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SIMCO SRL Via Durando 38 - 20158 Milano
tel. 02 39325605 -fax 02 39325600 E-mail: [email protected] - Sito: www.simcoconsulting.it
I vostri KPI crescono? Verso l’ordine perfetto Il WERC (Warehousing Education and Research Council) ha presentato un benchmarking sulle prestazioni dei centri distributivi, facendo emergere innanzitutto l’esigenza di un “metro” di misura condiviso. È statisticamente molto difficile essere superiori alla media, tuttavia, secondo il rapporto, la maggior parte dei responsabili di centri distributivi percepisce le proprie prestazioni come “migliori”. Lo studio del WERC mette a confronto i dati sulla base di 45 indicatori operativi messi a disposizione da circa 1.000 aziende aderenti all’indagine. Le aziende rappresentate appartengono ad un’ampia varietà di settori, hanno dimensioni anche molto differenti e diverse tipologie di Clienti. Buona parte dell’analisi si è concentrata sulle operazioni che caratterizzano la movimentazione di colli (64.5%), mentre il resto su quella di bancali (35.6%). Kate Vitasek, Managing Partner di Supply Chain Visions, illustrando nella sua presentazione la metrica in esame suggerisce alle aziende di selezionare gli indicatori di prestazione focalizzandoli sul proprio Cliente (better for Him, better for You). Tanto per cominciare, suggerisce di mettere a fuoco i quattro elementi alla base “dell'ordine perfetto”:
1. la percentuale di ordini consegnati puntualmente;
2. la percentuale di ordini completi;
3. la percentuale di ordini senza errori da danneggiamento della merce;
4. la percentuale di ordini spediti con documentazione corretta (bolla/fattura).
SIMCO SRL Via Durando 38 - 20158 Milano
tel. 02 39325605 -fax 02 39325600 E-mail: [email protected] - Sito: www.simcoconsulting.it
Secondo il rapporto del WERC, presentato l’ultima settimana di aprile al congresso annuale dell'organizzazione, le performance considerate “best practice” per questi indicatori sono pari a:
1. almeno il 99% degli ordini consegnati puntualmente;
2. almeno il 99,3% degli ordini completi;
3. almeno il 99,8% degli ordini senza errori da danneggiamento della merce;
4. almeno il 99,99% degli ordini spediti con documentazione corretta (bolla/fattura). Viene considerata best practice solo la prestazione relativa alla porzione migliore del campione, pari al 20% delle aziende che hanno fornito risposta (pertanto circa 200). Tuttavia preme sottolineare che non tutte le aziende hanno fornito i dati completi per la rilevazione metrica, pertanto è possibile che le aziende che non raccolgono i dati non hanno probabilmente prestazioni analoghe a quelle che invece li hanno forniti. Un elemento di particolare interesse: più dell’85% degli aderenti all’indagine segnala la rilevazione di consegne puntuali, tuttavia la gran parte delle aziende traccia il tempo di spedizione, mentre solo una minoranza adotta strumenti di rilevazione della consegna presso il Cliente. Probabilmente proprio questo concentrarsi sulla metrica interna, piuttosto che riferirla al Cliente induce le aziende a ritenere migliori loro proprie prestazioni rispetto a quelle realmente erogate.
Visionsupplyhain
Beyond Fill Rate:Perfecting The Perfect Order
Kate VitasekManaging Partner
Supply Chain Visions
www.scvisions.com
1© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Learning Objectives
What is good when it comes to measuring distribution performance?
Process vs Results Measures
The What and Why of the Perfect Order Index
Case Study
2© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
You have a 99% fill rate from your DC.
Is this Good?
3© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Metrics Drive Behaviors
Does Not Consider
Kinds of Behavior Created
Metric
- Did it arrive when the customer wanted?- How much did it cost to fill the order- Cycle time up or down the supply chain (tail)- Customer complaints (quality or accuracy)
- Expedited orders to manufacturing- Airfreight shipments- Large inventories on hand to prevent out of
stocks
99% Fill Rate for a Distribution CenterBad
4© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Metrics Drive Behaviors
Does Not Consider
Kinds of Behavior Created
Metric
- How much did it cost to fill the order?
- Customer complaints (quality or accuracy)
- Did it arrive when the customer wanted?
- How much did it cost to fill the order
- Cycle time up or down the supply chain (tail)
- Customer complaints (quality or accuracy)
- Cross functional view to work with OM and Manufacturing
- Large inventories on hand to prevent out of stocks
- Expedited orders to manufacturing
- Airfreight shipments- Large inventories on hand
to prevent out of stocks
97% On Time to Customer Request
99% Fill Rate for a Distribution Center
BetterBad
5© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Metrics Drive Behaviors
- How much did it cost to fill the order?
