You’ve heard the adage “You can’t manage what you don’t measure?” Does it apply to you? Read on.
Most years, our clients suggest new metrics for benchmarking, many of which the participants quickly utilize to improve their business. However, in the past few years some key metrics have had less than 100% participation, despite the importance to your customers and your bottom line.
Here’s an example: if you want sufficient inventory to fulfill customer demand, you have to manage your suppliers – because problems here can mean backorders and low fill rates. We all know this. So it’s no surprise that OEMs who have used metrics on their suppliers’ past performance to award future business actually improved supplier performance
We’ve collected supplier on-time performance data for NAPB since 2003, yet only half of the automotive companies reported it for 2013 NAPB. Heavy equipment (HE) companies are doing better, with almost everyone reporting. Starting in 2011, we collected supplier performance by type: “local internal”, “overseas internal”, and “external”. About two-thirds of the heavy equipment companies report internal supplier on-time percentages to this detail, but only a third of the auto companies. If you can’t even track internal performance, what hope is there to track your external suppliers?
In order to gain a different perspective on suppliers, we have recently added to the data collection the average supplier past due line level. Though two-thirds of HE companies report this data, only a handful of automotive companies do.
Without accurate data, a company cannot create incentives to improve a supplier’s performance or penalties for those who don’t meet the standards. Supplier problems disrupt the supply chain, from the warehouse workers who must unload an unexpected delivery, to the dealer whose order is delayed.
Transportation is one of the most important pieces of the supply chain but also one of the hardest to track. Since the beginning of NAPB, we’ve tracked lines shipped by mode. In recent years, we’ve added metrics such as outbound transportation costs by mode, transportation damages by mode, and on-time delivery by mode, in order to better quantify transportation performance.
No one needs to remind you that transportation costs are an important area to measure and manage. For NAPB participants, outbound transportation costs make up a median of 40% of the annual supply chain costs. A small decrease in these costs can have a large effect on the bottom line. Almost all OEMs can report outbound transportation costs as a total, but a third don’t report costs by mode. On-time delivery reporting is similar; about two-thirds of the OEMs can report it by mode.
Transportation damages have the lowest level of participation for these metrics. Less than half of OEMs are able to report damages, depending on the mode. Parcel has the highest reporting percentage, compared to LTL (less-than-truckload), DDS (dedicated delivery service), and air. Damages matter to your customers (if you have any doubt, take a look at your NAPB Parts Manager Satisfaction Survey verbatims). Are you taking steps to identify gaps in performance across the modes and carriers who may be causing that damage?
Bottom Line: Start measuring; start managing. In other words, this year, collect and report data that might not have been available in the past. Compare yourself to the industry; discover where you can improve.