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About the Author

Kevin Harris
Director of Freight Data and Marketing
Compliance Networks

Kevin Harris has over 11 years of experience as a project and marketing manager with Compliance Networks, helping retailers develop and implement process and profit-improvement solutions. Kevin has managed successful distribution operations for very large and small retailers and manufacturers. He got his start in operations and logistics in 1983 as an infantry officer in the U.S. Army, serving in the 3rd Ranger Battalion.

For more information, please visit www.compliancenetworks.com.


Supply Chain Comment

By Kevin Harris, Director of Freight Data and Marketing, Compliance Networks

February 21, 2013



Data, Collaboration, and Profitability from the Extended Supply Chain

Performance Metrics must Support Corporate Objectives and Operational Requirements for Supply Chain Processes



It is tough to fix something that you don’t know is broken. Unfortunately, most supply chain stakeholders don’t capture, integrate, and otherwise leverage the data necessary to know how their supply chain is performing.

Retailers and suppliers simply cannot afford to develop merchandising plans, supply chain plans, and other plans or strategies while handicapped with inaccurate and incomplete supply chain performance data. Ongoing improvement is also hindered when supply chains lack the data to know why execution of the plan was less than excellent.

Harris Says:

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Accurate, complete, and carefully prepared numbers are very effective for collaborative communication. Numbers that are relevant to all concerned stakeholders provide an excellent shared space with which to collaborate.
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If You Build It They Will Improve

Supply chains realize the benefits of supplier performance management almost immediately after implementation. When the program includes effective communication of performance metrics and the intent to recover the cost of performance failures, supply chain performance improves rapidly.

According to Nikki Baird in The Reinvention of Supplier Performance Management (Supply and Demand Chain Executive, March 2006):


 

"The value is definitely there. A study by Aberdeen Group in December 2002 found that a company could increase its supplier performance by 26.6 percent, on average, just by incorporating a formal performance measurement program. The benefits increased to over 60 percent improvement in the cases where companies shared that information with their suppliers, rather than only using that information internally. And the companies that used automation tools to support their supplier performance initiatives achieved 57 percent greater improvement over companies without such tools. Extended supply chain visibility is the first step to achieving this level of benefit by providing the granularity and the synchronized view that enables suppliers and customers to work together to improve supply-side processes."


Compliance Networks’s customers can validate the findings above. Below are typical results from one of our retail customers within 18 months of implementing a vendor performance program:

 

• Reduced DC cycle times by more than 40 percent

• Improved DC productivity by 14 percent

• Trimmed distribution costs per unit by 8 percent

• Curtailed problem shipments by 63 percent

• Boosted cross-dock by 30 percent

• Increased DC capacity


Supply Chain Performance Data

A well-designed and implemented Vendor Performance program will capture performance history across a wide span of supply chain activities. It will detect performance throughout the entire PO lifecycle and provide rapid feedback to supply chain stakeholders, to maximize opportunities to correct supply chain performance failures before they are repeated.

The robust Supply Chain Data Warehouse that is produced by the Vendor Performance program becomes a valuable resource for managing supply chain collaboration, execution, improvement and planning.

Continuous Retail Supply Chain Improvement

Leveraging a Plan-Do-Check-Act cycle, the performance data from vendor performance programs is used to identify supply chain execution failures and successes, and adjust merchandising and other supply chain planning and execution.

Objectives and Metrics

Performance metrics must support corporate objectives and operational requirements for supply chain processes. Performance metrics must drive the gathering of data. Historically, the availability of data drives the metrics, which often produces lackluster performance improvement results.

Once performance metrics have been defined, they must be clearly communicated to the vendors or suppliers, and other supply chain stakeholders.

Measure Results

An Aberdeen Group supply chain study in November 2002 found that nearly 60% of enterprises are less than satisfied with their ability to consistently measure and manage supplier performance. Further, the study found that the typical supplier performance measurement program targets less than a third of the total supply base. A best-in-class Vendor Performance program will target 100% of vendors to maximize collaboration among supply chain stakeholders and optimize the benefits to the enterprise.

The 100% supplier target is more easily achieved if the vendor performance program leverages automated systems to perform as much of the performance-measuring activities as possible, allowing humans to do what they do best (analyze, evaluate, perform manual audits, and data entry).

All the Data, All the Time

Competent vendor performance programs capture and consolidate disparate data that is essential for comparing vendor performance with retailer expectations. The data must be accurate, current, and complete. The vendor performance system must facilitate access to the data for all stakeholders. The result is a supply chain data warehouse that is a single source of information that is relevant to end users and decision makers throughout the enterprise. Convenient access to reliable supply chain information encourages the use of that information to support supply chain improvement activities.

Collaborating with Shared Space

Effective collaboration requires effective communication of intent, objectives, limitations, constraints, plans, information, and expectations in an environment of mutual respect for the needs of other stakeholders.

Numbers – The Universal Language

In 1912, Emile Durkheim, wrote in Les formes elementaires de la vie religieuse:

  ...categories such as time, space, cause, and number represent the most general relations which exist between things; surpassing all our other ideas in extension, they dominate all the details of our intellectual life. If humankind did not agree upon these essential ideas at every moment, if they did not have the same conception of time, space, cause, and number, all contact between their minds would be impossible.


Accurate, complete, and carefully prepared numbers are very effective for collaborative communication. Numbers that are relevant to all concerned stakeholders provide an excellent shared space with which to collaborate. Numbers with shared relevance and importance provide for minimal translation effort and misinterpretation.

The medium with which data is shared is not as important as frequent information exchange and dialogue regarding opportunities for stakeholders to support each other’s objectives.

The Bottom Line

Michael Hugo wraps it up nicely in his book Essentials of Supply Chain Management:

  Over the longer term, those companies and supply chains that learn how to maximize the use of information to get optimal performance from the other drivers will gain the most market share and be the most profitable.

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