“If you can not measure it, you can not improve it.”   Yes, you must measure to improve. The question is: Are you measuring what you did or what you are projected to do?

Consider this: You are heading to work and an indicator light on your dashboard tells you that you are going to run into a traffic jam and you are given detour options and the time associated with each. The traffic jam didn’t exist when you started out on your route. You are able to make a quick decision to divert the accident and get to work on time.

This is the kind of alerting and performance measurement in manufacturing that you require, whether you are doing your own manufacturing or using contract manufacturing.

How do you do things today? You work feverishly to a plan. Everyone is executing to the plan. You are pleased with the level of effort and everyone is very focused. The end of the month goes by and the following week the financial metrics are distributed with the results of your supply chain performance. You did not achieve your objectives…and not by just a small amount. How did this happen?? You spend the next week trying to determine the root cause. At the next operations meeting you have to present your monthly numbers to the COO. When you miss a number you need to understand why and assign the appropriate corrective action.

• What if you knew mid month when there was an unexpected part shortage that it had the potential to impact your month end revenue target by 15% unless corrective was taken?
• What if you knew that an unexpected order cancellation was going to result in a 20% increase in excess inventory, and 100% of the goods were on order and if they were canceled immediately you would eliminate the excess exposure?
• What if you knew that the new product launch starting next month would result in a capacity issue causing multiple orders to be late, and if you re-prioritized the orders now you would maximize customer service, revenue and capture new market share with your new product.
• What if you collaborated so well with your supplier that their information was your information. When they had a projected shortage affecting you, you had the opportunity to work with your supplier to de-risk the situation.

These are all examples of situations where proactive performance measurement in manufacturing will alert you to the event and the impact of the event before it occurs.

The next question is …how are you solving problems?  Are you really good at ‘pulling levers’ and executing on actions without really knowing if they are the right levers?

• Have you ever spent premiums on freight or shipping lanes only to find out after the fact that your cost roll up exceeded your margin?
• Have you ever implemented a cost reduction only to find out after the fact that the excess inventory carrying cost of the old product wiped away your savings?

Best-in-class companies are quickly evaluating their options and tradeoffs using performance measurement tools before they execute.  A prerequisite for many of these decisions is consolidation of your supply chain data. Whether you are in the pharmaceutical industry, hi-tech, industrial or consumer packaged goods, visibility to your end to end supply chain is a necessity. This also opens up the opportunity for joint scorecarding, or performance measurement with your trading partners.

In summary, whether you are focused initially on your internal operations or you are now engaging with your partners (customer and suppliers) in information sharing and collaboration, you will benefit from looking forward at the potential risks and opportunities that may potentially impact you in the future, rather than looking in your rear view mirror.

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Tags: Collaboration, Performance management
Posted in Best practices, Supply chain collaboration
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