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,*,Title,-,*,-,Body Text,Second Level,Third Level,Fourth Level,Fifth Level,LShop/Ldn/22Oct97Rp-fc/kf,McKinsey Proprietary and Confidential,Developing An Overview of Supply Chain Performance Metrics,Process,Recommendations,McKinsey,October 2003,Thisdocument givesan overviewof the differentmetricsthat can beused tomeasuresupplychain performance,TheSupply ChainCoE,s objectiveisto define abenchmarkingframework capable of:,Comparing generic metricperformances for use onprojects.,Capturing further benchmarking datain aconsistentformat.,TheLondon Shops task:,Developan overviewof the differentmetricstomeasuresupply chainperformance.,Select the mostimportant metrics that can be used across industries.,Discusshowthemostimportant metrics linkother operational metrics withineach stageof the supply chain.,Suggesthowthesupply chainCoEshouldcontinueconcerningthistopic.,We usedinformationfromseveralsourcesduringourproject,Internalandexternal documents:,Highlevel benchmarkingframework for supplychain performance,(H.Cook):,ShopStudy(March 1997)accessing information from availableexpertsandpast projects.,Supply chainbenchmarksandbestpractice,(DowPolyurethane&Epoxy April1995).,Supply ChainBenchmark Assessment,(March 1997).,Supply chainappraisal and benchmarks:(clientX,September 1997).,Discussionswithsupplychain CoE:,Graham Colclough.,Andrew Morgan.,LeeSherman.,DeborahHuff(Cap McKinsey).,Possibledata sources,Performancemeasurementis an importantbutcomplexsubject,Thisdocumentsan initial stepin the rightdirection.,Companies see the need for metrics.,.but developingthe,“,“right”setofmetricsis achallenge,“Ifyoucant measure,you cantmanage,youcan,t motivate”,Establishingthepropermeasureswithinan organisationenhancescontinuous,No commonlyused,“,“model”.,Businessissuesthatwarrantperformancemeasurement:,Differ between industries.,Differ within industry.,Change overtime.,There isnoone,“,“right”answer,Focus,Accountability,Communication,Linking,strategy,to action,Assigning accountability,to take action when needed,Measuring progress,towards goals through,interactive communication and education,We useda generic supplychain frameworkasa basisforouranalysis.,Supply ChainFramework,Suppliers,Purchasing,InformationFlow,Forecasting&ProductionPlanning,CustomerService,Inventory Management,InboundLogistics,Manufacturing,Maintenance,Marketing&,Sales,OutboundLogistics,IntegratedSupply ChainManagement,Customers,Thisframework aligns with the CoE POV and is also similar to frameworkforthesupply chaindiagnosticsinventory database.,.and concludedthere are threestrategic objectivesweshould focusonwhenanalysing the supply chain,Keymetricsmustgive information onhowa company is performingagainstoldstrategic objectives.,Strategic objectives:,Quality,Time,Cost,Products/services according to customer expectations,On agreed time,At reasonable cost,Purchasing,Information Flow,Forecasting&Production Planning,Inventory Management,InboundLogistics,Manufacturing,Maintenance,Marketing&,Sales,OutboundLogistics,Integrated Supply Chain Management,Customer Service,Supply ChainFramework,NB:Boundaries,NPDI,Supportfunctions,Tailor to company specific(BSC)objectives,We beganwith abrainstorming session onthekeydriversforquality,time and cost,Thecompletepicturecanbefound intheappendix.,We looked atthesupplychain from the customers perspective.,We brainstormedon“whatcould go wrongalong the supplychain”:,Whataredriversofperformancefroma quality,timeandcost pointof view.,Price,Service,Productquality,Productquantity,Productdelivery,Latearrival,Latedelivery,Inventory cost,Productcost,Produc-tioncost,Deliverycost,Customerservicecost,Quality,Time,Cost,Making theirclientspecificwarrants attention,Respectallsourcesof data:,Understand theirrelationshipsthe“causal tree”:,Recognised Cross-Industry;In-Industry and In-Company similarities and differences.,Blind-sided,IntuitionOpinionDiscussionSurveyFunctional MeasuresKPIs,External Best Practice,Qualitative,Quantitative,Objective 1,KPI,KPI,KPI,KPI,Objective 2,KPI and xxx measure,“Dual service”measures(cost&time),“Hard wired”and tennons,Push-pull,Making theirclientspecificwarrants attention,(cont.),Recognise Cross-Industry;In-Industry;and In-Company similarities and differences.,Interface the solution to the current clients measures,systems,processesandculture:,.and guidemigration over time.,Ensure accountability for collectingandactioning is clear.,ProposedSupplyChain KPIs,KPIs help to identify“where”the performance problem is withinthesupplychain,and steertowardsareas to explore“why”.,Accuracy(as%of sales),Customersatisfaction,%ofsatisfied customers,Total cycletime,Time(for customer)fromplacingorder to receivinggoods,%ofproducts deliveredon time,Total supplychain costas%ofsales,Costperproductsold as%of sales,Costas%ofsales,%ofproducts deliveredaccording tocustomer order(quantity/quality),%ofcustomers satisfiedwith service,%of products orderedalreadyinstock,Defectrateofproductsas%of production,%of goods deliveredaccordingtoorder(quantity/qualit
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