“Oftentimes we have parts that we can no longer get, and they’re in small numbers, so we can’t get interest in the part of an industry to build something when there’s only a small number and they have to retool or do that.”
3D printing is playing a large role to improve logistics across the services. Advancements in 3-D printing allow the force to not worry about the supplying and ordering of parts cutting out the supply chain and reducing timelines for making parts.
In a real-world example, the service had to replace load-bearing handles on C-5 aircraft for $1,600 each. The part, however, was unavailable and HQ said it didn’t know when it would be able to get the part. Through 3D printing, the service was able to produce the part for $300 and didn’t have to wait around for it to be delivered.
Dispatcher Road trip Story illustrates important lessons about using performance measures to help ensure that a supply chain is performing well.
Dispatcher is driving on a long trip in a car that has a broken speedometer and a broken gas gauge. Dispatcher has been traveling for several hours, keeping track of the time and looking at the odometer to determine how fast Dispatcher is going.
Dispatcher is sure the speed limits are being followed– when Dispatcher is stopped by a patrolman and given a speeding ticket.
Slowing down, Dispatcher drives for two more hours keeping track of the time and the odometer, but once again is stopped by a patrolman and given another speeding ticket.
During the remainder of the trip Dispatcher slows down to a speed Dispatcher now believes will avoid getting another speeding ticket.
Dispatcher drives for one more hour when the car stops all of a sudden. Dispatcher ran out of gas!
Not a very good trip, primarily because Dispatcher was missing some very important key measurement devices in the car – the speedometer and the gas gauge.
Unlike Dispatcher, most people would be extremely reluctant to drive this car. In a similar way, however, there are many companies that run their supply chains without a good set of measurements in place.
Like Dispatcher, the only way they are able to find out if they are meeting their supply chain goals is after the fact, by diagnosing poor financial results, or when they lose an important customer- events similar to the speeding tickets.
Dispatcher experience teaches us several lessons on the importance of measuring supply chain performance
Measurements are important to directly controlling behavior and indirectly to performance – the speedometer reading impacts how hard or soft Dispatcher pushes on the gas pedal.
A few key measurements will go a long way toward keeping a company on track towards achieving its supply chain improvement objectives – like those on a speedometer and a gas gauge.
Seemingly relevant, but cumbersome, measurements are of little use, and
are possibly a hindrance, in helping to improve supply chain performance like the odometer in the car.
Picking the wrong measures and leaving out important ones could lead to supply chain performance degradation – like running out of gas.
Driving a supply chain based only on after-the-fact measures, like losing
an important customer or having poor financial performance is not very effective-- the way getting speeding tickets and running out of gas is an expensive way to drive a car.
Many companies use the term “scorecard” to describe the report that conveys performance information to suppliers.
No standard measurement approach exists across industries, although supply chain organizations should strive internally for some consistency, particularly with respect to the technical aspects of their systems.
It does not make sense for every business unit or internal location to re-invent how they measure performance. The challenge today is to develop a measurement process and scorecard system that offers some flexibility to a company's internal operations while maintaining company-wide consistency.
Consider the following examples. A consumer products company developed a scorecard to evaluate its suppliers, most of which were substantially larger than the company. It was bad enough that this scorecard was not pilot-tested and was less than professional in appearance.
But the system failed when many larger suppliers challenged the accuracy of the company's scores, particularly when the scores were lower than those received from the suppliers' more sophisticated customers. Suffice it to say that this experience deterred the company from moving forward with its measurement objectives.
Procurement teams must take a hard look at their measurement processes long before suppliers can challenge the legitimacy of the metrics. The processes must not turn into the kind of exercise that one supplier's executive described as “they present and we rebut.”
A second example highlights a variety of shortfalls that confront too many supplier measurement systems. Almost every supply chain organization has at least thought about developing a supplier scorecard system. Those that are serious about the process have most likely committed serious time, budget, and resources toward development and maintenance of systems of measurement.
One such logistics company had a system that on the surface, appears ideal. Do senior managers need a ranking of supplier performance sorted by commodity group? Do they want a listing of the company's best or worst performing suppliers? This, and much more, is available at the push of a button.
However, during a training session at this logistics company, an instructor asked several buyers to name one of their best performing suppliers—what the company called an elite supplier.
The intent was to use examples of real suppliers to demonstrate the data features of the system but some buyers cites a supplier as being worthy of preferred status while others, in the same supply chain organization, indicated they would rather discontinue the relationship with that supplier? And what are the dangers of a system that awards high scores to poorly performing suppliers?
The consensus was that although the scorecard system was supported by an extensive database that allowed all kinds of rigorous analyses, the data to support the system was still collected and keyed in manually. Furthermore, many scorecard items required subjective judgments.
On top of this, most buyers had responsibility for frequently inputting data for a large number of suppliers, a heavy burden on top of their “normal” workload. Many in attendance also agreed that the data for the scorecards was keyed in just before, and sometimes after, the cutoff date, meaning that the emphasis was hardly on the quality of the data. Attendees also acknowledged that supplier scores were used as an indicator of a buyer's job performance.
The group agreed that their suppliers were held to the same criteria and weights, even though not all suppliers were equally important to the company's success. Also, internal customers or stakeholders had no way to be part of the measurement process.
There was also some confusion about what kind of organization qualified as a supplier since some suppliers provided material from multiple locations. Finally, no clear agreement emerged that the measurement process was contributing to higher performance.
What are some lessons here? Clearly, an effective scorecard system requires much more than an elaborate database that can present data in many ways. While that capability is important, technical capabilities do not guarantee system success. And scorecards should not ignore the voices of internal customers. Managers at manufacturing plants, warehouses, distribution centers, and logistics hubs are often perfectly positioned to evaluate suppliers' day-to-day performance.
Another lesson is that scorecards often place a serious work burden on the individuals responsible for maintaining them, which often results in scorecards that are late or completed at the last minute—which raises concerns about data integrity. Is a reliance on subjective and last-minute evaluations affecting the integrity of the scores?
A further conclusion is that scorecard systems can result in too much averaging of data for suppliers that provide goods from more than one location. If a supplier provides goods from a dozen locations around the world, does this call for one scorecard or a dozen? If this supplier pursued certification it would apply to individual sites, not to the entire company. Furthermore, the number of suppliers and the number of shipping points are often very different figures.
A final lesson is that scorecard systems can drive the wrong behavior. The results will be skewed—and not fit for their intended purpose—if a buyer's performance evaluation is based partly on the performance of suppliers. Worse, the performance is often being determined by scorecards responsibility for completing.
The conflict of interest is obvious. While most everyone at the company may agree that supplier measurement can be a good thing, it is also evident that the system in place is far from ideal.
Most buyers say continuous improvement in an organization relies on performance “measuring, measuring, and measuring again.” Once a company’s road map for change is laid out, it can develop a set of performance metrics or key performance indicators to ensure that it knows when it is meeting its objectives. Such organizations should choose a limited number of metrics and align executive to management-level measures.
Supply chain performance measurement efforts have been conducted to address the following questions:
1. Why is performance measurement important?
2. What general approaches are available to measure supply chains?
3. What advice can be followed when selecting performance measures?
4. What methods are available for setting performance targets?
5. What are application vendors doing to support performance
6. What initial steps should a company execute to get started?
7. Why Is Performance Measurement Important?
8. How does measurement affects supply chain behavior?
9. How does supply chain behavior impact performance?
10. How does performance measurement provides means to assess if supply chain has improved?