The subject's still performance metrics, but our second annual survey looks at the topic in a whole new light … and once again finds there's more than meets the eye.
Some 5,000 years ago, in the land that is now Iraq, the first known system of writing was developed by the Sumerian people. Those early scribes scratching figures on clay tablets weren't recording epic tales, codifying laws or even chronicling the exploits of the gods. Scholars believe they had another, more mundane purpose in mind: to record inventory. It seems that the very first written words also represented the first known recording of supply chain measures.
Today, 50 centuries later, modern-day scribes—both humans and machines—still measure what's moving through the supply chain and how well the various players are carrying out their tasks. Though their tools may be digital, their goals haven't changed. Nor have the challenges. Today's warehouse and distribution managers still wrestle with such questions as what activities to measure, how to measure them, and what to do with the data they collect.
To learn more about how metrics are used in today's supply chain operations, DC VELOCITY, in partnership with Georgia Southern University, launched a study last year (see "taking appropriate measures," DC VELOCITY, July 2004). What that initial study found was that the respondents were indeed using detailed performance metrics but not necessarily to much effect. The metrics in use were rarely aligned with corporate strategy. Nor was there a terribly strong correlation between the metrics used and type of customer served. Indeed, the responses indicated that for most corporations, the process of choosing what to measure was a pretty scattershot affair.
The study further revealed that no standard "baseline" set of metrics existed that would allow DCs within, say, a specific industry to compare operations. Given that shortfall, the researchers decided their next step would be to try to develop the benchmark data needed for comparisons. To help them expand the study, the sponsors teamed up with two new partners: the Warehousing Education and Research Council (WERC), the leading association of warehousing professionals in North America, and Supply Chain Visions, a consulting firm that specializes in helping companies with supply chain strategy and education.
And so it was that this year's survey respondents were presented with an expanded list of questions. They were asked to identify the metrics they used; they were asked how well they were performing against those metrics; and they were asked how much management support they received. What follows is essentially an executive summary of the survey results. To view the full results, visit WERC's Web site (www.werc.org) or DC VELOCITY's Web site (www.dcvelocity.com).
So how're they doing?
In contrast to the first study, which looked strictly at what respondents were measuring and how they determined what to measure, the 2005 study broadened its focus. Respondents were presented with a list of 55 metrics and asked not only how important they considered each entry, but also how well they felt their companies were performing in that area. What they're measuring will probably come as no surprise. As Exhibit 1 shows, the 11 most commonly used measures— such as on-time shipments and receipts, percentage of overtime hours, order fill rate and percentage of orders picked complete—tend to be operational (as opposed to, say, financial) in nature. All of these metrics were used by at least 80 percent of the respondents. At the other end of the scale were several metrics that were used by fewer than half of the respondents. As Exhibit 2 shows, the less-popular measures included days of raw materials on hand, average cubic capacity used and pounds shipped per worker hour.
At the same time it asked respondents what they measured, our survey queried them as to how well they were performing against the metrics they considered most important. And like the children of the mythical Lake Wobegon, it seems that they're all above average. A majority (65 percent) of the respondents answered that they believed their performance to be about or above average with respect to peers in their industry in areas related to perfect order delivery, fill rates and cycle times. If that seems statistically improbable, it's important to keep in mind that a couple of things may be at work here. Certainly, it's possible that these particular respondents—members of WERC and managers engaged enough to fill out a detailed Web survey— work for companies that do, indeed, record consistently above-average performance. And, of course, it's equally possible that these companies believe they're performing better than experience would bear out.
The "on time" trap
Indeed, it's not at all unusual for suppliers to be less than objective about their own performance. And it's certainly not unheard of for a company to boast about its stellar record shipping orders on time while its customers lament its repeated failure to deliver on time. How could that be? It's very simple. On-time shipment and on-time delivery are two entirely different matters. A lot can happen between the time an item leaves the dock and the time it's delivered.
So why did more of the survey respondents say they measured "on-time shipment" than "on-time delivery?" For one thing, it's a whole lot simpler. Tracking when an order ships is a straightforward matter; it's much tougher to obtain reliable data on precisely when the order was delivered. And because the survey's respondents were DC managers, it could be that this metric simply reflects their daily responsibilities more accurately.
But that's not the only difficulty. Another, more intractable, problem is the apparent confusion surrounding exactly what "on time" means. When asked whether their customers defined on-time delivery differently, nearly 70 percent of the respondents answered yes.
How much variation could there possibly be in the definition of "on time?" Apparently, quite a lot. Many respondents (58 percent) indicated that their customers simply defined an on-time delivery as a delivery on the requested or agreed-upon day. But others were more exacting. Thirty-two percent of the respondents said that "on time" meant delivery at an appointed time, or at least within a 30-minute window of that appointed time. Still others reported different definitions, including "No line down time" or "By 4: 00 p.m." This lack of agreed-upon standards and definitions goes a long way toward explaining why some suppliers have difficulty delivering "on time."
