I was talking to a group of Gartner analysts yesterday, and they asked me a very compelling question: “How do you use metrics in your enterprise to ensure globally uniform results?”
As you can imagine, the list of things we measure at Avnet is very long, but there are a few important tools for measuring success that come to mind most immediately: customer on-time delivery, supplier on-time delivery, inventory turns, days payable outstanding, days sales outstanding, perfect order fulfillment, and order fulfillment cycle time. (You can get information about relevant measurements for your organization using the Supply Chain Council's SCOR framework.)
Once you've got the right tools, the question of ensuring globally uniform results remains. I believe the most important metric we have is one that combines all working capital and reflects it in a single simple number. It's a percentage, and the number itself is not important. What it represents, however, is. This measurement combines payables, inventory, and receivables data and provides a snapshot of current performance, as well as a projection of future enterprise, customer, and supplier programs.
How does this drive uniform behavior and results? No matter what region or business unit, there is a common framework of financial performance and responsibility — we all need to deliver results to our shareholders, and in the same way.
OK. Is that enough? We all know the answer to that — no way. So, what are the next most important metrics to look at in the end-to-end supply chain? I'd like to start off with the basics, which, in my mind, always begins with the customer. This leads us right to customer on-time delivery (OTD). Assuming that the product is what the customer really wants, and that the lead time is something they are satisfied with, they really count on getting their order when they asked for it.
The OTD challenge varies by industry. For example, think about the supply chain demands for the production, delivery, and installation of a piece of complex capital equipment, as compared to that of an order for a couple hundred solid-state drives. Each obviously follows very different supply chains leading up to fulfillment. However, in a world where we can go online and price a satellite launch for a 21,000-kilogram payload, select the option to put it into geosynchronous transfer orbit (GTO), and click on a “contact me” to discuss potential launch dates for a commercial manned flight through Space X, our customers have come to expect just about anything can and should be delivered on time. So, yes, OTD is really important.
Next is order fulfillment cycle and perfect order fulfillment. They go hand in hand. Today, our customers want things when we promise them; they want them quickly and perfectly. Is there any option for Space X other than perfect order fulfillment? I know I'm drawing from an extreme example, but the bar for performance is being set very, very high by many other companies, as well.
Simple metrics are always the best. They are easy for everyone to understand, they create a common language, and they put forth a single version of the truth.