- Cross functional view to work with OM and Manufacturing and Transportation
- Overall order accuracy and quality – including invoicing
95% Perfect Order Fulfillment
Best
Does Not Consider
Kinds of Behavior Created
Metric
- How much did it cost to fill the order?
- Customer complaints (quality or accuracy)
- Did it arrive when the customer wanted?
- How much did it cost to fill the order
- Cycle time up or down the supply chain (tail)
- Customer complaints (quality or accuracy)
- Cross functional view to work with OM and Manufacturing
- Large inventories on hand to prevent out of stocks
- Expedited orders to manufacturing
- Airfreight shipments- Large inventories on
hand to prevent out of stocks
97% On Time to Customer Request
99% Fill Rate for a Distribution Center
BetterBad
6© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Learning Objectives
What is good when it comes to measuring distribution performance?
Process vs Results Measures
The What and Why of the Perfect Order Index
Case Study
7© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Acquire a Process, Not Functional Orientation
Do not optimize all the smallest particles, but understand interactions to make best trade-offs
A telescope is better tool than a microscope – look at the biggest picture, and the long-term considerations – at processes, not activities
8© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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What’s the Point of a Metric: Process vs Results Metrics
Results MetricsUsually functionally orientedUsually focused on one aspect of a process Measures components of a process – but not the whole processIf left unchecked, drive suboptimization
Process MetricsAre usually company-wide or customer focusedAre cross functional in nature (and sometimes cross company)Measure the “total effect” of a processDrive overall optimization of costs and customer satisfaction
9© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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Develop Cross Functional / Process Framework
The composition of a process measure is based on the composition of the process being measured
Task
Task
Task
Activity
Function
Activity
Task
Task
Task
Function
Activity
Task
Task
Task
Function
Process
Activity Activity Activity
Task
Task
Task
Task
Task
Task
Task
Task
Task
10© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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Example Framework
Cross Functional Metric: 98% Order Fulfillment within 5 Business Days
Distribution Dept
Order Management Dept
Transportation Dept
Del
iver
y Ti
me
% C
usto
mer
A
ppoi
ntm
ent M
et
Ord
ers
Pick
ed/H
our
Ave
rage
Ord
er
Size
Pick
/ Pac
k Sh
ip
Tim
e
Ord
er R
ecei
pt &
Ve
rific
atio
n Ti
me
Ord
er E
ntry
into
Sy
stem
Tim
e
Ord
ers
Proc
esse
d/H
r
Ord
ers
Proc
esse
d/W
k
Indi
vidu
al
Func
tiona
l Met
rics
and
Dat
a
Fill
Rat
e %
11© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Learning Objectives
What is good when it comes to measuring distribution performance?
Process vs Results Measures
The What and Why of the Perfect Order Index
Case Study
12© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
What is a Perfect Order?
On time
Complete
Damage Free
Correct Invoice
13© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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Best Practice for Process Metrics:Indexing: The Perfect Order
95% X 95% X X
On Time X Complete X XDamage FreeAccurateInvoicing =On Time X Complete X XDamage FreeAccurateInvoicing =
95% 95% =
POI
81.4%
14© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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What are Some Benchmarks?
93..67 X X X
On Time X Complete X XDamage Free
AccurateInvoicing =On Time
DeliveryXComplete X Accurate
Invoicing =
=
POI
99 X X X
On Time X Complete X XDamage Free
AccurateInvoicing =On Time
DeliveryXComplete X Accurate
Invoicing =
=
POI
99.7
AVER
AGE
BEST
PRA
CTIC
E
93.30 98.35
99.9
98.2
100
84.4
98.6
Source: Warehouse Education Research Council 2005 Benchmarking Study
15© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
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Why the Perfect Order?
Ultimate measure of a customer’s order
AMR StudyOnly about 80% of orders in the US are perfect11% of orders are not delivered on time
StockoutsLate shipmentsTransit delaysMultiple deliveries
Helps reduce costs
16© Supply Chain Visions 2004 – All Rights Reserved
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Cost of Doing “Wrong”
Physical cost to fix the errorLabor cost for multiple shipments in backorder and additional freight Providing replacement productRefunding purchase priceProviding creditCost of processing additional receipts for multiple shipment
Penalties Retail compliance fees come straight from profits
Lost revenueCost of lost sales Cost of lost customers
17© Supply Chain Visions 2004 – All Rights Reserved
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How Much Can It Cost?
Typical Order = profit of $15Five items priced at $5 eachShipped by the best way at a cost of $5Total invoice $30Margin of 50% with profits of $15
Cost to “Perfect” the Order of a Mis-shipment for one item = $9.75Customer service labor and phone charges - $5.00 Transportation for a return - $2.00Replacement item - $2.00Labor to pick/pack/ and check the order again - $.75
Consider the below simple example of an incorrect business to consumer shipment.
