KPI Infrastructure

Some time ago I reviewed the KPIs of a group of clients, and what was fascinating was the range of time it took for them to gather only the most essential data – Perfect Order Reliability (OTIF), Order Cycle Time (OCT), Upside Flexibility (Lead Time), Total Supply Chain Cost to Serve (TSCCS), and Cash-to-Cash cycle time (C2C). One team took an hour to get the metrics, even to the detail of segmentation by major supply chains, and so on – it was more time to fill in a form than it was to gather the data (that’s telling you a little bit about form design too). They used standard metrics as part of their overall day-to-day supply chain management, and the infrastructure to report was real-time – for all metrics. Another team took a day.

They had the infrastructure for the metrics, but it wasn’t real time – it was aggregated each day for operational review meetings. Another team took a week or so – they had metrics data, but it was all very manufacturing and product focused. They took quite some time to move from their particular ‘product oriented’ view to a ‘supply chain’ view.

Then finally I had a team come back after a month with the data – a month. They had some metrics, but it was a massive set of spreadsheets and aggregated data, and as they tried to get end-to-end supply chain views, they realized it was a real tangle. But they got it. Then there was the final client. A month passed. A second. Then they admitted they gave up, that they weren’t able to pull the data, reconcile it, and get a valid end-to-end set of KPI’s.

So, imagine that you have a big business environment shift – maybe a large firm like Lehmann brothers goes out of business, and there is no way to get working capital easily. Perhaps there’s a strike – ports, trucks, airline. Maybe a problem with a raw material suddenly escalates issues and returns. The first few businesses I worked with were very well organized to detect – even proactively – turns of events that would have severe impact on their supply chain performance. It wasn’t that all their supply chain processes were perfect, they never are. But they can at least orient and make changes where changes matter. The latter businesses were in trouble. Imagine that something happens – revenue and margins go quite bad, and it takes months to even get high-level data on which supply chains are disintegrating, and by how much. Or imagine you aren’t even able to get cost for a supply chain, or reliability information as your customers flee.

As I discuss supply chain transformation with clients, the first priority, and focus for the supply chain organization, is creating a foundation of the major supply chain KPI’s. Diagnostic metrics come and go, but end-to-end supply chain metrics are here to stay. With that foundation, they can react (or proactively avoid) to the emergence and escalation of problems in their supply chains quickly – and I mean hours, days, weeks. Overall time spent managing issues is drastically reduced – no groping for direction or dimension of the problem – but laser-focused efforts to move the supply chain back to strategy-determined performance.

Here’s a practical guide, based on observing companies, what slow reaction time to get metrics does to you: If it takes you an hour or so to get the data, you can react with a plan to correct course perhaps in a few days; If it takes you a day or so to get data, understand it may take you a few weeks to set up a plan to resolve emerging issues; If it takes a week, think some months for course correction; If it takes you a month to get data and analyze diagnostics, your changes drag out for years. Meanwhile, you may be out of business.

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Joseph Francis

About Joseph Francis

Joseph Francis is a former Managing Director of PCG with over 20 years of experience in Supply Chain and IT Management. He served as Executive Director of Supply Chain Council and is co-designer of OpenReference's emerging global standard in supply chain strategic business management, and recognized worldwide as an expert in supply chain operations management.