Metrics are the lifeblood of good business. But as an article at SupplyChainOpz shows, there are seemingly good metrics that can be misused to the detriment of your supply chain. Do you have what it takes to stay on the path of light?
Magnificent Seven or Sinister Seven
- Productivity metrics
- Utilization metrics
- Conflicting metrics
- Personal metrics
- Unclear metrics
- Too many metrics
- Gaming metrics
Higher assumed productivity does not always reduce to lower costs, especially as it pertains to salary employees, so productivity metrics should be used sparingly. Too much emphasis on machine time and utilization metrics will similarly hurt overall performance. Conflicting metrics can also crop up in ways you might not suspect:
Suppose you want to buy the steel sheet products, the simplest KPI is “thickness tolerance” (say 0.5 inch +/- 5%). However, the exact same metric can create confusion between supplier and customer, for example,
– Supplier uses Digital Caliper to measure the thickness, 3 points along the edge of the steel sheet
– Customer uses Go/no go Gauge to measure the thickness, 1 point at the both end of steel sheet
Conflicting metrics can cause the big argument between supplier/customer if they are not identified and agreed upon in advance.
Avoid assigning a metric like inventory turnover ratio to one person. Get rid of unclear metrics by making sure they make concrete sense both formulaically and in practice. You also want to hone in on only the metrics that are most applicable to your processes to avoid metric overload. If you do not do this, people will find ways to game the system and manipulate the myriad metrics to look the way they want them to look. To read about these concerns in greater depth, you can read the full article here: http://www.supplychainopz.com/2014/08/supply-chain-metrics.html