Look Beyond KPIs to Analyze Where Your Supply Chain Is Failing

Published : August 16, 2016

Find where your supply chain is failing

Think, for a moment, of your supply chain as you would a balanced diet. Even if you’re carefully measuring your caloric intake, it doesn't necessarily mean that you’re eating well! The same can be said for operational measurement and supply chain analytics. They're helpful, but only as part of a broader approach that considers every angle, not just those derived from data. With much industry emphasis placed on supply chain KPIs, it's easy to hone in on them and miss the supply chain forest for the trees.

Think of Your Links

A "chain" is more than a connection between two points. It's a series of interconnected links, with each link dependent on the ones before and after it. If your raw material supplier falls short, your supplier can't give you what you need. If your ordering volume suddenly shrinks, your supplier takes a hit to the budget and shrinks their raw material order accordingly. KPIs can tell you how your fill rates are performing over time, but they're not as nuanced when signaling a need for inter-chain communication. In fact, by the time a noticeable negative trend shows up in your analytics, it's often too late to do anything substantial to divert problems. The solution is to take a more proactive, broad-based approach, rather than the react-and-repair tactics often favored by supply chain management.

To super-charge your supply chain management, ask yourself these questions about each of the companies directly involved in your supply chain:

  • Do you know their maximum output capacity?
  • Do you know — roughly — where your company stands with them, in terms of priority?
  • Do you know if, in the event of a shortage, they would procure an alternate supplier or if you'll need to?
  • Do you know what your company can do, barring extreme resource drains, to help their growth?
  • Have you asked if their company can help your company's growth, beyond basic fulfillment?

These are all important points of communication that data and metrics can't provide. While these "essay questions" aren't quite as easy to answer as the "multiple choice" of KPI course-corrections, without them your fulfillment workflows may end up dead in the water. Even if you've had these conversations once, bear in mind that companies — especially those at the extreme ends of the supply chain, considering your company as the center — do change, grow, shrink and change focus over time, even if their operations seem predictable and routine on the surface. Touch base often, no matter what your numbers tell you.

Think of Your Accuracy

Where does your data come from? If you've been blindly trusting data streams from suppliers that don't have a good transparency track record, you could be in for a nasty surprise. While some firms are slow to adopt transparency due to lack of resources, for others it's a conscious choice — one that could end up costing you. Much like a cell in a spreadsheet, once a formula has been worked out and connected to automatic data streams, the contributing processes can fade into the background, leaving only the end result in the spotlight. This is a dangerous precedent, as errors and biased information can easily change an outcome and compel larger, unneeded orders or lead to complacency and stagnation in what should be a process of continual improvement. 

Understandably, you don't want to ruffle feathers in existing supplier relationships by questioning every data point, but periodic audits for liability and record-keeping are commonplace and an easy way to fact-check the data that informs your KPI standings. Even if you think you know what's going on in your supply chain, chances are there's always something else to research.

In fact, a recent industry survey found that a troubling 72% of companies reported that they didn't have full supply chain visibility. This majority signals the beginning of a game-changing period of upheaval and bar-setting in the industry: transparency is quickly becoming a must-have feature for companies that want to remain competitive. If you experience a lot of pushback in your own efforts for full chain visibility, it could signal that a supply chain partner doesn't have your best interests in mind — an unpleasant possibility that's easier to fix the earlier it's discovered. 

Think of Your Team

While some employees undoubtedly self-measure success in terms of data — orders picked, boxes packed, hours worked and so on — many more take a more holistic view of a good day's work. If your management team is hyper-focused on supply chain analytics, it can be demoralizing for fulfillment center employees and trusted supply chain partners that have worked hard for excellence.

Static numbers may not reflect a favor called in, or extra effort put in during a crunch. They can't tell a tale of priority-shifting, great ideas and the proverbial extra mile. This is a very important consideration for companies that think using KPI shortfalls as a basis for punitive action is a good idea. It won't take long for even the most hardworking staff to resent the very numbers you're hinging performance on. Use KPIs for guidance on tactics, not as the sole measure of "good" versus "bad" performance from your fulfillment center staff. They're just not informative enough to present a holistic picture. 

Beyond smart usage of your collected data, ask your staff if they think existing operational KPIs are a good idea. They might not have a wide enough view to weigh in on analytics that impact inter-company decisions, but they can certainly vote on the numbers they contribute to directly. For example, if your measurements of order completions are missing a crucial step, thus bumping up the timer, it reflects poorly — and unfairly — on the men and women that must work within those parameters. Supply chain KPIs need to be based on the reality of your fulfillment center, not the other way around. Your team will appreciate your commitment to accuracy on the human side, as much as the fulfillment side, of everyday operations.

KPIs in your supply chain are only as good as the research and ongoing data feeds that support them. You have a responsibility as a management professional to ensure that they are necessary, accurate and unbiased before placing them as a goal for your entire team to strive towards. Supply chain analytics are undoubtedly powerful, but just like any resource in business, it's about steering and aim as much as it is sheer speed on the road to success.

Logistics Managers Guide

Topics: Supply Chain Logistics, Supply Chain Efficiency

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