Supply Chain Performance Measurement
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Transcript of Supply Chain Performance Measurement
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Supply Chain PerformanceMeasurement
Presented by: David F. Ross, PhD, CFPIMAPICS Profession Development
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Slide-2
Meet Your Session Leader
Introduction APICS member since 1986
13 Years Manufacturing and Distribution Industries
22 Years Enterprise Business Systems Education and Consulting
Senior Manager, Professional Development – APICS
Articles and 6 Books in SCM
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Slide-3
Agenda
• Critical questions of SCM PM
• Goals and performance attributes of SCM PM
• Obstacles to effective SCM PM
• SCM PM models
• Balanced scorecard model
• SCOR model
• SCM PM technical architecture
• Steps to creating a successful SCM PM program
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Slide-4
Critical Questions
• Why is SCM performance measurement important?
• What general approaches are available to measure supply chains?
• What methods are available for setting performance targets?
• How should a company get started?
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Slide-5
Critical Questions
• Why is SCM performance measurement important?
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Slide-6
Goals of SCM Performance Measurement
• Better alignment of channel capabilities and customer requirements and expectation
• Increased optimization of collective channel operations
• Increased visibility to demand and supply
• Increased opportunities for collaboration
• Increased opportunities for channel alignment
• Increased opportunities for information exchange
• Increased profitability
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Slide-7
SCM Performance Attributes
• Velocity
• Visibility
• Collaboration
• Trust
• Customer focus
• Flexibility
• Security (risk management)
• Compliance and Environmental Excellence
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Slide-8
Obstacles Hindering Performance Efforts• Technical barriers, such as difficulty locating,
cleansing, and integrating data from multiple sources
• Design problems that stem from not understanding how to use methodologies, strategy maps, and appropriate performance indicators and targets
• Social constraints, such as an organizational culture adverse to measurement and accountability, non-supportive executive team, unrealistic standards, and conflicting goals
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Slide-9
Critical Questions
• Why is SCM performance measurement important?
• What general approaches are available to measure supply chains?
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Slide-10
SCM Performance Measurement Models
•Cash Velocity
•Balanced Scorecard
•SCOR
•The Logistics Scoreboard
•Activity-Based Costing (ABC)
•Economic Value-Added (EVA)
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Slide-11
Supply Chain PM Criteria• Holistic approach
• Process-based
• Aligned with strategy
• A dynamic system
• Balanced approach
• A managerial tool
• Cover strategic, tactical and operations level
• Provide a forward looking (leading) perspective
• Tool for improvement
• Provide drill-down functionality
• Handling conflicting objectives
• Simple
• Comparability
• Relevant metrics
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Slide-12
Critical Questions
• Why is SCM performance measurement important?
• What general approaches are available to measure supply chains?
• What methods are available for setting performance targets?
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Slide-13
Balanced Scorecard SCM PM Strategy
•Communicate the strategic purpose of the balanced scorecard to supply chain partners
•Develop goals and measures consistent with the corporate and supply chain strategies
•Create schedules and assign responsibilities
•Drive managers to attain desired results
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Slide-14
Linking SCM to the Balanced Scorecard
CustomerGoals
FinancialGoals
SCMImprovement
• Improved product/service quality• Improved timeliness• Improved flexibility• Improved value
• Higher profit margins• Improved cash flows• Revenue growth• Higher return on assets
• Product/process innovation• Partnership management• Information flows• Threats/substitutes
SCM Goals
• Waste reduction• Time compression• Flexible response• Unit cost reduction
CustomerPerspective
FinancialPerspective
Innovationand LearningPerspective
BusinessProcess
Perspective
Supply Chain ManagementMeasurements
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Slide-15
Balanced Scorecard ModelSupply Chain Objective: Increased Channel Flexibility
Area Strategic Theme Strategic Objectives Strategic MeasuresFinancial Increased supply
chain flexibility• Channel cost reduction• Increase profit margins