Room for improvement
But even delivering shipments on time every time doesn't necessarily guarantee happy customers. Timeliness doesn't count for much if the customer opens the carton to find not the six dozen red sweaters it ordered but 16 pairs of jeans and two pink sweaters. Nor will timeliness matter much if the invoice is riddled with errors or the goods arrive damaged.
There is, however, one widely recommended measure that incorporates all of these elements—the Perfect Order Index (POI). If an order is to qualify as a "perfect order," the following conditions must be met: 1) the right items are delivered to the right place, 2) at the right time, 3) in defect-free condition, and 4) with the correct documentation and pricing/invoicing.
Despite its obvious advantages, the POI is hardly in widespread use today; our survey indicated that only 42 percent of the respondents used the POI, and only about 32 percent considered it to be an important measure. But we believe that as more companies try to close the performance perception gaps with customers, they will start to see the value of the Perfect Order Index.
The survey team also noted that few companies were using what we consider to be a solid set of balanced measures. When the respondents ranked the 55 metrics according to importance, they tended to favor operational and "capacity and quality" metrics. Notably absent from the top of the list were measures that are primarily financial.
Ideally, we would like to see a more even distribution of the types of measures used. For the most part, our study confirmed our suspicions from last year that measures tended to be used as part of a "foxhole" management strategy—that is, each department focused on its own performance without much regard for the corporate big picture.
A little R-E-S-P-E-C-T
The final part of the survey contained questions about corporate attitudes toward metrics programs. One question, for example, focused on senior management's interest in performance measures—specifically, whether that interest had increased or decreased in 2004. Nearly two-thirds of the respondents (66 percent) indicated that their company's senior management had demonstrated increased interest in metrics, while only 3 percent reported decreased interest. This is an encouraging sign—one likely related to an increased awareness among top executives of the potential benefits of effective supply chain management.
It appears that the survey respondents haven't just captured management's attention; they've also captured its ear. More than 80 percent of the respondents said they felt that management listened to and acted on their suggestions for improvement. But that doesn't necessarily mean they're compensated for their wisdom. While 85 percent said they were recognized for making the company better, only 60 percent reported that they were financially rewarded for their improvement efforts.
On the subject of management communication to staff, the majority of respondents (75 percent) reported that they felt they fully understood the company's values and direction, that they were clear on their personal role within the company, and that they were comfortable that the company was headed in the right direction. That's important, because no measurement program will succeed if employees don't understand where the company is headed. Nonetheless, the researchers question whether the relatively infrequent use of financially oriented metrics may indicate that top management is being less than forthcoming about corporate financial objectives.
It remains to be seen whether questions like these will be resolved in next year's edition of the metrics study. In the meantime, the study's authors invite readers' comments, suggestions, and insights into the research and their own use of measures. They can be reached by e-mail: Karl B. Manrodt at Kmanrodt@georgiasouthern.edu; Kate L. Vitasek at kate@scvisions.com.
a look at the survey respondents
Conventional wisdom dictates that the longer you make a questionnaire, the fewer responses you'll get. And there's no disputing the second annual metrics study questionnaire was long—10 pages' worth of detailed questions. Nonetheless, more than 380 DC VELOCITY readers and WERC members took the time to respond.
Just who were these dedicated professionals? They came from companies of all sizes representing a wide range of industries. Nearly one-third—30 percent—of the respondents worked in the consumer products manufacturing industry. Another 22 percent came from the third-party warehousing industry, while 12 percent came from general manufacturing and 9 percent worked in the retail industry.
As for their "location" in the supply chain—that is, whether their direct customers were end users, retailers, distributors/wholesalers, or manufacturers—most were either at or very close to the end of the chain. Roughly 60 percent indicated that their customers were either retailers or the end users. Only 18 percent reported that their primary customers were distributors, and the remaining 22 percent sold to manufacturers.
As for company size, it turned out that the respondents' businesses were fairly equally distributed among the survey's size categories: about one-third worked for businesses reporting sales of less than $100 million, about one-third reported that their companies' sales fell into the $100 million to $500 million range, and the remaining third reported sales in excess of $500 million.
Congestion on U.S. highways is costing the trucking industry big, according to research from the American Transportation Research Institute (ATRI), released today.
The group found that traffic congestion on U.S. highways added $108.8 billion in costs to the trucking industry in 2022, a record high. The information comes from ATRI’s Cost of Congestion study, which is part of the organization’s ongoing highway performance measurement research.
