As the saying goes, "a chain is only as strong as its weakest link." This applies to the supply chain as well. Nowadays, supply chain is being recognized as the key for companies to improve overall effectiveness in their business processes while increasing customer satisfaction. However, companies should keep in mind that any performance improvement performed at one level of the supply chain does not guarantee that the improvement will translate to all levels of the supply chain. Now is time to consider the whole supply chain picture for performance enhancement and embrace collaborative performance enhancement for the total improvement of the organization.
Different supply chains exist at various levels of an organization and all are interconnected to the overall performance of the whole organization. For the performance improvement of the whole supply chain, benchmarking at a collaborative level is essential. The key to the benchmarking process is to comprehend how many "drivers" are in your "bus," so to speak, with the "drivers" being performance indicators and "bus" being Supply Chain Performance.
There are many different performance criteria that can be used to measure and improve the performance of the supply chain, but there are a few decisive factors in particular that should be recognized as vital for corporate success. In the process of benchmarking, companies should seek out supply chain best practices by studying their successful competition or others in their industry. By studying and comparing different elements of supply chain, the company can derive a strategy to eliminate obstacles in their supply chain segments.
Benchmarking at a collaborative level demands understanding between participating members to drive the whole process toward success, rather than concentrating on one small segment of the company's supply chain. This also requires that all participating members of the supply chain facilitate their monitoring of, and response to, the actual performance status along the supply chain and benchmarking process. Also, while selecting metrics, care must be taken that all stakeholders achieve buy-in in order to achieve their best performance and support to make the project successful.
Measure What Is Hot, Not What Is Not
As was already mentioned, there are many performance indicators that a firm could use to improve the supply chain, but it is important to recognize “what is hot and what is not” for that specific company. The central idea here is to focus on the key metrics that can really make difference to the company, lest the company find itself lost in a sea of meaningless data. So which metrics should be selected? Here are some tips to help you figure that out for your company.
Select criteria that is meaningful for your company
Benchmarking basically covers four areas of performance metrics that are key to unlocking supply chain excellence: delivery performance, flexibility and responsiveness, logistics cost, and asset management. Remember that success can't be measured by bottom-line results along; customer satisfaction and organizational performance must also receive the same amount of attention when deciding what metrics to use. Also note that at every stage a company's evolution, different performance measurements will stand out as vital to future of the company.
Align your metrics with participants' metrics and objectives
For supply chain improvement there must be high degree of understanding between the partners of supply chain. Selection of improvement criteria should not conflict with the objectives of the company. Moreover, the selection of metrics should be done in a way that coincides and reaches toward the common goal of total supply chain improvement for all supply chain partners and stakeholders.
Make it measurable
The criteria that are selected for supply chain improvement are not always in a measurable form. The conversion of qualitative improvement factors into a measurable form is desirable for the better understanding process goals.
Apply best practices
After selecting a few important metrics and measuring them, compare your results with the best performing firms in your industry, or even other industries, to see where your company may be leading and where it may be lagging.
After comparing your metrics with best-in-class firms, set goals for supply chain improvement, keeping in mind the capability of your firm. Goals are not necessarily based only on budget but also on strategy and objectives. They should also be set long-term (yearly) and short-term (weekly, monthly) and should be monitored.
Find ways to continuously improve
Now that you have goals for improvement in place, look for compatible ways to reach those goals. It is essential during this step that there is trust, understanding and information exchange between all links of the supply chain. Good forecasting is an important practice that should also be in place during this step.
Remember, Rome wasn't built in a day, and neither is a good supply chain, particularly in the dynamic business environment in which all companies find themselves today. Keeping a constant eye on key performance indicators, along with continuous evaluation and improvement, should be your mantra for success.
About the Author: Nilesh Anand is currently receiving his masters in Supply Chain Management at The Royal Institute of Technology, Sweden.