Supply Chain Management Analytics- What Constitutes an Efficient Supply Chain?
An efficient supply chain is critical to the success of any business, but especially to those involved in manufacturing. The ability to properly understand, collect and analyze available information that shows the efficiency of your supply chain can be a challenge; is cost per mile the best measurement? How about on-time pickup and/or delivery percentages? It’s imperative that your business determine what analytics deliver the best results that provide accurate data to measure performance.
In order to collect and analyze data that makes sense for your business, the first question that needs answering is, what determines a healthy and efficient supply chain for your business? In most cases, a balance between high safety standards, and cost-effective processes that compliment your business strategy will produce a healthy, successful supply chain. Determining all of the moving pieces of your supply chain, ensuring the proper relationships are established and nurtured with external logistics professionals and other vendors, coupled with clear communication will ensure that safety, cost awareness and efficiency are a top priorities for your supply chain.
Analytics and metrics that assess efficiency
Defining the analytics and metrics that can demonstrate your supply chain’s efficiency vary depending on the strategic goals and needs of your business. Many times, manufacturers look strictly at the cost of transportation; while cost is important, a healthy and efficient supply chain requires more critical analysis.
Depending on your overall business strategy, and the needs of your customers, the following analytics should be considered:
- Number of safety incidences of your transportation vendors
- Customer service complaints and feedback
- Claims process management
- Environmental impact resulting from your logistics processes
- Impact of technology on the supply chain
These are just a few of the examples of supply chain analytics that should be considered to increase the visibility into your full supply chain . Once you determine what you’d like to measure, develop benchmarks that can be used as a comparison for improvement. For example, if reduction in the time it takes between unloading and reloading a certain product needs to be reduced, include that baseline time as your metric, and then determine the optimum goal for improvement.
Once benchmarks are established, determine the improvement goals and strategies, and ensuing metrics that need to be analyzed to the results. As you move forward in creating the most cost-effective and efficient supply chain, tracking and revisiting each metric that is established will be key to measuring your success.
The bottom line? It’s important to determine what metrics should be measured based on your business’ goals; metrics are not a “one size fits all” measurement that can be used for everyone. Each manufacturer, shipper and customer has different needs based on their business, and your supply chain and logistics professionals should work to develop metrics based on the individual needs of the business. In addition, what gets measured, gets improved, and using analytics that establish a baseline for continuous improvement is essential.
3 tips to ensure success
Determining business goals and objectives, and developing baseline metrics for analysis that can accurately measure improvements is essential for enhancing the overall performance of your supply chain. In addition, it’s important to keep these three tips in mind.
1. Use common language when defining your metrics
There’s nothing more frustrating than when your physician speaks with you using “doctor-speak,” instead of using terms that appeal to the patient. The same is true in supply chain management, and reiterates why it’s so important to learn about the customer and understand their business goals and strategy.
For example, if a customer’s common cost measurement is cost per kilogram, it’s critical to develop and report on metrics that include that language. That way, whether you’re speaking with the transportation manager or the CFO, they know exactly what’s being discussed and how it relates to their business strategy.
2. Metrics are always evolving
Establishing and tracking metrics is not a straight-line process; continual tracking and measurement of metrics is fluid and constantly evolving. Regular assessment and review of metrics and their importance is critical to ensuring an efficient and cost-effective supply chain.
In addition, the ability to make near real-time changes based on possible disruptions in the supply chain is critical in the ability to keep the supply chain moving successfully. Utilizing data available through supply chain analytics can help to immediately identify when a supplier encounters issues within a given time frame as they occur, and work to make immediate corrections.
One example that we utilize at Dupré, is “web portals.” Our engineers have developed, maintain and operate these interactive platforms that allow multi-party interfacing to monitor a particular supply chain. This almost immediate “review” of supply chain efficiencies makes it possible to track and update relevant metrics as needed, increasing productivity and overall supply chain performance.
3. Efficient does not always mean productive, and vice versa.
Many times these two terms are made to mean the same thing, when in fact, they can mean very different things. It’s critical to know what your customer’s business’ objectives are to ensure that you’re accurately measuring productivity and efficiency based on their needs.
For example, a manufacturer that hauls small containers filled with liquid (called totes) to a customer may need empty containers brought back to the manufacturer to be refilled and then distributed once again. These totes take up a full trailer, leaving no room for including additional product and decreases the efficiency of the truck on the return trip. Yet, knowing this customer’s requirements, means using data that measures both volume and space, and developing a solution, and measurable metric, that is specific to the customer.
To ensure the most efficient supply chain for your business, it’s critical to work with a logistics partner that cares about your business’ goals and objectives, and then provides a supply chain solution that effectively balances safety, cost and efficiency to achieve the best results. Their knowledge and willingness to learn about your business will allow you to become more competitive and profitable and create a cost-effective, high performing and efficient supply chain.