Identify a set of metrics for each of the following categories: 1) time, 2) service quality, 3) cost. Explain what each metric involves and how it is measured. There should be 5-10 metrics for each of the three categories.
Metrics under the time category:
Order Fulfillment Cycle Time: It is the consistently achieved average cycle time that is spent to fulfill the customer orders. The cycle time is calculated from the start of the order receipt till the end, which happens when the customer accepts the order.
The time that is calculated from the time that a customer places an order to the time the order is fulfilled is called gross cycle time. It includes all the time that passes between these two activities, even those that add value and those that do not. It will also include the dwell time if the order is placed in advance. So the responsiveness of an organization is the cumulative time of all the activities that are needed to fulfill the order except dwell time. Dwell time is any lead time in the order fulfillment process where no activities take place and is different from idle time and non-value add lead time. It is zero for those companies that do not measure it.
Source Cycle Time: This is the average time associated with the processes of Source Stocked product, Source make-to-order product, and Source engineer-to-order product.
This is a level-2 metric in SCOR model. This metric is calculated using level-3 metrics, which are taken from the processes used for sourcing, which depend on the strategies used by the company such as make-to-stock, make-to-order or engineer-to-order.
Make Cycle Time: It is the average time of all Make processes such as Make-to-order, Make-to-engineer, and Make-to-stock processes.
This is a level-2 metric in the SCOR model and is dependent on level-3 metrics dependent on the Make processes and the strategies that the company uses such as make-to-stock, make-to-order or engineer-to-order.
Deliver Cycle Time: It is the average cycle time of all deliver processes such as deliver stocked product, deliver make-to-order product, deliver engineer-to-order product, and deliver retail product.
This is also a level-2 metric in the SCOR model and is dependent on level-3 metrics dependent on the Deliver processes, which depend on the strategies that the company uses such as deliver-to-stock, deliver-to-order or engineer-to-deliver.
Delivery Retail Cycle Time: It is the average cycle time of processes to acquire for merchandising and sell finished goods at a retail store.
This is a level-2 metric in the SCOR model and is dependent on level-3 metrics dependent on the Deliver Retail processes.
Other metrics under this category are Authorize Supplier Payment Cycle Time, Identify Sources of Supply Cycle Time, Receive Product Cycle Time, Schedule Product Deliveries Cycle Time, Select Supplier and Negotiate Cycle Time, Transfer Product Cycle Time, and Verify Product Cycle Time, to name a few.
Metrics under the service quality category:
Perfect Order Fulfilment: The percentage of orders with complete and accurate documentation and no delivery damages. The fulfillment is considered perfect if the original commitment made to the customer is met through the supply chain. The data is collected from the deliver and impact deliver enable processes.
Percentage orders delivered in full: It is the percentage of orders in which all the items that are committed are received by the customer. The data is collected from Reserve Inventory and Determine Delivery Date, Receive and verify Product by Customer, Reserve Inventory and Determine Delivery Date, Enter Order, Commit Resources & Launch Program, Ship Product, and Receive and verify Product by Customer processes.
Delivery Performance to Customer Commit Date: It is the percentage of orders that are fulfilled on the dates committed to the customer. The data is collected from Reserve Inventory and Determine Delivery Date, Load Vehicle and Generate Shipping Documents, Ship Product, and Receive and verify Product by Customer processes.
Documentation Accuracy: Percentage of orders with on time and accurate documentation. The data is collected from the processes Load Vehicle and Generate Shipping Documents, Load Product & Generate Shipping Docs, Load Product & Generate Shipping Docs, and Invoicing.
Perfect Condition: Percentage of orders that meet the specification, configuration, installed without faults (if applicable), and were delivered in an undamaged condition.
Other metrics under this category are Delivery Item Accuracy, Delivery Quantity Accuracy, Customer Commit Date Achievement Time Customer Receiving, Delivery Location Accuracy, Compliance Documentation Accuracy, Other Required Documentation Accuracy, and Payment Documentation Accuracy.
Metrics under the Cost category:
Total Cost to Serve: It is the sum of all the supply chain costs that were incurred to deliver products and services to the customer. The total cost includes indirect and direct costs, which are made up of planning costs, sourcing costs, material landed costs, production costs, order management costs, fulfillment costs, and returns costs.
Planning Cost: It is the total cost associated with the personnel, assets, automation, and overhead required for the planning of supply chain processes. It is calculated by adding the Labor cost, Automation cost, Property cost, Plant cost, Equipment cost, Governance cost, Compliance cost, and overhead cost.
Planning Labor cost: These are costs that are associated with the personnel who perform the supply chain planning. It is calculated from wages, income taxes (federal, national, state, regional, local), and employer contributions to health insurance, social security and retirement plans.
Sourcing Cost: These are the costs incurred for managing the ordering, receiving and warehousing of merchandise and services. This is calculated by adding the costs for managing acquisition, supplier performance, manage purchase order, material handling, and other costs.
Production cost: Costs included in managing and performing production processes such as scheduling, assembly, disassembly, mixing, forming, repairs and other similar activities. Cost of materials is excluded from this. If production is outsourced, then it is the fees paid to the third-party.
Other cost metrics include Sourcing Cost, Sourcing Labor Cost, Sourcing Automation Cost, Sourcing Property, Plant and Equipment Cost, Sourcing GRC, Inventory, and overhead Cost.
