Editor's Note: No two successful performance management programs are the same, but all successful performance management programs share common principles. To shed some light on what separates a good company from a great company with regard to performance management, DC VELOCITY will publish a column on one of the 12 Commandments of Successful Performance Management each month. This month we drill into the fourth commandment: Beware.
The Fifth Commandment Beware: Know the point of your metrics and be careful not to get sidetracked
The scenario is all too familiar: Tired of fielding complaints from customers about poor service, senior management decides to crack down on the DC staff. It gathers the supervisors, planners and expeditors together to announce that it expects everyone to pull together to improve delivery reliability. As an incentive, it's establishing a bonus program; workers will be rewarded based on their performance against a standard metric, say, the DC's fill rate.
The
12 Commandments of
Performance Management
1Focus:
Know
your goals 2Balance:
Use a balanced approach 3Involve:
Get employees engaged 4Apply:
Be metrics "users", not just "collectors" or "posters" 5Beware: Know the point of your metrics 6 Anticipate: Use metrics
as your headlights 7 Integrate: Layer your
metrics like an onion 8 Listen: Pay attention
to what your customer is saying 9 Benchmark! 10 Be flexible: There's
no such thing as the holy grail of metrics 11 Lead: Practice what
you preach 12 Be Patient: Crawl
before you walk (or run!)
In the following days, managers draft "expedite" lists and workers spend hours chasing orders that are due to ship in hopes of achieving world-class performance. What they don't realize, however, is that the company will never achieve world-class performance by focusing on an isolated metric—be it fill rate, inventory turns or order cycle time.Worldclass performance is a result of world-class process—devising a system for perfectly executing not a task like getting a box to the dock, but a comprehensive multi-step process, like order fulfillment.
Focusing exclusively on one small task is like painstakingly caulking a window frame while the ceiling collapses around you. Nonetheless, companies fall into this trap all the time.What follows are a few true-life examples (with identifying details changed) of how companies have gotten sidetracked from their main mission by a metric (in this case, fill rate):
Company A receives an order for a printer cartridge on Monday but holds off sending the order to the DC because that particular cartridge is out of stock. When the cartridges are finally restocked on Thursday, the order is forwarded to the DC for fulfillment on Friday. By now, the impatient customer has had to wait five extra days for the cartridge. Nonetheless, Company A, which measures fill rates by how quickly the order is filled once it hits the DC (not from the time the order was received), proudly reports a 100-percent fill rate.
Company B receives an order for a truck engine on Monday. Though its normal cycle time is two days from order to shipment, the company quotes the customer a five-day cycle time because it's experiencing unusually high demand.When it ships the engine out on Friday, Company B reports that it has achieved a 100-percent fill rate because it shipped the product when it said it would (but not when the customer needed it).
Company C, a videogame manufacturer whose plant runs 24 hours a day, ships games to DCs nationwide. The cutoff for trucks leaving the plant is usually 9 p.m. During the peak demand period, production falls behind and an order misses the truck. However, the plant continues assembling the order and finally sends the carton to the shipping department at 10 p.m. Shipping clerks fill out the manifests and send the carton to the dock—where it sits until the next evening. Though the carton languishes on the dock for nearly 24 hours, Company C's computer system shows the order as "shipped" and reports a 100-percent fill rate.
Company D boasted of stellar fill rates (98.5 percent) for books shipped from its DC to retailers.Nonetheless, customers were constantly on the phone complaining about lousy service. An investigation revealed that though the books left the DC on time, they rarely arrived at the customer's receiving dock during the scheduled delivery window. When they failed to show up, the retailer was forced to reschedule the delivery, which meant delays of up to three days.
Company E's delivery performance had slumped, with fill rates dipping into the low 70th percentile. Management stepped in to offer bonuses if workers could raise that to 99 percent. In short order, they were hitting the target regularly. What no one noticed was that a spike in expedited shipments had cost the company over $1 million.
Are your orders perfect?
It's safe to say that claims that a company regularly achieves a 100-percent fill rate or ships products "on time" is no guarantee that the customer will receive the goods on time. Nor does it mean the customer will get the products it ordered in the quantity ordered or that the box will arrive undamaged and with a correct invoice. It simply tells you that the company has found a way to hit one particular target consistently.
To measure what's truly important to the customer, you must turn to the Perfect Order. Though slight variations exist, the Perfect Order is usually defined as an order that's delivered on time, complete, damage free and accompanied by the correct invoice.
