I’m sure that most of us have heard the term, “What is measured happens,” but have we mastered this art of determining who, what, and how to measure to ensure our supply chain management success? For those who are uncertain about this critical supply chain management art-form, here are six tips to guide the way.
Six Tips to Measure, Manage, and Then Hit Your Supply Chain Targets
1. Top of the Mind: When you measure something and review it regularly, say monthly, the measurement becomes top of the mind, such as, your inventory turns. This number won’t be overlooked, ignored, or forgotten, but instead acted on if it’s too low or too high.
2. Increases Motivation: Most of us are motivated by competition. That’s what measurement does for us; provides numbers for our staff to shoot for. Without competition, we become comfortable and content in our old ways.
3. Accountability: There is no way to hold anyone accountable for their actions if we don’t show them how they have missed the mark with their action or non-action. Only measurement allows us to do so!
4. Measure It All: Once upon a time it would have seemed inconceivable to want to track everything in our supply chain, nor would it have even been possible. But in today’s electronic and analytics rich environment, it is more possible than impossible to track everything that is meaningful in your supply chain. We have always tracked things like inventory turns, savings, and purchase orders as well as global measurements such as supply expense per adjusted admission, supply to net revenues, etc. Continue to track these areas, but now we need to add even more areas like tracking 100% of your consumption and utilization of products, services, and technologies. We need to know with certainty where we are doing well and where we have opportunities for improvement. We can reduce costs, mitigate risks, and improve quality by knowing what product in what category in what department is causing our issues every time.
5. Measure the Right Way: You must figure out what you want to accomplish with your measurement before you begin to measure. For instance, do you want to increase your inventory turns? If so, you need to benchmark other hospitals to determine the ideal inventory turns target to aim for. Then and only then can you start to measure, starting with where you are now.
6. Don’t Confuse Metric with Measurement: Ruth Henderson of Whiteboard Consulting tells us that, “A measure is one quantitative number that counts something (e.g., we made $100,000 profit last quarter). A metric gives you more information because it compares the measurement to some other baseline (e.g., we made $100,000 profit last quarter, $50,000 more than the same quarter last year).”
These six tips are just a few ideas on who, what, and why you need to measure continuously to make sure you are on the right track to mastering this art and science. By following this path, you can up your supply chain performance three-fold almost overnight.
Measurement Improves Performance
A performance measurement system, such as a Balanced Scorecard Dashboard allows a supply chain department to measure, monitor, and react to changes in your supply chain operations in real-time. The visibility provided by the measurement enables a supply chain manager to make better and more timely decisions to control supply chain operations while lowering risks. In my opinion, it would be foolish in the 21st century for a supply chain manager to attempt to manage without a performance measurement system in place when tools are readily available to do so.