What are the best practices for setting goals in supply chain performance?

Choosing the Right SCM Metrics is an important step in achieving long-term success in our business. Major SCM Metrics, 𝟭. 𝗢𝗧𝗗: 𝗢𝗻-𝘁𝗶𝗺𝗲 𝗗𝗲𝗹𝗶𝘃𝗲𝗿𝘆 𝟮. 𝗢𝗧𝗜𝗙: 𝗢𝗻 𝗧𝗶𝗺𝗲 𝗶𝗻 𝗙𝘂𝗹𝗹 𝟯. 𝗢𝗿𝗱𝗲𝗿 𝗔𝗰𝗰𝘂𝗿𝗮𝗰𝘆 𝟰. 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗧𝘂𝗿𝗻𝗼𝘃𝗲𝗿 𝗥𝗮𝘁𝗶𝗼 𝟱. 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗔𝗰𝗰𝘂𝗿𝗮𝗰𝘆 𝟲. 𝗗𝗮𝘆𝘀 𝗦𝗮𝗹𝗲𝘀 𝗼𝗳 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 - 𝗗𝗦𝗜 𝟳. 𝗦𝘁𝗼𝗰𝗸 𝗼𝘂𝘁 𝗿𝗮𝘁𝗲 𝟴. 𝗜𝗻𝘃𝗲𝗻𝘁𝗼𝗿𝘆 𝗖𝗮𝗿𝗿𝘆𝗶𝗻𝗴 𝗖𝗼𝘀𝘁 𝟵. 𝗦𝘂𝗽𝗽𝗹𝗶𝗲𝗿 𝗥𝗲𝗷𝗲𝗰𝘁𝗶𝗼𝗻 / 𝗗𝗲𝗳𝗲𝗰𝘁 𝗥𝗮𝘁𝗲 (%) 𝟭𝟬. 𝗔𝘃𝗲𝗿𝗮𝗴𝗲 𝗟𝗼𝗴𝗶𝘀𝘁𝗶𝗰𝘀 𝗖𝗼𝘀𝘁𝘀 𝟭𝟭. 𝗦𝘂𝗽𝗽𝗹𝘆 𝗖𝗵𝗮𝗶𝗻 𝗖𝗼𝘀𝘁𝘀 𝗮𝘀 % 𝗼𝗳 𝗦𝗮𝗹𝗲 𝟭𝟮. 𝗣𝗢 𝗖𝘆𝗰𝗹𝗲 𝗧𝗶𝗺𝗲 𝟭𝟯. 𝗥𝗲𝗮𝗹𝗶𝘇𝗲𝗱 𝗦𝗮𝘃𝗶𝗻𝗴 𝟭𝟰. 𝗢𝗿𝗱𝗲𝗿 𝗟𝗲𝗮𝗱 𝗧𝗶𝗺𝗲

If we are talking operationally (as opposed to tactically or strategically), metrics should be built around three critical performance objectives: reliability, stability and velocity. Reliability metrics encourage resources to take actions in accordance with the operational model design. Operational stability metrics combat the transference and or amplification of variability through the system. Operational velocity metrics focus on the speed of work through the resources and system. These three objectives are built around protecting and promoting system flow, the direct determinant of the rate of return on assets. Cost-based metrics at the operational level directly lead to behaviors that harm flow ultimately jeopardizing rates of return

Para medir a cadeia de suprimentos corretamente precisamos iniciar entendendo o escopo que estamos tratando. Suprir um processo pode significar desde uma simples compra de materiais até um sistema estruturado de atividades, pessoas, informações e recursos para garantir o abastecimento de seus clientes. Além disso, pode se apresentar como uma cadeia tradicional, enxuta, flexível ou integrada. Medir um sistema de como esse pode considerar KPIs de estoque em termos de nível, ruptura ou cobertura. Há ainda variações para garantir a entrega correta, como o OTIF (on time in full), ou a validade dos produtos, como o Shelf life.

