How Was Your Day?

How many times have you been walking down the street or standing in an elevator or sitting next to someone on an airplane and casually asked “how are you?” or “how are you feeling?” Perhaps you have a conversation with your spouse in the evening that starts with “How was your day?” Many times, the response is automatically something like, “fine” or “not bad.” My wife always answers with, “busy, but I got a lot done.” Sometimes just to test whether or not it was the auto response, I query her about what exactly made it busy and what did she actually get done. This usually causes her to think and make a more thorough evaluation of her day.

Sometimes, when looking at our supply chain planning performance, we have the tendency to do the same thing. If you review your standard KPI data on a regular basis, it is easy to become stale in the way it’s evaluated. Let’s say for example we look at service level performance every week or even every day. Are you just looking at the raw number and whether or not it’s in an acceptable range? Or are you taking the time to look at the trend of the service performance over time? If the service level is a measure by individual planner, do you just make a binary decision as to whether or not they achieved service? Or are you looking at a deeper level for both high and low performing planners to better understand where they are by supplier. The same thing is true for a KPI like inventory turns. Because turns are calculated off of an average inventory level, spot changes in the inventory might have little effect on the turns value unless a trend in inventory is sustained. Quite possibly, by the time the turn value is below an acceptable range, or too fast, the actual problem could be too large to quickly correct.

There’s an approach in target shooting that states a small target will give only a small miss. In golf, if you miss a putt off of the putter by only ½ inch, it is not likely to miss the entire hole. Suppose however that it is a 40-foot putt. That ½ inch miss in the first foot can become a two-foot miss by the time it gets to the hole. Another adage is to inspect what you expect. If you are truly interested in inventory turns, then measure them. If, however, you are really interested in how much aged or excess inventory you have, then measure that.

There are a few things to keep in mind. First, be sure you have a clear and well-communicated objective for your supply chain planning process. If the objective is to increase sales, establish the measurements to help you understand if your supply chain is actually enabling that process. If the objective is to turn inventory as fast as possible, be sure you measure that specifically. If the objective is to provide nearly perfect service level to your customers, measure that. Be careful with the service measure, because that is different than measuring actual lost sales. You might find line fill, perfect order, or just total order to total ship as the measure. Again, know your objective and then measure the KPI to support the outcome. Often, it takes more than one KPI to fully measure performance- but don’t overcomplicate it. We have a scorecard that we use in our business. Think of it as the minimum amount of metrics you need to look at if you are on a desert island, to know if your business is on track.

Once you have determined a very tight correlation between the KPI’s and your supply chain planning objectives, don’t just give it the “how was your day” look. Take the time to peel a layer or two off of the number to determine the underlying reason for the result. If you can preemptively determine the future path of the metric, you can establish corrective actions to ensure sustained excellent performance.

You may recall references to a former boss of mine in past View From The Ridge articles. He used to always tell us to come to a meeting prepared to tell him more than just what the number was, but instead explain why the number was what it was. This was expected whether the KPI was on track, beating plan or short of plan. We should always know expectations for the next reporting period. I encourage you to do the same with your metrics.

We constantly talk with customers with performance that they see as ‘acceptable’. What they often don’t see is the direction of their performance.

As you look at your analytics and KPI’s, keep these four things in mind:

• What are my SCP performance objectives?
• What are the specific KPI’s that will measure performance toward those objectives?
• What is the minimum number of KPI’s that can be established to meet the objectives?
• Make sure you always know not only what the value of the KPI is, but also why it is that value.

Remember, our LifeLine team can help you with each of these areas. We want to you to excel and be able to sustain an excellent level of performance.