Gone are the days when the supply chain department board was only about metrics, analytics and spreadsheets. Recent developments have made supply chain a core discipline in itself, which:
- Provide considerable leverage to positively impact the financial performance of the company
- Will allow more efficient utilization of working capital
- Will improve our abilities to support customer requirements
I think the best supply chain metrics look at the total cost of supply chain, including end to end spend, salaries of the team, and overhead, and relate that cost to the results you care about – revenue generate and customer satisfaction.
Other metric such as Days On Hand (or Inventory Turns), cost per line shipped, Stock fill rate (SFR), Defective Parts Per Million (DPPM), Excess & Obsolete (E&), Cost of Premium Freight, Supplier On Time Delivery, Customer Order Past Due to Request/ And a few more can help you make decisions about where to focus and what parts of your supply chain processes are broken; but most CEOs really just care about the cost and the net results, not the interim steps.
Here are some areas I’ve found useful over the past 5 years working as supply chain manager that is useful for supply chain department. These are the key topics you should discuss in your weekly or monthly supply chain team meeting. I don’t have all the answers — so please add your favorite metrics or topics in the comments on the blogs.
9 Things You Can Show in Your Supply Chain Department Board
1) The Team
It is important to show the team structure. The Supply Chain organizational chart shows the internal structure and hierarchies of an organization, and should creates an easy visual depiction for the ranks of different people, jobs, and departments that make up supply chain department. This organizational chart also help determine how authority and information flow between people and departments.
2) The Objectives
This is where you should show the Supply Chain Department annual goals, objectives and key metrics. You don’t have to show the individual goals but depart goals & objective in general. Key projects should also be displayed to keep team in focus and get the discussion going.
3) Performance Metrics
The purpose of this section is to display the key performance indicators (KPIs) and measurements for the supply chain department. Focus of these KPI`s is the performance of the respective supply chain organization from a customer perspective (face to customer). Thus the performance of all deliveries to customers initiated by the respective supply chain organization. Typical list of metrics could be On Time Delivery, Gross Inventory, Days On Hand (or Inventory Turns), cost per line shipped, Stock fill rate (SFR), Defective Parts Per Million (DPPM), Excess & Obsolete (E&), Cost of Premium Freight, Supplier On Time Delivery, Customer Order Past Due to Request has to be measured and discussed in supply chain department meetings.
Basically, the purpose of a communication plan is to reach target audience of supply chain department to spread the word about your key things happening in business or in department. This communication segment could be about anything. A communication plan is a living document and should be evaluated on a regular basis and improved over time by asking team what they want to see and how frequently.
This section should show key customer consideration, any unique features or customer request. Also I have seen some business showing the key customer performance in this specific section which drives the focus to noisy customers!
6) 5S or 5S+
It describes how “work space for efficiency and effectiveness occurs by identifying and storing the items used, maintaining the area and items, and sustaining the new order”. The 5S state should not be just about office area, but also should display the 5S or 5S+ state of warehouse for following elements.
- SORT involves sorting through the contents of the workplace and removing unnecessary items
- STRAIGHTEN involves putting the necessary items in their place and providing easy access
- SHINE involves cleaning everything, keeping it clean daily, and using cleaning to inspect the workplace and equipment for defects
- STANDARDIZE involves creating visual controls and guidelines for keeping the workplace organized, orderly, and clean
- SUSTAIN involves training and discipline to ensure that everyone follows the 5S standards
- SAFETY involves the safety aspects of organisation in the area.
This section should display quality related supply chain metric. For example:
- Shipping / packaging / outer box labels – 15 boxes containing 100 pieces each where all 15 outer box labels are incorrect. 1 unit per lot counts against the rejection quantity.
- Specific labels integral to the unit (as defined on the drawing or specification) – all of these incorrect labels count as rejects.
- Shipping damage – where shipping damage is clearly caused by the shipping company. Zero (0) units counted against rejection quantity.
- Shipping damage – where shipping damage is caused by improper packaging by the supplier.
- Mixed parts – different parts mixed in the same container or shipment Record incorrect parts as rejects.
- Certification errors – 15 boxes containing 100 pieces each where all 15 certifications are missing or incorrect then 1 unit per shipment lot counts as the rejection quantity
- Kilo defect – 1000 Kg received 10 Kg rejected – 10/1000*1000000 = 10,000 DPPM
All these things could be small or intermittent defects but they are real pain points for customer and mostly own by supply chain team. Therefore, setting up key metrics around that and discuss in supply chain department meetings will focus on these quality defects.
8) Weekly Gemba
Another tool which should be shamelessly important from world of lean! A good definition given by iSixSigma “ gemba (and sometimes genba) walk is the term used to describe personal observation of work – where the work is happening. The original Japanese term comes from gembutsu, which means “real thing.”
Gemba walk is not just the management tool. It is the team effort and each member should do it on regular basis on a schedule, identify problems on the floor and sometime in office layout.
