How do I know I’m unfit and over weight? Easy, I look at those around me! (I’m fixing it by the way)
Knowing if your Supply Chain is unfit is not so easy. OK, it might look healthy, and maybe it’s doing the job OK.
But maybe you should be getting much better performance in terms of cost and service?
Perhaps similar businesses are actually performing at a much higher level?
These simple ‘self-help’ tips will help you assess if you need to get your Supply Chain to the Gym!
First of all, don’t try to check and measure everything. There’s no need. Sure, once you’ve identified a potential issue or opportunity, by all means drill down a bit more. But first off, just check these few ‘vital signs’ of your Supply Chain’s health and fitness.
From working with hundreds of organisations across many countries over the years, these are the really ‘vital’ signs I look for. I’ll include here a few snap shots from our Benchmarking database of 887 companies to help you get the idea.
Customer Service Performance. Supply Chain performance is really all about the customer, or it should be at least. If customer service is poor, you’ll be losing customer loyalty, losing sales and incurring additional costs to ‘fix’ up errors and service failures.
But what’s good? Here’s a snap shot. (These results are for Food & Beverage companies handling ambient products)
So go and have a look at your own Customer Service performance.
- What is your service offer?
- Is it well understood by your business and your customers alike?
- How does your performance rank against that offer?
It’s a great place to start when looking for improvements. Because superior customer service performance leads to happier customers, who buy more of your ‘stuff’. And actually, high levels of service can help you save money too! Yes, hard to believe I know, but I’ll show you that later.
These other vital signs can then help you with improving customer service.
Supply Chain Cost as a Percentage of Sales.
We certainly need to get a handle on costs, and this is a good place to start. Let’s have a look at Pharmaceutical Suppliers this time.
Obviously this varies by industry, because of different market needs, handling requirements and product value. But you need to get a grasp of this and what ‘good’ looks like in your industry.
Whatever your industry, if this figure is over 10% I’d say you have problems.
Note: For these Benchmarks, Supply Chain costs include the following:
- Customer Service
- Outbound Transport
- Inventory Holding Costs
- Inventory Management
So then start to dig a little deeper to see what the major cost driver might be.
These next two are a logical step.
Warehousing Cost as a Percentage of Sales. This time we’ll look at Manufacturers Benchmark data.
The key things that will drive up your warehousing costs are these:
- Inventory levels! Holding too much often leads to the use of external storage.
- Poor layouts and flow.
- Using the wrong picking processes.
Outbound Transport Cost as a percentage of Sales. This time we have a snap shot from ‘Food & Beverage’ companies handling chilled & frozen product.
Inventory Record Accuracy (IRA). If your IRA is poor, you will really struggle to maintain customer service performance. And the additional issue is, you’ll be carrying too much inventory.
Here are some benchmarks from Retail Suppliers this time.
Supplier Performance. Now this is an area that’s often neglected. But it’s so important. Because if you don’t manage your suppliers effectively and monitor their performance, you have a poor chance at the other end of your Supply Chain, to delivery great customer service.
If this is an area of neglect in your business you really do need to fix it. Key things to check are these:
- Do you have formal service agreements with Suppliers?
- What service performance has been agreed?
- Pick your top 20% of Suppliers in terms of spend and check their supply performance.
Here are some SIFOT (Supply In Full On Time) Benchmarks to give you an idea of realistic targes to aim for.
This time we’ll pick on Retail Suppliers again. That is; suppliers to Retail companies.
I would urge you to go and take a look at some of these Vital Signs for your Supply Chain. Maybe you measure them all already? But I suspect you only measure 2 or 3 of them… Check the others and you might be surprised at the opportunities you uncover to start getting your Supply Chain Super Fit!
Oh, here is that article about how higher customer service levels can actually save you money. Best in Class Service at Half the Cost.
Good luck with your Supply Chain ‘fitness program’.
P.S. And if you’re wondering what my personal goal is to start getting fitter, check this out. We need to be fit as well as our Supply Chains
thank you very much for this informative communique
I always have enjoyed every notification from Rob. ‘Fat vs. Slow’ is one more very practical topic that can be used as “tool” to diagnos SCM.
thank you very much am happy for this information
THIS REALLY GIES A GOOD START ON ASSESSING THE PERFORMANCE OF A SUPPLY CHAIN. WE CAN ONLY IMPROVE WHAT CAN BE MEASURED
Very short, simple tips to test my supply chain, I found it very beneficial, thank you.
I’m glad you enjoyed the information.
Supply chain needs trimming, and good lot of exercise is needed to reduce the fat body. Look at procurement, good suppliers, timely supply, and a good deliver, distribution good fleet, efficient customer service.