Setting Goals for your Supply Chain Metrics:
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.
