Supply Chain Metric Goals

Once you have an understanding of basic Supply Chain Metrics, focus on a limited number of measurements that add value. Choose those metrics that will track your companies true performance. You don't want to get into the trap of "analysis paralysis". Over-analysis leads to confusion and sometimes conflicting goals. I would recommend picking 5 - 7 key measures per functional area. These measures are sometimes referred to as KPI's (Key Performance Indicators).
Once you have identified these metrics, you can then set your goals. This will enable your organization/department to track it's performance to expectations. But how do you set these goals? How do you determine what to target? At what point have you achieved Supply Chain optimization?
Your overall company goals should be considered when setting your Supply Chain targets. You want to make sure that your Supply Chain goals do not conflict with your company objective. Targets can reflect how aggressive you want to be in pursuing change.

Some Guidelines.....
First, make sure you understand exactly what it is your measuring. What drives this measure? What causes failure? Where do you need improvement? Once you can answer these questions, you're in a better position to set your goals.
Some companies use a guideline of 10% improvement per year. But, this is a very general guideline.

Benchmarking: One way to set your goals is Benchmarking. There are various benchmarking services, that for a fee, will compare your company to other "like" companies. You submit your answers to a set of questions. Those answers are averaged in with other companies submissions. Averages are calculated and World Class levels are set.
As an example, if the average Fill Rate for your industry is 93% and your performing at a 80% level, then it's obvious you need to set an aggressive goal. However, if the industry average is 93% and you're at 94%, you may want to target a minimal gain. Your aggressive efforts should probably be focused in other areas. The caveat here is defining "like" industries. Make sure the comparison your making is a fair one.

SMART goals :
Specific: Provide enough detail so that there is no question on what is being measured and no question how the metric is calculated. You should be specific as to the measurement, goals and responsible people/department.

Measurable: Here is where you use your metric. Make sure you have a reliable system in place that will accurately measure your performance

Attainable: Will the Supply Chain projects you have scheduled for the year produce results that will achieve your goal? The person setting the goal and the person responsible for achieving the goal should agree with the target. If results are un-attainable or unrealistic, they will have a de-motivating effect on your employees.

Realistic: Don't plan to do things if you are unlikely to follow through. Better to plan only a few things and be successful rather than many things and be unsuccessful. Your Supply Chain goals should be challenging, but realistic in relation to the improvement projects you have in place.

Time frame: Identify when your targeting to hit your goal.
Example: Your current Fill Rate is 87% and your Supply Chain projects should improve your measure to 93%. But is the 93% goal for the final month of the year OR is it averaged out over a specific timeframe?

Customer Service Policy:
Additionally, make sure that your Supply Chain goals are aligned with your Customer Service Policy.
Example: Your agreement to your customer might be a 95% Fill Rate, with an Order Cycle Time of 10 days. Make sure that your goals reflect these customer agreements.

Supply Chain optimization is difficult to achieve. But with the right metrics in place and proper goals set, you now know where to focus your improvement projects. You have just gotten closer to Supply Chain optimization.

Our goal is to guide companies that are looking to optimize their Supply Chain. Originally, we intended on answering questions about Inventory Control, Sourcing, Manufacturing, Distribution and Supply Chain Metrics. However, we currently do not have the resources to answer individual questions.
If you want to contact me, email me at: john@supplychainmetric.com

Back to the Homepage

For information on Inventory Turns, Fill Rate Measurement, Backorder Reporting or any other Supply Chain Metric, click on the links to the left. The text that appears on this website is the opinion of the webmaster. Metrics may or may not be uniform across all industries. All data listed here may be used as a general guide, but it's accuracy is not guaranteed. Please consult a qualified Supply Chain professional for more details on Supply Chain Measurements. Other Supply Chain Websites
This site is owned and maintained by Michelle Taras & John Taras CPIM, PMP

abicus.gif (3177 bytes)

VendorManagedInventory.com - information on Vendor Managed Inventory
InventoryTurns.com - additional information on how to calculate inventory turns or inventory turnover.
SupplyChainManagementNews.com - News stories about Supply Chain Management
SupplyChainDefinitions.com - various definitions of supply chain terms
SupplyChian.com - various supply chain info (yes, i know it's mis-spelled)
SupplyChainPurchasing - a new site Michelle is developing. All about Supply Chain Purchasing.
BusinessPlanningandConsulting.com - a website that discusses Business Plans and Consulting (business planning)

other...
DangerousTricks.com - my 13 year old son is working on his first website. The site has video's of people doing extreme stunts.
VariousWebsites.com - a weekly review of what's hot on the internet.