• Increase cash flow• Reduce channel inventory
Customer Perception of flexible response to customers
• Customers drive product• Service individualization• Increase product variety
• Flexible supply channels• Ability to deliver
customized solutions
Business Process
Postponement and value-added strategies
• Increase synchronization• Increase communication• Fast flow inventories• Multi-purpose facilities
• Increase inventory turns• Increase efficiency/
utilization• Optimize transportation
Innovation and Learning
Increased material handling and process capabilities
• Increase core competencies
• Motivating/skilling workers
• Employee survey• Personal scorecard• Competency checks
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Slide-16
SCOR ModelPlan
• Demand/Shipment Forecast • Accuracy• Adherence to Plans• Inventory Turns• Planning Cycle time
Make
• Production Costs
• Product Quality• Changeover
Times• Capacity
Utilization
Suppliers Deliver
• On-Time Shipment
• On-Time Delivery
• Order Fulfillment
• Returns
Source
• Procurement Costs• Vendor Lead Times• Materials Quality• Materials
Inventories
Return
• Packaging Return
• Carbon Footprint
• Energy Reduction
Customers
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Slide-17
SCOR Metrics and Performance AttributesPerformance Attribute Attribute Definition Level 1 Metric
Supply chain reliability Delivery of right product, to right place, at right time
Perfect order fulfillment
Supply chain responsiveness Supply chain speed providing product to the customer
Order fulfillment cycle
Supply chain flexibility Agility of a supply chain to respond to marketplace change
Upside supply chain flexibilityUpside supply chain adaptabilityDownside supply chain adaptability
Supply chain costs Costs associated with operating the supply chain
SCM costCost of goods sold
Supply chain asset management
Effectiveness in managing assets to support demand satisfaction
Cash-to-cash cycle timeReturn on supply chain fixed assets
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Slide-18
SCOR Metrics Detail
Level 1 Metric Definition CalculationUpside SC flexibility
Number of days an organization requires to achieve an unplanned sustainable 20% increase in quantities delivered
Least amount of time required to achieve the increase considering source, make, and deliver components
Upside SC adaptability
Amount of increased production an organization can achieve and sustain in 30 days
Largest sustainable quantity increase considering source, make, and deliver components
Downside SC adaptability
Reduction in quantities ordered sustainable at 30 days prior to delivery with no inventory/ penalties
Largest sustainable quantity decrease considering source, make, and deliver components
Supply Chain Flexibility
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Slide-19
SCOR Metrics Detail (cont.)Level 2 Metric Level 3 Metric CalculationInput Labor Number of tasks a worker can perform
Machine Efficiency of using a flexible machine
Process Material Handling Number of movements and movement paths without incurring more costs
Routing Number of alternative routings without incurring more cost
Operation Number of products with alternative sequencing paths without incurring more costs
Output Volume Extent of change in process volume without incurring more costs
Mix Number and variety of products produced without incurring more costs.
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Slide-20
SCM PM Platform ArchitectureCustomers
Sales
Transport
Inventory
Purchasing
DataWarehouse
Sales
Transport
Inventory
BIETL
OperationalData Level
ETL Level Data Warehouse Level AnalyticalLevel
User Level
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Slide-21
Excel Spreadsheet ExampleSCOR Supply Chain Process Actual TargetPlanForecast Accuracy 85% 90%Return on Assets 80% 99%Delivery Performance to Customer Request Date
50% 75%
Capacity Utilization 88% 95%Cumulative Source/Make Cycle Times 10 8Intra-mfg Replan Cycle Time 80% 75%SourceSource Flexibility 15% 25%On Time Delivery Performance 85% 95%Cumulative Source Cycle Times 30 30MakeCumulative Make Cycle Time 12 10Production Plan Adherence 85% 100%
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Slide-22
Critical Questions
• Why is SCM performance measurement important?
• What general approaches are available to measure supply chains?
• What methods are available for setting performance targets?
• How should a company get started?
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Slide-23
Developing SCM PM - Steps
Step 1: Formulate Strategy and Build Consensus
Step 2: Select Metrics in Alignment with the Supply Chain
Step 3: Integrate and Communicate Metrics
Step 4: Drive the Organization to Maintain and Optimize the Desired Results
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Slide-24
Enabling the Supply Chain Universe
Thanks for Attending!