Focusing on the Customer
Returning to our opening observation about baseball statistics, just as sabermetricians appear to have an endless appetite for creating even more ways to measure a player's performance (why be content with charting a player's batting average when you can also chart things like his batting average on balls in play and weighted runs above average?), so too are supply chain professionals never really satisfied with using the same set of metrics from year to year. For instance, the Warehousing Education and Research Council (WERC) conducts an annual study examining which metrics are most frequently used to measure operational performance in warehouses and distribution centers (DCs), and that list can be quite fluid.
In the DC Measures study for 2019 (which highlights that year's 12 most popular metrics), several metrics appeared in the top 12 that were far down the list the previous year. The “number of orders shipped complete per customer order” appeared at number 2 in 2019, whereas it had been at number 34 in 2018. Similarly, the “percent of orders with on-time delivery” metric was the number-4 choice in 2019, but the number-33 choice in 2018. Both of those metrics, according to WERC, are customer-facing metrics and are used to measure a company's performance at achieving perfect orders. In the previous 16 years of the DC Measures study, “perfect order” metrics had never appeared in the Top 12, illustrating a shift in focus toward operations and away from employees. As the study notes, metrics focused on supply chain talent tend to rise or fall in relative importance based on the state of the economy and the availability—or lack thereof—of employees in key areas, like warehousing.22
“The appropriate metrics to manage and measure the success of a company's operation vary significantly by industry, by individual company, and by the scale of the business,” observes Tan Miller, director of Rider University's Global Supply Chain Management Program. “What does not vary, however, is the universal need of all companies to employ a well-structured, hierarchical framework to organize and manage their metrics.”23
As Miller explains, a hierarchical supply chain performance measurement framework (HPMF) has three levels: strategic, tactical, and operational. “In an HPMF, it is the scale of an operation or activity that a particular metric monitors which determines its place in the hierarchy. Metrics that measure the performance of an entire major functional area, such as distribution, are considered strategic, while metrics that monitor major subfunctions, such as warehouse operations and transportation, are categorized as tactical. And finally, metrics that monitor subfunctions of subfunctions, such as the receiving operation in a warehouse, are considered operational.” The goal of such a framework, Miller says, is to align all of a company's supply chain activities to achieve a desired mission and objective.
As the WERC study illustrates, companies' objectives can shift significantly as market conditions themselves shift—for instance, as customers demand shipments in smaller lots but delivered more quickly than before, companies have to adapt by improving their perfect order metrics, which concurrently means placing less emphasis on other metrics (such as workforce measurements). In any event, the better a company understands its capabilities—and can frame those capabilities into a meaningful context—the better it can measure its performance in the areas that are most important to its customers.
Notes
1 1 John Thorn, “Sabermetrics,” Total Baseball, 3rd ed. (New York: HarperPerennial, 1993), 620.
2 2 Jaewon Kang, “Coty Stumbles Amid Supply-Chain Disruptions,” Wall Street Journal (7 November 2018), www.wsj.com.
3 3 Kim Bhasin, “Coty CEO Frustrated with Supply Chain Snags at Beauty Brands,” Bloomberg (7 November 2018), www.bloomberg.com.
4 4 David Blanchard, “Chain Reactions,” Logistics Today (March 2004), 6.
5 5 Reuben E. Sloane, J. Paul Dittmann, and John T. Mentzer, The New Supply Chain Agenda (Boston: Harvard Business Press, 2010), 4–5.
6 6 David Blanchard, “Moving Past the Problems Can Be Problematical,” Chief Logistics Officer (October 2003), 5.
7 7 In the interests of full disclosure, as a participant in Gartner's peer panel, I am one of the voters in the Top 25 rankings.
8 8 David Blanchard, “Top 10 Supply Chains of 2019,” IndustryWeek (July/August 2019), 24–27.
9 9 Helen L. Richardson, “Building a Better Supply Chain,” Logistics Today (April 2005), 17–25.
10 10 David Blanchard, “The Trouble with Benchmarking,” Logistics Today (June 2005), 7.
11 11 David Blanchard, “More Supply Chain than You Can Imagine,” Material Handling & Logistics (September/October 2019), 11.
12 12 Blanchard, “The Trouble with Benchmarking.”
13 13 David Blanchard, “As ConAgra Mills Sows, So Does It Soar,” IndustryWeek (December 2011), 44.
14 14 Kevin Zweier, “The Wisdom of the Market Is Your Guide to Transportation Rates,” Material Handling & Logistics (January 2015), 24–25.
15 15 Sarah R. Sphar, “A Supply Chain Check-up,” Supply Chain Technology News (October 2001), 34.
16 16 Peter Bolstorff and Robert Rosenbaum, Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model, 3rd ed. (New York: Amacom, 2012), 9–12.
17 17 Shoshanah Cohen and Joseph Roussel, Strategic Supply Chain Management (New York: McGraw-Hill, 2005), 186–187.
18 18 Peter Bolstorff, “Supply Chain Management for Dummies,” Supply Chain Technology News (October 2000), 51–53.
19 19 Peter Bolstorff, “Keeping Your Focus,” Supply Chain Technology News (December 2000), 43–48.
20 20 Mike Ledyard and Kate Vitasek, “Don't Measure What You Won't Change,” Logistics Today (June 2004), 37–38.
21 21 Richardson, “Building