The
chain reaction
Supply
chain performance metrics and benchmarking are critical measures that
enhance the understanding of the chinks and armours present in the entire
process, finds an industry survey
In
the current business environment, which appears difficult and unpredictable,
the Indian industry has found a new avenue to pin its hopes on. Supply
chain and logistics are suddenly under close scrutiny. Between them,
they offer companies the best way to sustain their businesses in rough
times. Supply chain management in India comes in several shapes, sizes
and forms. Several models emerge from the basic rudimentary one of the
angadias (they transport mail, business contracts, clothing, machinery
and hard cash). The blueprint of the angadia service is very unique
as it exhibits the least complexity and great flexibility. Nevertheless,
millions of rupees worth of material are carried by the highly sophisticated
track-andtrace methods employed by express cargo companies and every
model co-exists and supplements each other. In this article, we analyse
the other issues of the supply chain which is as important as the process
and strategy. We look at supply chain performance metrics, the outlook
of the various consultants in India on supply chain management, and
an overall comparison of Indian and overseas supply chain practices.
Measuring performance
According to an industry expert, the performance metrics
for a supply chain should be aligned together with the supply chain
vision and strategy and should reflect best practices. The chief value
delivery mechanism for a company is its supply chain. Performance metrics
for a supply chain measures the effectiveness of the supply chain in
delivering this value, through measurement of performance in key areas.
These performance metrics also enable companies to measure the return
on investment made in enhancing the supply chain capability, be it in
the form of enhanced capacity, better quality control or investment
in technology. Typically, the performance vision of the supply chain
is stated in terms of mutually consistent targets on key supply chain
metrics. Performance metrics are typically organised in a hierarchy
to reflect the value creation process in the supply chain. This hierarchical
structure enables us to understand the constituent factors of a highlevel
metric and identify opportunities for improvement. At the top of the
metric hierarchy are the overall measures in three key performance areas
– Quality, Efficiency and Delivery, as illustrated in the Table
‘Top Trio’. It accurately represents the trade-offs inherent
in business like the one between inventory investment and accuracy of
deliveries. The relative importance placed on each of the metrics at
this level is driven by the overall strategy and performance vision
of the company. For example, a company aiming for market leadership
may choose to maximise delivery at the cost of efficiency. While the
above metrics do provide an accurate overview of the supply chain performance,
sustaining and improving that performance is predicated on understanding
the following factors:
• Where the performance stands on a comparative basis
• The reasons behind the performance being the way it is, and what
are the areas of improvement.
The first question is answered by putting in place the next tier of
the metric hierarchy as discussed earlier. Typically, the metrics in
this tier would be as illustrated in the Table
These metrics provide us with a more detailed understanding
of the overall performance and improvement opportunities. For example,
delivery accuracy as outlined in the Table ‘Top Trio’ is affected
by planning frequency, inventory investment and manufacturing cycle
time (among others). A less-than-satisfactory performance on delivery
accuracy could therefore be diagnosed by analysing the metrics in all
three areas as discussed earlier.
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