Using Supply Chain Benchmarking to Bolster Enterprise Value
The 2009 supply chain book of metrics
Relevant supply chain data — gathered through benchmarking — can help provide executives with the context they need to identify and prioritize improvement opportunities. Through benchmarking, executives gain fact-based measures across different dimensions of performance, such as cost, quality, cycle time and customer service. We’ve found that comparing performance against industry peers is most effective; however, over time, examining measures against leading performers in other industries can also help identify effective practices.
Our initial pilot group, and the focus of the executive summary, features companies within the consumer products and life sciences industry sectors. As these sectors are facing particularly difficult supply chain pressures and challenges, the insights from their data can add significant value to other industries as well. We’re currently examining supply chain processes in a variety of industries (food and beverage, household and personal care products, medical devices, pharmaceuticals, process and industrial products, technology) and we’ll be providing additional summaries in the months ahead.
Benchmarks within this study capture supply chain metrics following the strategy/plan/source/make/deliver process taxonomy. Through the study, we evaluated supply chain performance across all the participating companies, distributed the results across quartiles and then compared individual company metrics to the peer group to identify leading and lagging performance indicators.
- Strategy: Metrics surrounding the creation and management of the overall supply chain strategy, including defining the organization, establishing the budget and management oversight. Specifically, we’re looking at the performance achieved by the overall supply chain network. Some of the metrics reviewed as part of the function include:
- New product revenue contribution
- New stock-keeping unit (SKU) volume as a percent of all active SKUs
- Plan: Metrics driving customer service and working capital (including inventory levels across the supply chain) and address the functions of demand planning, supply planning, inventory management, distribution requirements planning. Some of the metrics reviewed as part of this category include:
- Perfect order rate
- Forecast accuracy
- Working capital
- Source: Metrics on procurement effectiveness and efficiency — strategic sourcing, operations and management of suppliers, contracts and commodities. Some of the metrics reviewed as part of the function include:
- Sourcing cost
- Sourcing contracting
- Make: Metrics on cost and staffing around manufacturing — production, material availability, quality assurance, maintenance, sanitation and engineering. Some of the metrics reviewed as part of the manufacturing function include:
- Direct labor vs. indirect labor
- Manufacturing outsourcing rate
- Capacity utilization
- Overall equipment effectiveness
- Deliver/Return: Metrics on cost and staffing levels for order fulfillment, logistics, distribution, transportation and returns/recalls.