In three words; “Better, Faster, Cheaper”. Applicable in any industry. Example: Garbage collectors working on their routes. They spend valuable time sorting out the good stuffs that they can earn some extra money recycling. As such, time is lost doing their actual work which in turn affects the efficiency which in turn affects the garbage collection cost to the Majlis.

Choosing appropriate metrics is essential when establishing effective supply chain performance goals. Start by pinpointing critical aspects like managing inventory, fulfilling orders, and lead times, ensuring a direct correlation with broader business goals. Metrics such as inventory turnover, timely delivery, and supply chain cycle time provide valuable benchmarks for assessment. Aim for a well-rounded strategy, incorporating metrics that balance efficiency and flexibility to navigate evolving market dynamics. Additionally, integrate customer-centric metrics like order fulfillment and customer satisfaction.

SMART goals work well when the larger goal is broken down into SMART objectives. In the example given, "To increase the on-time delivery rate from 85% to 90% by the end of the next quarter, by implementing a new order management system and improving the communication with the suppliers and customers." the larger goal should be broken down into individual objectives to manage progress. One could be, "Improve communication with customers by implementing an automated text message system with delivery updates by the end of next month."

In optimizing supply chain performance, it's crucial to adopt SMART goals, ensuring they are Specific, Measurable, Achievable, Relevant, and Time-bound. Specify clear objectives that address key supply chain elements such as production efficiency, inventory accuracy, and on-time delivery. Ensure these goals are quantifiable, allowing for precise measurement and evaluation of progress. Goals should be realistic, considering the available resources and capabilities, and aligned with broader operational and organizational objectives. Relevance is essential, focusing on areas that directly impact the plant's overall efficiency and effectiveness.

In setting goals for supply chain performance, a crucial practice involves thorough benchmarking against industry best practices to identify opportunities for improvement. Begin by assessing current processes and metrics, comparing them to top-performing benchmarks within the industry. Identify areas where the plant's supply chain performance can be enhanced, considering aspects such as production efficiency, lead times, and inventory management. Prioritize opportunities that align with the plant's strategic objectives and have the potential for significant improvements. Implementing technology solutions and best-in-class methodologies can be instrumental in achieving these benchmarks.

Optimizing performance involves a strategic approach to goal-setting that emphasizes alignment and stakeholder involvement, particularly in crafting a consumer-centric supply chain. Begin by engaging stakeholders, including customers, to understand their expectations and preferences. Align supply chain goals with these insights to ensure they resonate with end-user needs. Involving key stakeholders fosters collaboration, making the supply chain more responsive to market demands. Prioritize consumer-centric metrics like on-time delivery, order accuracy, and overall customer satisfaction in goal-setting.

If we're talking about improvement, my humble opinion is that companies must go beyond just monitoring and reviewing dashboards and KPI's. Supply Chain must embrace Continuous Improvement and Operational Excellence Culture. Companies need to ensure that their Supply Chain is inoculated with these genes and have the proper skills, processes and mindset operating as such. It’s the only efficient way to make sense out of figures and set meaningful actions. For example, some of the best operating Supply Chains I’ve seen always included people trained and certified on Lean and Six-Sigma. Their role was to ensure continuous improvement is driven in a structured way, with root-cause analysis of nonperformance, & alignment of effective solutions

Setting goals in a dynamic supply chain requires a vigilant approach to monitoring and reviewing progress. Establish clear and measurable Key Performance Indicators (KPIs) to track various aspects such as inventory levels, lead times, and production efficiency. Regularly monitor these KPIs to quickly identify deviations from the set goals. Implement real-time analytics and reporting systems to stay agile in response to dynamic market conditions and unexpected challenges. Conduct frequent reviews, involving key stakeholders, to assess the effectiveness of strategies and make timely adjustments. Embrace a continuous improvement mindset, recognizing that a dynamic supply chain requires adaptability.