Discuss how each of these metrics is related to either reliability, responsiveness, flexibility, costs, or asset management.
There are two parts to performance in supply chain logistics. Attributes and Metrics. Attributes are used to express the strategy and they cannot be measured directly. They are measured by a group of metrics. If the strategy is to gain superior performance for supply chain reliability, then it is expressed as an objective where Perfect order fulfillment is X%. Here the attribute is Reliability, the metric is Perfect Order Fulfillment. A list of all attributes and metrics are given in the appendix. The attributes Reliability, Responsiveness, and Agility are customer focused while the Cost and Asset Management Efficiency are internal-focused. Each of these performance attributes has a strategic level-1 metric, which are used to measure its success or failure in achieving its objectives.
The Metrics in the SCOR model are in a hierarchical nature. There are level-1, level-2, and level-3 metrics. Each sublevel serves as diagnostics for the higher level metrics. To find the root cause or to decompose the metrics of level-1 metrics, it is important to observe the level-2 metrics and so on.
Being a manufacturing company, our company would place more emphasis on the Make, Source, and Deliver processes. Out of these, Source process metrics are most important as they have the biggest potential for increasing throughput and reducing cost. Other important metrics, from the customer retention point, is percent complete and on-time-delivery.
Every company focuses on costs and when considering the costs, the sourcing cost and production cost are important as they have the maximum impact on the costs and those are things that can be controlled by the company by planning and executing properly. So the metric that we would be focusing on is Supply chain management cost.
As far as reliability is considered, the attribute perfect order fulfillment is important which depends on % of perfect orders that have been fulfilled. As this approaches 100%, the customer retention also increases.
For responsiveness, order fulfillment cycle time is an important metric, as this shows how many customers orders are fulfilled in the least possible time. The company should always try to eliminate any nonvalue-add lead times and idle times so as to increase the responsiveness of the organization.
For agility and adaptability, the metric upside supply chain flexibility is an important metric. This is the metric that is measured for attaining a 20% sustained increase in quantities delivered for unplanned demand. The 20% is a benchmark. This would measure the flexibility of a supply chain in case of changes are most companies have to deal with change regularly.
In short, the following metrics are important for my company:
Returns cost
Supply chain management cost
Upside supply chain flexibility
Order fulfillment cycle time
Perfect order fulfillment
References
Cole, B. (2016, march 3). Know the SCOR model to build strong supply chain metrics. Retrieved from searchmanufacturingerp.techtarget.com/: http://searchmanufacturingerp.techtarget.com/feature/Know-the-SCOR-model-to-build-strong-supply-chain-metrics
SCC. (2012). Supply chain operations reference model, Revision 11.0. Chicago, IL: Supply Chain Council, Inc.
Appendix
Order Fulfillment Cycle Time: [Sum all cycle times of all orders delivered] / [Total number of orders delivered]
Source Cycle Time: Source Cycle Time - (Identify Sources of Supply Cycle Time + Select Supplier and Negotiate Cycle Time) + Schedule Product Deliveries Cycle Time + Receive Product Cycle Time + Verify Product Cycle Time + Transfer Product Cycle Time + Authorize Supplier Payment Cycle Time
Make Cycle Time: Make Cycle Time - (Finalize Production Engineering Cycle Time) + Schedule Production Activities Cycle Time + Issue Material/Product Cycle Time + Produce and Test Cycle Time + Package Cycle Time + Stage Finished Product Cycle Time + Release Finished Product to Deliver Cycle Time.
Deliver Cycle Time: Delivery Cycle Time :: MAX {[Resources & Determine Delivery Date Cycle Time + (Consolidate Orders Cycle Time + Schedule Installation Cycle Time) + Build Loads Cycle Time + Route Shipments Cycle Time + Select Carriers and Rate Shipments Cycle Time], Receive Product from Make/Source Cycle Time} + Pick Product Cycle Time + Pack Product Cycle Time + Load Vehicle & Generate Shipping Documentation Cycle Time + Ship Product Cycle Time + (Receive & Verify Product Cycle Time) + (Install Product Cycle Time) .
The Max function means that when the processes can run concurrently, the time taken by the process that runs for the maximum time is considered for calculating the cycle time.
Delivery Retail Cycle Time: Delivery Retail Cycle Time = Generate Stocking Schedule Cycle Time + Receive Product Cycle Time + Pick Product Cycle Time + Stock Shelf Cycle Time + Fill Shopping Cart Cycle Time + Checkout Cycle Time + Install Cycle Time
Perfect Order Fulfilment: [Total Perfect Orders] / [Total Number of Orders] x 100%
Percentage orders delivered in full: [Total number of orders delivered in full] / [Total number of orders delivered] x 100%
Perfect Condition: [ Number of orders delivered in Perfect Condition ] / [Number of orders delivered ] x 100%
Delivery Performance to Customer Commit Date: [Total number of orders delivered on the original commitment date] / [Total number of orders delivered] x 100%
Documentation Accuracy: [Total number of orders delivered with accurate documentation] / [Total number of orders delivered] x 100%
Total Cost to serve: [Total costs to serve] = [planning costs] + [sourcing costs] + [material landed costs] + [production costs] + [order management costs] + [fulfillment costs] + [returns costs]
