Big Data & Analytics Savi Solutions

How to Monitor Metrics to Optimize Performance

With too many metrics, too much unfiltered data, and ever-present change, many organizations struggle to focus on the most important metrics for their organization. When everything appears relevant, it’s easy to become overwhelmed or bogged down by metrics that are neither beneficial nor noteworthy to your overall success. Yet focusing on the right metrics is critical to any organization’s success, so it’s worth taking a closer look.

The first step is to acknowledge that change needs to occur in your organization. All key persons in your organization, from the top down, should be part of the conversation to define what you’re trying to accomplish and to prioritize what projects and initiatives are most important to driving the desired change. Based on your organization’s priorities, you can then align your daily progress to more pertinent milestones. This type of strategy yields a set of metrics to measure your daily progress against the larger milestones.

Organizations should focus on supply chain metrics that have the highest correlation to market capitalization, such as:

  • Customer service, such as percent of loads/orders delivered on time and in full
  • Accurate estimated time of arrival and departure of goods
  • Supply Chain Cost of Goods Sold / Operating Margin
  • Truck Load vs. Less than Truck Load (LTL)
  • Stock/inventory turns
  • Risk of theft, loss, and damage

It’s important to discuss tradeoffs while focusing on specific metrics. Metrics play against each other, so while you choose to optimize for one metric, it may cause an adverse change in another metric.

Lora Cecere, Founder of Supply Chain Insights, says, “A supply chain leader’s goal is to improve the potential of the supply chain within the possible range for a specific industry. It is a balancing act. Supply chain teams must balance growth objectives, [and] define asset strategies while managing costs and inventories.”[1] She calls this the “Effective Frontier.” Rather than the Efficient Frontier, which is a common concept in economics discussions, the Effective Frontier aims to find balance in order to be an effective organization…because, in the end, what good is efficiency on operational growth if it doesn’t drive towards the company objectives?

One example of driving towards the Effective Frontier is closely monitoring inbound and outbound estimated times of arrival on product movements, so that the overall inventory buffer levels can be reduced, and closely matched with the arrival and departure of product. This in turn drives inventory turns up, while making better use of working capital. This increases operating margin, which in turn will make the CFO, CEO and investors quite happy.

One example of driving towards the Effective Frontier is closely monitoring inbound and outbound estimated times of arrival on product movements, so that the overall inventory buffer levels can be reduced, and closely matched with the arrival and departure of product. This in turn drives inventory turns up, while making better use of working capital. This increases operating margin, which in turn will make the CFO, CEO and investors quite happy.

 

[1] Cecere, L. (2015, September 18). Driving Supply Chain Excellence: Understanding Improvement and Performance. Retrieved from Forbes: http://www.forbes.com/sites/loracecere/2015/09/18/driving-supply-chain-excellence-understanding-improvement-and-performance/