As the Cheshire Cat famously told Alice as she dithered about which road to take, if you don't know where you want to get to, it doesn't matter which way you go. That's something supply chain managers might want to think about. If the results of a recent study are any indication, more than a few companies have thrown piles of money at programs aimed at figuring out how far they've come (and how far they have to go) without giving much thought to where the company's actually heading.
That was the surprising finding of a new multi-phase study on metrics conducted by DC VELOCITY, Georgia Southern University and the University of Tennessee. In the study's first phase, respondents were asked to select the metrics they used (from a list of 80) and then asked to identify their companies' overall strategy (in broad terms). It quickly became apparent that although many companies have formal measurement programs in place, the metrics they're using to measure their progress don't necessarily align with their overall business strategy. In fact, the researchers found that companies basically used the same, one-size-fits-all set of metrics whether their corporate objectives were cutting costs, maximizing asset utilization, increasing customer satisfaction or maximizing profitability. "Companies are either not evaluating metrics when changing strategies or believe that existing metrics are appropriate for all strategies," said Karl Manrodt and Stephen Rutner of Georgia Southern and Mary Collins Holcomb of the University of Tennessee in their report.
As for those "existing metrics," they include standard measures like inventory count accuracy, cost per unit shipped or processed, and on-time delivery. But that's not to imply that all companies are even measuring these basics. "Perhaps the greatest surprise was the low levels of use of some of these metrics." the researchers wrote. "It is hard to conceive of 45 percent of companies NOT measuring customer satisfaction. Also, with the recent focus on cost leadership, it is challenging to understand why almost half of respondents do not measure the total cost per order shipped. Finally, one-third of respondents do not capture on-time delivery statistics. While there may be good reasons at specific companies for not using specific measures, this implies that there is still not a perfect set of measures for every organization."
Results of the first phase of the study were presented at the Warehousing Education and Research Council's annual conference last month. They will also be published in DC VELOCITY's July issue. In the meantime, work continues on the second phase of the research, which will focus on how much weight participants give to each type of metric and how they define some of the more commonly used measures.
The study's authors invite readers' comments, suggestions, and insights into the research and their own use of metrics. They can be reached by e-mail: Karl B. Manrodt at Kmanrodt@georgiasouthern.edu, Stephen M. Rutner at Srutner@georgiasouthern.edu, and Mary Collins Holcomb at MaryHolcomb@ln.utk.edu.
Gartner, Inc.
