Prime Advantage Blog

Translate Organizational Objectives to Supply Chain Metrics

Mike McDonald on Mar 1, 2016 10:02:51 AM

Have you adjusted your metrics to drive toward this year's objectives? Operations and procurement play a big part in fulfilling a company's strategy. The role they play will vary depending on if you are launching new products, increasing quality or decreasing costs. The success of these endeavors hinges on your ability to assign proper metrics to track the progress.030116_Image

Once the undertaking is established, the first step is to fully define the associated metrics. For example, if one of your company’s strategies is to increase quality, from an operations and procurement standpoint, you need to clearly outline where you are going to get the data and how you are going to quantify success and failure. Having a defect-per-million (DPM) measure is a great way to work toward this goal. You need to effectively delineate the inspection criteria or you could ultimately not get what you are expecting when you receive the data.

Your strategy should include comprehensive inspection procedures that break down every type of possible defect. This information then needs to be passed along to the suppliers that will be measured to these standards. Vendors can serve as the first line of defense in making sure you are receiving the components you expect. Make sure you are constantly identifying and collecting data around the different types of defects as they occur so you can report back to your suppliers in a thorough and constructive way.

If you are putting together a very robust plan that includes component failure in the field, you will also need to define how this data is collected. Field quality problems have a huge impact on your brand and your customers' satisfaction. Knowing the root of these failures is very important and can help you develop preventative inspection or testing before the product leaves your facility.

When you define new metrics there might not be historical data available to benchmark to see if you are improving. New definitions can also impact the historical data as they might be changing how you categorize or record the data. In these instances, you can just use the goal you've established as your baseline. The goal is your ultimate data point, so measuring to it is permissible when historical data cannot be used to track movement.

The next step for your new metric is to understand how it will influence other functional areas. If you are greatly decreasing your DPM, but increasing your overall cost due to a higher scrap rate or inspection time, you are likely negating other goals. Make sure you are balancing all of your measures and understanding where you could be bringing down the success in other areas.

Keep monitoring the data so you're not caught flat-footed to any significant impact brought on by the changes. Share this information as often and as publicly as you can. Having everyone aware of your objectives and how you are progressing will help improve in indirect ways. By this route, everyone can embrace the goals and help the company achieve.

Wood Stone Success Story

Topics: Supply Chain, Analytics and Technology

Mike McDonald

Posted by Mike McDonald

Mike is the Executive Vice President of Business Development for Prime Advantage, a Chicago based Group Purchasing Organization for mid-market manufacturers. Responsibilities include managing business development, marketing, and the GPO's Healthcare Cost Containment program. He’s been a featured speaker, published author, and recognized award winner within the supply chain community.

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