSuppliersPurchasingInformation FlowForecasting&Production PlanningCustomer ServiceInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain ManagementCustomersThis framework aligns with
10、the CoE POV and is also similar to framework for the supply chain diagnostics inventory database.-7-.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.
11、Strategic objectives:QualityTimeCostProducts/services according to customer expectationsOn agreed timeAt reasonable costPurchasingInformation FlowForecasting&Production PlanningInventory ManagementInboundLogisticsManufacturingMaintenanceMarketing&SalesOutboundLogisticsIntegrated Supply Chain Managem
12、entCustomer ServiceSupply Chain FrameworkNB:BoundariesNPDISupport functionsTailor to company specific(BSC)objectives-8-We 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
13、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.PriceServiceProduct qualityProduct quantityProduct deliveryLate arrival Late deliveryInventory costProduct costProduc-tion costDelivery costCustomer s
14、ervice costQualityTimeCost-9-Making 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 MeasuresKPIsE
15、xternal Best PracticeQualitativeQuantitativeObjective 1KPI KPI KPI KPIObjective 2 KPI and xxx measure“Dual service”measures(cost&time)“Hard wired”and tennons Push-pull-10-Making their client specific warrants attention(cont.)Recognise Cross-Industry;In-Industry;and In-Company similarities and differ
16、ences.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-Proposed Supply Chain KPIsKPIs help to identify“where”the performance problem is within the supply chain,and steer
17、 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 sales%of products delive
18、red 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 from production ord
19、er 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 LogisticsManufacturingMaintenanceInventory ManagementMark
20、eting&SalesCustomer ServiceOutbound LogisticsQualityTimeCost%of active suppliers that account for 90%of total purchase valueNeed to identify M&S KPIsBEWARE of inter-relationships-12-Each stage of the supply chain has a variety of metrics to monitor operational effectivenessThese metrics help identif
21、y“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 active suppliers that account for 90%of total purchase value%of correct orders pl
22、aced#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 head count%of goods delivered according to order(quantify/quality)by supplier#of ca
23、rrier 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 assurance,going from stock to production%of orders delivered without unplanned communica
24、tion 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 goodsTime from production order to deliver into finished product warehouse%of accoun
25、ts 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 connected via EDIAverage actual time to developed/negotiate a contract%of goods deliver
26、ed 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 weeklyResponse time to schedule changesResponse time to unforeseen problemsTurnaround time on
27、 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 downtimeCost as%of salesCost as%of salesCost as%of total costsCost of orders purchased(ran
28、geCost 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 producedS
29、ource:H.CookNos of strategies,or“uptime”service-based contracts-13-In 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
30、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%of correct orders taken#of additional sales from customer referrals#of order chang
31、es 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 development per order shipped#of complaints due to On-time delivery;Order Entry;Packaging;Product
32、 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 requests as%of customer orders%of calls abandoned,answered by recording,delayed%of customer contact through cu
33、stomer service%of customer follow-up 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 responde
34、nts 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 of utilisation of facilities(%)Equipment utilisationloadEquipment utilisationweightTime from order placement to start of deli
35、veryCustomer satisfaction(rating)%of 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 histo
36、ry 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 passive labourAverage#of orders rejectedAverage product time in warehouseNo.of days consumption in stock(A-goods)No.of days consumption in stoc
37、k(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 products with duplication stockPlanned days of inventory on hand%of accounts receivable settled before due date%of accounts receivable settled in 13
38、0 days%of accounts receivable settled 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
39、1 monthAverage#of days delay after scheduled 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 cycleLong
40、est customer quoted leadtimeNew product 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
41、 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 percent of inventoryInventory cost as%of total assets(gross assets)Maximum stock levelMinimum stock levelCost as%of salesCost as%of salesCost p
42、er delivery#of route miles per delivery#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 pr
43、ofit from premium pricing%of revenue 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.Cook-14-Given the multitude of metrics we suggest
44、 to analyse supply chain performance 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 benc
45、hmarking Consultant Top management 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 cha
46、in Identify the“why”within the supply chain stage Give more in-depth information about supply chain stage-15-For example,the quality of customer service performance can be clearly measured at three different levelsQualityKey KPIsSuggested Supporting MetricsOther Operational Measures%of customers sat
47、isfied with service#of complaints 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
48、 will be measured for generic benchmarks,whilst operational metrics will be measured by a customer service manager.#of complaints that were not answered to customer satisfaction Average number of orders rejected-16-Key KPIsSuggested Supporting MetricsOther Operational MeasuresOutbound logistics perf
49、ormance.%of products delivered according to customer 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 order
50、s delivered early%of orders delivered with an average 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 routeQu