Total hours of congestion fell slightly compared to 2021 due to softening freight market conditions, but the cost of operating a truck increased at a much higher rate, according to the research. As a result, the overall cost of congestion increased by 15% year-over-year—a level equivalent to more than 430,000 commercial truck drivers sitting idle for one work year and an average cost of $7,588 for every registered combination truck.
The analysis also identified metropolitan delays and related impacts, showing that the top 10 most-congested states each experienced added costs of more than $8 billion. That list was led by Texas, at $9.17 billion in added costs; California, at $8.77 billion; and Florida, $8.44 billion. Rounding out the top 10 list were New York, Georgia, New Jersey, Illinois, Pennsylvania, Louisiana, and Tennessee. Combined, the top 10 states account for more than half of the trucking industry’s congestion costs nationwide—52%, according to the research.
The metro areas with the highest congestion costs include New York City, $6.68 billion; Miami, $3.2 billion; and Chicago, $3.14 billion.
ATRI’s analysis also found that the trucking industry wasted more than 6.4 billion gallons of diesel fuel in 2022 due to congestion, resulting in additional fuel costs of $32.1 billion.
ATRI used a combination of data sources, including its truck GPS database and Operational Costs study benchmarks, to calculate the impacts of trucking delays on major U.S. roadways.
There’s a photo from 1971 that John Kent, professor of supply chain management at the University of Arkansas, likes to show. It’s of a shaggy-haired 18-year-old named Glenn Cowan grinning at three-time world table tennis champion Zhuang Zedong, while holding a silk tapestry Zhuang had just given him. Cowan was a member of the U.S. table tennis team who participated in the 1971 World Table Tennis Championships in Nagoya, Japan. Story has it that one morning, he overslept and missed his bus to the tournament and had to hitch a ride with the Chinese national team and met and connected with Zhuang.
Cowan and Zhuang’s interaction led to an invitation for the U.S. team to visit China. At the time, the two countries were just beginning to emerge from a 20-year period of decidedly frosty relations, strict travel bans, and trade restrictions. The highly publicized trip signaled a willingness on both sides to renew relations and launched the term “pingpong diplomacy.”
Kent, who is a senior fellow at the George H. W. Bush Foundation for U.S.-China Relations, believes the photograph is a good reminder that some 50-odd years ago, the economies of the United States and China were not as tightly interwoven as they are today. At the time, the Nixon administration was looking to form closer political and economic ties between the two countries in hopes of reducing chances of future conflict (and to weaken alliances among Communist countries).
The signals coming out of Washington and Beijing are now, of course, much different than they were in the early 1970s. Instead of advocating for better relations, political rhetoric focuses on the need for the U.S. to “decouple” from China. Both Republicans and Democrats have warned that the U.S. economy is too dependent on goods manufactured in China. They see this dependency as a threat to economic strength, American jobs, supply chain resiliency, and national security.
Supply chain professionals, however, know that extricating ourselves from our reliance on Chinese manufacturing is easier said than done. Many pundits push for a “China + 1” strategy, where companies diversify their manufacturing and sourcing options beyond China. But in reality, that “plus one” is often a Chinese company operating in a different country or a non-Chinese manufacturer that is still heavily dependent on material or subcomponents made in China.
This is the problem when supply chain decisions are made on a global scale without input from supply chain professionals. In an article in the Arkansas Democrat-Gazette, Kent argues that, “The discussions on supply chains mainly take place between government officials who typically bring many other competing issues and agendas to the table. Corporate entities—the individuals and companies directly impacted by supply chains—tend to be under-represented in the conversation.”
Kent is a proponent of what he calls “supply chain diplomacy,” where experts from academia and industry from the U.S. and China work collaboratively to create better, more efficient global supply chains. Take, for example, the “Peace Beans” project that Kent is involved with. This project, jointly formed by Zhejiang University and the Bush China Foundation, proposes balancing supply chains by exporting soybeans from Arkansas to tofu producers in China’s Yunnan province, and, in return, importing coffee beans grown in Yunnan to coffee roasters in Arkansas. Kent believes the operation could even use the same transportation equipment.
The benefits of working collaboratively—instead of continuing to build friction in the supply chain through tariffs and adversarial relationships—are numerous, according to Kent and his colleagues. They believe it would be much better if the two major world economies worked together on issues like global inflation, climate change, and artificial intelligence.
And such relations could play a significant role in strengthening world peace, particularly in light of ongoing tensions over Taiwan. Because, as Kent writes, “The 19th-century idea that ‘When goods don’t cross borders, soldiers will’ is as true today as ever. Perhaps more so.”
Hyster-Yale Materials Handling today announced its plans to fulfill the domestic manufacturing requirements of the Build America, Buy America (BABA) Act for certain portions of its lineup of forklift trucks and container handling equipment.
