Gone are the days when the supply chain department board was only about metrics, analytics and spreadsheets. Recent developments have made the supply chain a core discipline in itself, which:
- Provides considerable leverage to impact the financial performance of the company positively
- This will allow more efficient utilization of working capital
- Will improve our ability to support customer requirements
We believe the best supply chain metrics look at the total cost of the supply chain, including end-to-end spending, salaries of the team, and overheads, and relate that cost to the results you care about – the revenue generated and customer satisfaction.
Other vital metrics should also be taken into account, such as Days-On-Hand (or Inventory Turns), Cost-per-Line Shipped, Stock Fill Rate (SFR) just to name a few. These metrics can help you make decisions about where to focus and what parts of your supply chain processes are broken.
Do read out comprehensive blog Top 18 Supply Chain KPIs for the Supply Chain Team.
But most CEOs really care about the cost and the net results, not the interim steps.
Here are some areas and aspects we have found useful over the past 5 years working as supply chain managers for the Supply Chain department. These are the key topics you should discuss in your weekly or monthly supply chain team meeting. We don’t have all the answers – so please do feel free to share your favourite metrics or topics with us in the comment section!
9 Things You Can Show On Your Supply Chain Department Board
1) The Team
It is essential to show the team structure. The Supply Chain organizational chart shows the internal structure and hierarchies of an organization. It should create a straightforward visual depiction of the ranks for different people, jobs, and sub-departments that make up the Supply Chain department as a whole. This organizational chart can also help determine how authority and information flow between people and the sub-departments.
2) The Objectives
This is where you should demonstrate the Supply Chain department’s annual goals, objectives and key metrics. You don’t have to show the individual goals but the overall department goals and objectives. Key projects should also be displayed to keep the team focused and get the discussion going about their implementation.
I would recommend the objectives should be created about the Four Pillars of Supply Chain Strategy
3) Performance Metrics
The purpose of this section is to display the Key Performance Indicators (KPIs) and measurements for the Supply Chain department. Focusing on these KPIs and metrics will portray the true performance of the respective Supply Chain organization from a customer’s point-of-view, and thus, the performance of all the deliveries to customers initiated by the respective Supply Chain organization.
A 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&O)
- Cost of Premium Freight
- Supplier On-Time Delivery
- Customer Order Past Due to Request
If you don’t have robust Supply Chain metrics, I suggest starting with easy to customize Supply Chain KPI Dashboard. It will save at least 2-4 days of work.
These metrics have to be measured consistently and reported in a comprehensive manner for a thorough discussion in Supply Chain department meetings.
In simple terms, the purpose of a communication plan is to reach the intended target audience in your supply chain department to spread the word about the key things that are happening in the business or within the department. This communication segment can be about anything! A communication plan is a living document and should be evaluated on a regular basis and improved over time by asking the team what they would want to see and how frequently.
This section should show key customer consideration, any unique features or customer requests. Some businesses show the key customer performance in this specific section which drives the focus to noisy customers!
6) 5S or 5S+
This 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 the warehouse for the 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 the organisation in the area.
You can conduct a 5S Audit Tool of your supply chain department using our Free Online Tool which will give you a rating and spider chart for each state.
This section should display supply chain KPI which are related to quality standards. 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 minor or intermittent defects, but they are real pain points for customers and are mostly owned by the supply chain team. Therefore, setting up key metrics around that and discussing them in supply chain department meetings will help focus on these quality defects.
8) Weekly Gemba
Another tool which should be shamelessly important from the 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 a management tool for any supply chain department. It is a form of team effort; each member should do it regularly on a schedule, identify problems on the floor and sometimes in office layout.
9) Health, Safety & Environment
As a leader of the Supply Chain Department, this is one of the most important area.
Health, safety & environment should be the top priority in most businesses. The trend of outsourcing and the growing importance of supply chains has its implications for the working conditions and the health and safety of the workers of the supplier and contracting companies. All these aspects must be consolidated and considered in weekly or monthly meetings of any supply chain department.
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 a 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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About the Author- Dr Muddassir Ahmed
Dr MuddassirAhmed is the Founder & CEO of SCMDOJO. He is a global speaker, vlogger and supply chain industry expert with 17 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East and South East Asia in various Supply Chain leadership roles. Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Muddassir is a Six Sigma black belt and founded the leading supply chain platform SCMDOJO to enable supply chain professionals and teams to thrive by providing best-in-class knowledge content, tools and access to experts.