And it's not even that complicated to calculate: You simply multiply scores for the various component measures. For example, if a company reports that it has a 95.0-percent performance record for on time deliveries, fill rates, correct invoices and damage free shipments, the resulting Perfect Order index would be 81.4 percent (95% x 95% x 95% x 95%). Had each of the scores been 90 percent, the Perfect Order index would drop significantly—to 65.6 percent.
The lesson is simple. Manage your business with process metrics, and evaluate your business using results metrics. Used properly, process metrics drive the desired results.
Autonomous forklift maker Cyngn is deploying its DriveMod Tugger model at COATS Company, the largest full-line wheel service equipment manufacturer in North America, the companies said today.
By delivering the self-driving tuggers to COATS’ 150,000+ square foot manufacturing facility in La Vergne, Tennessee, Cyngn said it would enable COATS to enhance efficiency by automating the delivery of wheel service components from its production lines.
“Cyngn’s self-driving tugger was the perfect solution to support our strategy of advancing automation and incorporating scalable technology seamlessly into our operations,” Steve Bergmeyer, Continuous Improvement and Quality Manager at COATS, said in a release. “With its high load capacity, we can concentrate on increasing our ability to manage heavier components and bulk orders, driving greater efficiency, reducing costs, and accelerating delivery timelines.”
Terms of the deal were not disclosed, but it follows another deployment of DriveMod Tuggers with electric automaker Rivian earlier this year.
Manufacturing and logistics workers are raising a red flag over workplace quality issues according to industry research released this week.
A comparative study of more than 4,000 workers from the United States, the United Kingdom, and Australia found that manufacturing and logistics workers say they have seen colleagues reduce the quality of their work and not follow processes in the workplace over the past year, with rates exceeding the overall average by 11% and 8%, respectively.
The study—the Resilience Nation report—was commissioned by UK-based regulatory and compliance software company Ideagen, and it polled workers in industries such as energy, aviation, healthcare, and financial services. The results “explore the major threats and macroeconomic factors affecting people today, providing perspectives on resilience across global landscapes,” according to the authors.
According to the study, 41% of manufacturing and logistics workers said they’d witnessed their peers hiding mistakes, and 45% said they’ve observed coworkers cutting corners due to apathy—9% above the average. The results also showed that workers are seeing colleagues take safety risks: More than a third of respondents said they’ve seen people putting themselves in physical danger at work.
The authors said growing pressure inside and outside of the workplace are to blame for the lack of diligence and resiliency on the job. Internally, workers say they are under pressure to deliver more despite reduced capacity. Among the external pressures, respondents cited the rising cost of living as the biggest problem (39%), closely followed by inflation rates, supply chain challenges, and energy prices.
“People are being asked to deliver more at work when their resilience is being challenged by economic and political headwinds,” Ideagen’s CEO Ben Dorks said in a statement announcing the findings. “Ultimately, this is having a determinantal impact on business productivity, workplace health and safety, and the quality of work produced, as well as further reducing the resilience of the nation at large.”
Respondents said they believe technology will eventually alleviate some of the stress occurring in manufacturing and logistics, however.
“People are optimistic that emerging tech and AI will ultimately lighten the load, but they’re not yet feeling the benefits,” Dorks added. “It’s a gap that now, more than ever, business leaders must look to close and support their workforce to ensure their staff remain safe and compliance needs are met across the business.”
The “2024 Year in Review” report lists the various transportation delays, freight volume restrictions, and infrastructure repair costs of a long string of events. Those disruptions include labor strikes at Canadian ports and postal sites, the U.S. East and Gulf coast port strike; hurricanes Helene, Francine, and Milton; the Francis Scott key Bridge collapse in Baltimore Harbor; the CrowdStrike cyber attack; and Red Sea missile attacks on passing cargo ships.
“While 2024 was characterized by frequent and overlapping disruptions that exposed many supply chain vulnerabilities, it was also a year of resilience,” the Project44 report said. “From labor strikes and natural disasters to geopolitical tensions, each event served as a critical learning opportunity, underscoring the necessity for robust contingency planning, effective labor relations, and durable infrastructure. As supply chains continue to evolve, the lessons learned this past year highlight the increased importance of proactive measures and collaborative efforts. These strategies are essential to fostering stability and adaptability in a world where unpredictability is becoming the norm.”
In addition to tallying the supply chain impact of those events, the report also made four broad predictions for trends in 2025 that may affect logistics operations. In Project44’s analysis, they include:
More technology and automation will be introduced into supply chains, particularly ports. This will help make operations more efficient but also increase the risk of cybersecurity attacks and service interruptions due to glitches and bugs. This could also add tensions among the labor pool and unions, who do not want jobs to be replaced with automation.