That means the Greenville, North Carolina-based company now plans to expand its existing American manufacturing with a targeted set of high-capacity models, including electric options, that align with the needs of infrastructure projects subject to BABA requirements. The company’s plans include determining the optimal production location in the United States, strategically expanding sourcing agreements to meet local material requirements, and further developing electric power options for high-capacity equipment.
As a part of the 2021 Infrastructure Investment and Jobs Act, the BABA Act aims to increase the use of American-made materials in federally funded infrastructure projects across the U.S., Hyster-Yale says. It was enacted as part of a broader effort to boost domestic manufacturing and economic growth, and mandates that federal dollars allocated to infrastructure – such as roads, bridges, ports and public transit systems – must prioritize materials produced in the USA, including critical items like steel, iron and various construction materials.
Hyster-Yale’s footprint in the U.S. is spread across 10 locations, including three manufacturing facilities.
“Our leadership is fully invested in meeting the needs of businesses that require BABA-compliant material handling solutions,” Tony Salgado, Hyster-Yale’s chief operating officer, said in a release. “We are working to partner with our key domestic suppliers, as well as identifying how best to leverage our own American manufacturing footprint to deliver a competitive solution for our customers and stakeholders. But beyond mere compliance, and in line with the many areas of our business where we are evolving to better support our customers, our commitment remains steadfast. We are dedicated to delivering industry-leading standards in design, durability and performance — qualities that have become synonymous with our brands worldwide and that our customers have come to rely on and expect.”
In a separate move, the U.S. Environmental Protection Agency (EPA) also gave its approval for the state to advance its Heavy-Duty Omnibus Rule, which is crafted to significantly reduce smog-forming nitrogen oxide (NOx) emissions from new heavy-duty, diesel-powered trucks.
Both rules are intended to deliver health benefits to California citizens affected by vehicle pollution, according to the environmental group Earthjustice. If the state gets federal approval for the final steps to become law, the rules mean that cars on the road in California will largely be zero-emissions a generation from now in the 2050s, accounting for the average vehicle lifespan of vehicles with internal combustion engine (ICE) power sold before that 2035 date.
“This might read like checking a bureaucratic box, but EPA’s approval is a critical step forward in protecting our lungs from pollution and our wallets from the expenses of combustion fuels,” Paul Cort, director of Earthjustice’s Right To Zero campaign, said in a release. “The gradual shift in car sales to zero-emissions models will cut smog and household costs while growing California’s clean energy workforce. Cutting truck pollution will help clear our skies of smog. EPA should now approve the remaining authorization requests from California to allow the state to clean its air and protect its residents.”
However, the truck drivers' industry group Owner-Operator Independent Drivers Association (OOIDA) pushed back against the federal decision allowing the Omnibus Low-NOx rule to advance. "The Omnibus Low-NOx waiver for California calls into question the policymaking process under the Biden administration's EPA. Purposefully injecting uncertainty into a $588 billion American industry is bad for our economy and makes no meaningful progress towards purported environmental goals," (OOIDA) President Todd Spencer said in a release. "EPA's credibility outside of radical environmental circles would have been better served by working with regulated industries rather than ramming through last-minute special interest favors. We look forward to working with the Trump administration's EPA in good faith towards achievable environmental outcomes.”
Editor's note:This article was revised on December 18 to add reaction from OOIDA.
A Canadian startup that provides AI-powered logistics solutions has gained $5.5 million in seed funding to support its concept of creating a digital platform for global trade, according to Toronto-based Starboard.
The round was led by Eclipse, with participation from previous backers Garuda Ventures and Everywhere Ventures. The firm says it will use its new backing to expand its engineering team in Toronto and accelerate its AI-driven product development to simplify supply chain complexities.
According to Starboard, the logistics industry is under immense pressure to adapt to the growing complexity of global trade, which has hit recent hurdles such as the strike at U.S. east and gulf coast ports. That situation calls for innovative solutions to streamline operations and reduce costs for operators.
As a potential solution, Starboard offers its flagship product, which it defines as an AI-based transportation management system (TMS) and rate management system that helps mid-sized freight forwarders operate more efficiently and win more business. More broadly, Starboard says it is building the virtual infrastructure for global trade, allowing freight companies to leverage AI and machine learning to optimize operations such as processing shipments in real time, reconciling invoices, and following up on payments.
"This investment is a pivotal step in our mission to unlock the power of AI for our customers," said Sumeet Trehan, Co-Founder and CEO of Starboard. "Global trade has long been plagued by inefficiencies that drive up costs and reduce competitiveness. Our platform is designed to empower SMB freight forwarders—the backbone of more than $20 trillion in global trade and $1 trillion in logistics spend—with the tools they need to thrive in this complex ecosystem."