Prioritizing Supply Chain Metrics as Winter Approaches
Winter is starting to set in, and supply chains need to be prepared to respond to the unpredictable nature of the season’s weather. One big part of succeeding is having the right balance of metrics.
Managing supply chains that have complicated dependencies among departments and partners can be difficult, but companies that use too many independent metrics to help out can end up getting distracted and their supply chain performance can suffer.
That’s why Gartner has come up with a Hierarchy of Metrics that can be used by firms to align their performance measurements through the supply chain in ways that spur flexibility and responsiveness. This approach can be adapted and used by many different types of companies to help improve operations.
What Does the Hierarchy Look Like?
Sitting right at the top of this hierarchy of metrics is that of demand volatility, which is related to forecast accuracy. This has the biggest and most direct effect on the allocation of resources and the available capacity, whether it’s a distributor, manufacturer, wholesaler or retailer. Improving your forecast accuracy can make a sizeable difference in terms of cutting costs and improving service.
The next level, according to Gartner, is Costs and Perfect Order. Combined with Demand Volatility, these three metrics allow you to determine the supply chain’s health.
In the middle tier of Gartner’s hierarchy are the metrics used for determining supply chain performance with financial measurements like Total Inventory Days, Accounts Payable and Accounts Receivable Outstanding Days, and Cash-to-Cycle Time. This helps illustrate how quickly a supply chain is creating value.
The bottom tier is reserved for measuring operational excellence with asset performance and schedule adherence. For example. It includes Purchasing Costs, Perfect Order Detail, Direct Material Costs, Supplier Quality and On-Time Performance, and Total WIP and FG Inventory. These may be adapted depending on the type of business in question, but in general, this hierarchy can serve companies well as they seek to make improvements.
This blog post was based off of an article from Supply Chain Digest. View the original here.