The new administration in the United States introduces a lot of uncertainty, with talks of major tariffs for numerous countries as well as talks of US freight getting preferential treatment through the Panama Canal. If these things do come to fruition, expect to see shifts in global trade patterns and sourcing.
Natural disasters will continue to become more frequent and more severe, as exhibited by the wildfires in Los Angeles and the winter storms throughout the southern states in the U.S. As a result, expect companies to invest more heavily in sustainability to mitigate climate change.
The peace treaty announced on Wednesday between Isael and Hamas in the Middle East could support increased freight volumes returning to the Suez Canal as political crisis in the area are resolved.
The French transportation visibility provider Shippeo today said it has raised $30 million in financial backing, saying the money will support its accelerated expansion across North America and APAC, while driving enhancements to its “Real-Time Transportation Visibility Platform” product.
The funding round was led by Woven Capital, Toyota’s growth fund, with participation from existing investors: Battery Ventures, Partech, NGP Capital, Bpifrance Digital Venture, LFX Venture Partners, Shift4Good and Yamaha Motor Ventures. With this round, Shippeo’s total funding exceeds $140 million.
Shippeo says it offers real-time shipment tracking across all transport modes, helping companies create sustainable, resilient supply chains. Its platform enables users to reduce logistics-related carbon emissions by making informed trade-offs between modes and carriers based on carbon footprint data.
"Global supply chains are facing unprecedented complexity, and real-time transport visibility is essential for building resilience” Prashant Bothra, Principal at Woven Capital, who is joining the Shippeo board, said in a release. “Shippeo’s platform empowers businesses to proactively address disruptions by transforming fragmented operations into streamlined, data-driven processes across all transport modes, offering precise tracking and predictive ETAs at scale—capabilities that would be resource-intensive to develop in-house. We are excited to support Shippeo’s journey to accelerate digitization while enhancing cost efficiency, planning accuracy, and customer experience across the supply chain.”
Donald Trump has been clear that he plans to hit the ground running after his inauguration on January 20, launching ambitious plans that could have significant repercussions for global supply chains.
As Mark Baxa, CSCMP president and CEO, says in the executive forward to the white paper, the incoming Trump Administration and a majority Republican congress are “poised to reshape trade policies, regulatory frameworks, and the very fabric of how we approach global commerce.”
The paper is written by import/export expert Thomas Cook, managing director for Blue Tiger International, a U.S.-based supply chain management consulting company that focuses on international trade. Cook is the former CEO of American River International in New York and Apex Global Logistics Supply Chain Operation in Los Angeles and has written 19 books on global trade.
In the paper, Cook, of course, takes a close look at tariff implications and new trade deals, emphasizing that Trump will seek revisions that will favor U.S. businesses and encourage manufacturing to return to the U.S. The paper, however, also looks beyond global trade to addresses topics such as Trump’s tougher stance on immigration and the possibility of mass deportations, greater support of Israel in the Middle East, proposals for increased energy production and mining, and intent to end the war in the Ukraine.
In general, Cook believes that many of the administration’s new policies will be beneficial to the overall economy. He does warn, however, that some policies will be disruptive and add risk and cost to global supply chains.
In light of those risks and possible disruptions, Cook’s paper offers 14 recommendations. Some of which include:
Create a team responsible for studying the changes Trump will introduce when he takes office;
Attend trade shows and make connections with vendors, suppliers, and service providers who can help you navigate those changes;
Consider becoming C-TPAT (Customs-Trade Partnership Against Terrorism) certified to help mitigate potential import/export issues;
Adopt a risk management mindset and shift from focusing on lowest cost to best value for your spend;
Increase collaboration with internal and external partners;
Expect warehousing costs to rise in the short term as companies look to bring in foreign-made goods ahead of tariffs;
Expect greater scrutiny from U.S. Customs and Border Patrol of origin statements for imports in recognition of attempts by some Chinese manufacturers to evade U.S. import policies;
Reduce dependency on China for sourcing; and
Consider manufacturing and/or sourcing in the United States.
Cook advises readers to expect a loosening up of regulations and a reduction in government under Trump. He warns that while some world leaders will look to work with Trump, others will take more of a defiant stance. As a result, companies should expect to see retaliatory tariffs and duties on exports.
Cook concludes by offering advice to the incoming administration, including being sensitive to the effect retaliatory tariffs can have on American exports, working on federal debt reduction, and considering promoting free trade zones. He also proposes an ambitious water works program through the Army Corps of Engineers.