Unpacking Supply Chain Metrics: Managing by Measuring

September 4, 2014
Erik Möller during Metrics meeting.
Metrics meeting. (Photo credit: Wikipedia)

Supply chain metrics aren’t always high on the list of operations managers or small business owners. After all, there’s plenty of pressing real world work to be done on a daily basis, without adding the need to put a number on each and every activity.

As long as the product gets where it needs to go and the cogs keep turning, the supply chain is working right, right? Unfortunately that’s not always the case (and even if it is now, it won’t always be!)

Measuring and drawing meaning from the right numbers is important for anyone seeking to better understand their operations and flag areas for improvement. When we talked about ways to cut supply chain costs earlier this year, measurement was a crucial element.

Managing by Measuring

Putting numbers to your operational activities provides a tangible way to regularly review performance.

But knowing where to begin can be difficult. There are potentially hundreds of valuable numbers to track and limited resources to track them. And then there’s the analysis paralysis that often comes with getting too heavily into . Finding a balance between the two is the key, and it follows from measuring only what matters.

Even if you have several objectives, try to pick the top two or three and work6 backwards to create suitable measurements for each. Whether the goal is to improve efficiency, reduce delivery time, or a broad range of

The next question is what metrics to put in place to measure what matters to your company’s supply chain.

Supply Chain Metrics

Some examples of what you might measure are:

  • Percentage of shipments on-time,
  • Average delivery lead time,
  • Order error rates,
  • Order fill rates,
  • Supply chain adaptability,
  • Returns processing costs,
  • Customer satisfaction levels,
  • Customer retention rate.

There may be many more areas important to your business. In order to zero in on the right measures you’ll need to convert mission statements and primary operations objectives into numbers that accurately explain them. Some of these are tougher to translate from statements to metrics than others.

In some instances, you may have existing measures that can be adapted to tell a wider story of what’s happening in your supply chain. Individual reports could be combined into a monthly review to bring together different areas of your operation.

Creating a list of items that can be measured specifically, feeding into an overall metric that you will use to gauge progress towards the end objective, is a far more effective, useful analytics approach than simply gathering together a suite of basic headline numbers.

Meaning Over Metrics

Finally, having gathered a group of metrics that give you a foundation to review your supply chain operation, the next challenge is to derive meaning from the numbers.
Remember that the goal should always be to understand what the metrics mean in terms of movement in your desired direction, not just an arbitrary shift in an individual number.
Combining meaningful metrics with a long-term view of operational development then becomes an outstanding opportunity to squeeze more from your supply chain and move your business forward.

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