with Dr. Maria Rey-Marston Lecturer, Georgia Tech Supply Chain & Logistics Institute Managing Partner, MRM+ Partners LLP

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1 1 Webinar: Measuring & Managing Supply Chain Performance with Dr. Maria Rey-Marston Lecturer, Georgia Tech Supply Chain & Logistics Institute Managing Partner, MRM+ Partners LLP

2 MEASURING AND MANAGING SUPPLY CHAIN PERFORMANCE MARIA REY-MARSTON SUPPLY CHAIN & LOGISTICS INSTITUTE WEB.SESSION

3 Measuring and Managing Supply Chain Performance MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS 01. RESOURCE LEVEL: Cost and Productivity 02. PROCESS LEVEL: Velocity and Quality PROCESSES THAT DRIVE SUPPLY CHAIN PERFORMANCE

4 01. MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS RESOURCE LEVEL: COST AND PRODUCTIVITY PROCESS LEVEL: VELOCITY AND QUALITY

5 WHAT DO WE GET PAID TO DO?

6 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS BUT IS MORE THAN THAT LET'S GET BACK TO THE BASICS! DO MORE WITH LESS BETTER FASTER SUCCESS PRODUCTIVITY FINANCIAL QUALITY VELOCITY/TIME SATISFACTION PORTER S VIEW OF CREATING A COMPETITIVE ADVANTAGE!

7 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE COST PRODUCTIVITY VELOCITY QUALITY

8 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE COST OF RESOURCES AND ACTIVITIES Cost-to-Serve COST Cost-of-Doing Business Total Supply Chain Management Costs

9 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE RESOURCE PRODUCTIVITY Warehouse Density PRODUCTIVITY Inventory Turns Man-Hour Efficiencies

10 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE ELAPSED TIMES FOR PROCESS EXECUTION Customer Order Cycle Time VELOCITY Sourcing Cycle Time

11 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE PROBABILITY OF SUCCESS Perfect Order Percentage Demand Forecast Accuracy QUALITY On-Time In-Full Delivery (OTIF)

12 MEASURES OF SUPPLY CHAIN OPERATIONS SUCCESS SCM PERFORMANCE COST PRODUCTIVITY VELOCITY QUALITY

13 02. SCM PERFORMANCE SCORECARD DESIGN FOR SUPPLY CHAINS

14 01. Indicators and Profiles 02. Properties of Supply Chain Indicators 03. Design of Supply Chain Scorecard

15 01. Indicators and Profiles Not everything that is quantitative is a performance indicator Statistics (Neutral) Profiles (Behavioral but not Judgmental) Performance Indicators (Judgmental)

16 An example CUSTOMER / ITEM ABC 01. Indicators and Profiles INDICATOR OR PROFILE?

17 01. Indicators and Profiles FORECAST PROFILE FOR 2 SKU S Indicator AND Profile

18 Profiles Help Us Make Decisions 01. Indicators and Profiles Customer Response Measures Customer Classifications SKU Classifications Customer-SKU Classifications Customer Service Policy Design Inventory Management Performance Measures SKU Categories for Inventory Management INVENTORY STRATEGY 6/18/93 Snapshot versus Strategy Inventory % Sale Forecasting Models by SKU Category 20% Inventory Turnover and Fill Rate Targets by Logistics Segments 0% Inventory Reduction Opportunities by Logistics Segment A DFUs B DFUs C DFUs 80% 60% 40%

19 02. Properties of Supply Chain Indicators Key Principles Top-Down Alignment Control Lateral Coherence Bottom-Up Aggregation Balance

20 Top-Down Alignment GROWTH PROFITABILITY EFFICIENCY LIQUIDITY VALUE

21 Control Check Roles & Responsibilities

22 Lateral Coherence Where is the problem? SALES Revenue Growth Q x P PLANNING Inventory Turns Q Sold/Q Held PROCUREMENT Unit Cost Reduction Q (cost) x P (cost)

23 Bottom-Up Aggregation

24 Balance At least one of each! COST PRODUCTIVITY VELOCITY QUALITY

25 03. Design of Supply Chain Scorecard The overall goal is alignment with corporate-level indicators Design Features Optimal Scope Optimal Detail Optimal Frequency The Cube

26 Decisions to Determine Optimal Design Measurement Scope Unit of Analysis Level of Detail Activity Being Measured Frequency Intervals between measurements

27 CASE 01. Scope Detail Frequency HOURS 500 CASES NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT

28 The Cube Measures DIMENSIONS CONTEXTS PERSPECTIVES

29 The Cube of Supply Chain Performance Measures DIMENSIONS What is being measured? PERSPECTIVES Who Cares? CONTEXT What, When and Where?

30 The Cube Of Supply Chain Performance Measures One KPI example KPIs 3D view of success in SCM D: Quality = Line Fill Rate C: Project = Field01 Team P: Supplier = XYZ33

31 Probability of a PERFECT TRANSACTION TOTAL QUALITY MANAGEMENT Combination of Interdependent Events

32 97% 80% 95% The probability of experiencing a perfect order is the multiplication of the probabilities of the 8 independent events. Is entered correctly 96% Is damage Free Has available inventory 72% Arrives On-time Has the right amount of the right products 94% Arrives at the right location All SCM functions are represented in this KPI! 89% 93% 48% Is communicated electronically Has no invoice/collection errors Orders that are perfect

33 From Recording the past to Anticipating the future 5.5 CASE 01. WHS Turns Improve CASE 02. No Turns Improvement CASE 03. Turns Decrease 4% per year Disney World was predicting additional warehousing space requirements based on inventory turns reduction and equal storage density November 5-7, at Georgia Tech

34 CONTROL - SCOPE CONTROL AGGREGATION ALIGNMENT FREQUENCY DETAIL COHERENCE

35 The Aggregation Property Production 48% Reviews 0.3% Unloading Material 0.5% Decontamination 0.5% Cleaning 1% Loading Material 1% Calibration 1% Unscheduled Stops 1% Replenishment 2% Maintenance 2% Test Batch 4%

36 Other obvious ones S M A R T Specific Measurable Action Oriented Relevant Timely

37 Be Cautious with the Calculations, the Time Periods and the Reporting An Example FILL RATE (by Unit of Measurement) Total Fill (Binary) Unit Fill (Percentage) Case Fill Order Fill FILL RATE (by Location) Global Local FILL RATE (by Time Period) Initial At x hours Final

38 MEASURING AND MANAGING SUPPLY CHAIN PERFORMANCE MARIA REY-MARSTON SUPPLY CHAIN & LOGISTICS INSTITUTE WEB.SESSION

39 41 To learn more about our offerings, please visit Measuring and Managing Performance in Supply Chain and Logistics Operations November 5-7, 2014 (Georgia Tech Campus) Georgia Tech Supply Chain & Logistics Institute

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