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Supply Chain Check-up: Metrics that Matter

August 16, 2008

Supply Chain Check-up

How do you know that you need help in the first place, though? Benchmark studies and process maps are both expensive and time-consuming, and many companies whose earnings put them well outside of the Fortune 1000 realize that their supply chains aren’t all they ought to be, but they are still hesitant as to what to do about it. Below is a relatively short but challenging checklist that provides a basic assessment of how healthy your supply chain might be. If you answer “no” to any of the following questions, or even worse, if you don’t even know the answers to some of these questions, then the time to get serious about fixing your supply chain problems is right now:

  1. Do your order fill rates meet management’s specific and measured customer service strategy?

  2. Are your delivery lead times competitive and predictable?

  3. Do all of your supply chain departments agree on which products are made-to-stock and which are made-to-order?

  4. Do sales and manufacturing share equally in determining the mix and investment in inventory?

  5. Are the appropriate calculations being used, rather than “rules of thumb,” to establish the desired mix and levels?

  6. Are management’s inventory investment plan and customer service objectives being compared against the actual results that are achieved?

  7. Are short-term forecast deviations being monitored and adjusted, and is long-term forecast accuracy continuously improving?

  8. Is your inventory accuracy consistently above 98 percent?

  9. Are you able to avoid carrying excess safety stock buffers?

  10. Are your excess and obsolete inventories being measured, and are they less than 1 percent of total inventory

The SCOR model provides an industry-standard approach to analyze, design, and implement changes to improve performance throughout five integrated supply chain processes—plan, source, make, deliver, and return—spanning the full gamut from a supplier’s supplier to a customer’s customer and every point in between. The SCOR model is aligned with a company’s operational strategy, material, work flows, and information flows.

Think about using elements of Supply Chain Operations Reference (SCOR)

In Supply Chain Excellence, a handbook on using the SCOR model, the five SCOR processes encompass the following measurable activities:

  • Plan: Assess supply resources; aggregate and prioritize demand requirements; plan inventory for distribution, production, and material requirements; and plan rough-cut capacity for all products and all channels.

  • Source: Obtain, receive, inspect, hold, issue, and authorize payment for raw materials and purchased finished goods.

  • Make: Request and receive material; manufacture and test product; package, hold, and/or release product.

  • Deliver: Execute order management processes; generate quotations; configure product; create and maintain a customer database; maintain a product/price database; manage accounts receivable, credits, collections, and invoicing; execute warehouse processes, including pick, pack, and configure; create customer-specific packaging/labeling; consolidate orders; ship products;manage transportation processes and import/ export; and verify performance.

  • Return: Defective, warranty, and excess return processing, including authorization, scheduling, inspection, transfer, warranty administration, receiving and verifying defective products, disposition, and replacement

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