9) Health, Safety & Environment
Health, Safety & Environment should be the top priority in most business. Outsourcing trend and growing importance of supply chains has its implications for the working conditions and health and safety of workers of supplier and contracting companies, all these aspects needs to be consolidated and must be considered in weekly or monthly meetings of any supply chain depart.
I have seen some companies apply different strategies and instruments to impose OSH requirements to their suppliers. These actions are often part of a broader sustainable supply-chain management approach, and focus on the selection, auditing, monitoring, and training of the suppliers concerned. Examples are specific procurement strategies (applying OSH standards for selecting suppliers), management standards such as SA 8000, OSHAS 18001 or ISO 26000 etc.
As you conduct your supply chain department review of the KPIs that matter most in explaining your operations performance, remind yourself that great plans start with great understanding of where you are and how what you’re currently doing is working for you.
Covering diverse team topics and armed with the power of facts and the solid conclusions they provide, you’re well on your way to creating plans & actions that will drive improved performance in years to come.
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Thanks alot for the above topic
it was very useful fro me
i want to ask if we can go in deep in more details for the dashboard and it’s format
Hi Mohamed Rady, I will try to write a detailed blog on dashboard and it’s format. Please subscribe and watch the space.
Interesting read. I would love to see the detailed dashboard which in my view is more amplified compared to the balanced score card which I was thing of using to develop a strategy for my department and have a view of key performance matrices.
Hi Joel, I will be writing a blog on detailed SCM dashboard. Please subscribe to the newsletter and watch the space!
Did you blog about the detailed supply dashboard? I think I missed it. I would really like to see the details.
Hi Joel- I will start my research soon.
Hello Dr. Has your research reached a point of fruition with regards to my request?
Thanks for sharing..but i need more details about percentage of completion method for kpi metrics and reporting.
Hi Septawani, you are welcome. However, I am not sure on your questions. Thanks,
I want more details how to created processing KPI’s metrics. Thanks fir sharing.
Hi Septwani, not sure what you mean by processing KPI, can you please explain.
Thank you Mr.Muddassirism,
1.What is the most important KPI in a procurement department ?
2. What purchasing metrics and KPI should you track ?
Thank you very much Sir.
I would say price control and cost reduction should be most important KPI for procurement department.
Very good topics with clearly points of key supply chain management!
Thansk Renee Shan, I am glad you like the topics and find it useful.
Maheshwar S Hogarti
DDPM , Cost effectiveness, value Engineering, , performance metrics grross Inventory, Days On Hand (or Inventory Turns), cost per line shipped, Stock fill rate (SFR), Defective Parts Per Million (DPPM), Excess & Obsolete (E&), Cost of Premium Freight, Supplier On Time Delivery, Customer Order Past Due to Request has to be measured and discussed in supply chain department meetings.,
these all comes,
only when e,g design department has to give proper bill of material with correct qty , at the same time stock out is not allowed, otherwise excess inventory will left over atlease 3-4% in ship building, till now where in ship building not achieved, dppm can not be zero , there are chances of breakage due mis handling like fork lift, cutting of lifting belt, container like maersk, have holes , due to which water entered in rockwool , when I imported from rockwool germany, which we came to know after receipt at our end, more over maersk doesnot reply for insurance claims. i have a very bad expirience with them. wrong parcels shipped due to improper tagging by the vendor . ONLY WE CAN TAKE CORRECTIVE ACTION FOR FUTURE SUPPLIES. cOST REDUCTION CAN be achieved only when quantities are more, if we reduce process time or adapt new methods/ machineries. e,g hex head can be cut by milling machine, it will take more time as compared to lathe machine with attachment
Thanks for this topic very interesting.
I’d like to know how you take into account the health and sefety for people in SC Team ?
Ho can we measure all the impact, etc… Should we (as manager) ensure all the process flow, calculation methods ?
Thanks for your answer.
I seek advise from our Health and Safety Manager and ensure it is included in team development plan and communication plan. Regards,
Lew Hurlbert C.P.M
I found the article well detailed and insightful to Supply Chain Management. As a Lean Practitioner it has been my experience for companies to unknowingly overlook the impact of poor inputs while focusing on manufacturing operating systems. Any company will benefit their bottom line by reviewing your information and making a comparison of their metrics. Well done.
Hi Lew, many thanks for detailed and insightful comments. Much appreciated. Regards,
I like the concept of Supply Chain Dept Board and it is really an eye opener for me.
Great Job boss.
Kalyan, I am very pleased to know you like the concept. Your feedback is much appreciated.
Very interesting, thank you very much
You are welcome.
Supply Chain Tropic is very useful……
i am a Supply chain professional, so need SCM presentation.
Pls send the same.
How to Create a Supply Chain Strategic Plan that Will Work
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Great reading with exc pointers – my MBWA DEGREE TIES IN with the GEMBA paragraph….!! and is the most valuable tool in applied management/analysis approach.
is it possible to send me in excel format 9 essential SCM dashboard as you attached upper.
This is help me for analyzing SCM data.
Thnx & Rgds.
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Thanks for sharing!!
You are welcome.
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