18© Supply Chain Visions 2004 – All Rights Reserved
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Additional Benefits of the Perfect Order
Earnings Per Share (EPS) – An increase of 10 percentage points in the perfect order rating correlated to 50 cents better earnings per shareReturn on Assets (ROA) – Companies with better perfect order ratings tend to have better ROA. 5 percentage points correlates to 2.5% better ROAProfit Margins – A 3 percentage point better perfect order rating correlates with 1% additional profit margin
A recent study by AMR Research found a correlation between Perfect Order performance and some key financial and market indicators...
19© Supply Chain Visions 2004 – All Rights Reserved
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Usage of the Perfect Order Index
Almost 60% do not use POI, even though 73% said it was important or very important
1.1%
6.7%
18.9%
31.1%
42.2%
0% 10% 20% 30% 40% 50%
Not Very Important
Not Important
Neutral
Important
Very Important
No 59%Yes 41%
Do You Use the Perfect Order Measure?
Source: 2005 DC Velocity / WERC Metrics Study
20© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Learning Objectives
What is good when it comes to measuring distribution performance?
Process vs Results Measures
The What and Why of the Perfect Order Index
Case Study
21© Supply Chain Visions 2004 – All Rights Reserved
upplyhain isions
®V
Perceptions GapsPe
rfor
man
ce
Time
Your current trajectory
Best-in-class performance
Your Customer’s perception
t0 t1 t1’
There if often a gap in performance perception
22© Supply Chain Visions 2004 – All Rights Reserved
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Intuit Case Study
% On Time & Complete
50%
60%
70%
80%
90%
100%
Mar
Apr
May
June
July
Aug
OT & C Distribution CenterOT & C Retailer
OT & C Goal
Customer Benchmarking showed the DC was consistently reporting higher level of OT&C
23© Supply Chain Visions 2004 – All Rights Reserved
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Intuit Case Study
What is On Time?Fill rate vs on time shipmentsOn time shipments vs on time deliveryOn time delivery vs on time and complete
Order is coded into ERP to automatically insert customer business rules into the shipping process
Customer orders on Wed and wants it next WedIf their retail store is in Seattle it goes out on MondayIf there retail store in in Salk Lake City it goes out on Tuesday
Systemic way to flush Proof of Deliveries
Retailer Scorecard ReviewsWon the Supply Chain Partner of the Year from Staples
24© Supply Chain Visions 2004 – All Rights Reserved
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Logistics Measures in Context
Cash-to-Cash Cycle TimeNet Asset Turnover, Return on Net Assets
Days of Inventory in entire supply chain by ActivityTotal Safety Stocks as % of total inventory?Safety (hedge) stocks by customer Dedicated inventories by customer Local support inventories
Inventory Turnover Days of InventoryReturn on InvestmentReturn on Assets
Asset Utilization
Perfect Order Fulfillment (right item, right qty, right place, right time, defect free, correct documentation)Overall Customer Satisfaction
On-time delivery to commit, requestOrder Cycle Time VariabilityOrder Processing AccuracyForecasting AccuracyPlanning AccuracyManufacturing Schedule AdherenceStockouts against forecast
Filll rates by customer, commodityAvailable for Customer Pickup per requestErrors by line item, activity, reason code, etc.Cycle Count accuracy
Reliability
Upside Production FlexibilityForecasting/Planning cycle time% Expedite requests fulfilled Order Fulfillment Lead Time
Backlog & Back OrdersAggregate Cycle times by activityOrder Cycle Time Lead time from order receipt to manufacturer complete
Order Fulfillment Lead Time by customer, commodityFill rates by customer, commodity% expedite requests fulfilled by customerCapacity Load & Utilization
Flexibility & Responsiveness
Total supply chain management cost as a percentage of salesTotal Delivered Cost as a % of Revenue
Logistics Costs (order mgmt + distribution + freight) as a percentage of salesFreight costs as a percentage of sales to customerDistribution costs as a percentage of salesInventory shrink and obsolescence as a percent of salesLabor productivity Analysis Over, short, damage as % of salesReturns as a percentage of sales
Costs per line, per order, per activity, per shift, etcLoad factors, lines per order, Qty per line, etc.(cut?)Freight costs per pound by mode and destination
Cost
Strategic MeasuresProcess MeasuresResults Measures
Companies should strive for “balanced” metrics that are more process and strategic in nature
As published in Jan 2003 Issue of Logistics Management
Source: Supply Chain Visions
Visionsupplyhain
Kate VitasekManaging Partner
Supply Chain Visionswww.scvisions.com