How to Measure Supply Chain Performance

The appropriate metrics to manage and measure the success of a company’s operation vary significantly by industry, by individual company, and by the scale of the business. What does not vary, however, is the universal need of all companies to employ a well-structured, hierarchical framework to organize and manage their metrics.

The absence of a cohesive framework to house metrics greatly increases the likelihood that a company’s performance measurement system (PMS) will provide inadequate management support, and that resources will be wasted developing duplicative, unaligned and even conflicting metrics.

There are a number of well-known models and frameworks for operations, logistics and supply chain management. Two of the most prominent are the SCOR model and the Balanced Scorecard, and the interested reader is referred to these.

Figure 1 depicts an integrated hierarchical supply chain performance measurement system. The framework contains three levels (the strategic, tactical and operational), and within each level, it has both external and internal measures. In this PMS framework, it is the scale of an operation or activity that a particular metric monitors which determines its place in the hierarchy.

Figure 2 provides additional insight on how this hierarchical PMS framework works, displaying sample external and internal metrics for a distribution organization at each level of the hierarchy. The external metrics measure outputs and/or services that flow across the supply chain and evaluate some aspect of serving the customer. The internal metrics have an “inward” focus; and as shown in Figure 2, they evaluate how efficiently the overall distribution organization and each of its sub-functions operates.

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Transportation Predictions That Will Shake-Up the Supply Chain Industry In 2018

In the book, The Living Supply Chain, the authors argue that “Speeding up the supply chain is at the root of everything that is good: improved revenue, reduced working capital, higher profitability, and less obsolete inventory.

Conversely, slowing down the supply chain is at the root of everything that is bad: working capital write-offs, reduced profitability, and slowing revenues.”

To “speed” up the supply chain is to invest in change and change will come with the digital transformation of the supply chain, which is the major focus for executives in 2018.

Much change in the supply chain industry will be due to innovative technologies for digital transformations, along with the recent tax reforms (see below), and the still-current driver shortage/capacity crunch.

The digital transformation of the supply chain will change everything – for the better.

These are the innovative technologies that I predict companies must use to undergo this transformation within their supply chains:

  1. Cloud-based technology
  2. Advanced Analytics
  3. Tracking and Tracing
  4. Supply Chain Visibility
  5. Blockchain
  6. Artificial Intelligence
  7. Predictive Analytics
  8. The Internet of Things

“In 2018, shippers must embrace change in order to succeed. Waiting and seeing what will happen is no longer an option,” adds Clark.

“Transportation management systems are poised as the fundamental tool for supply chain transformation, helping businesses to position themselves above the competition with sustainable profits and better service levels.”

Read more at Transportation Predictions That Will Shake-Up the Supply Chain Industry In 2018

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Scientist Ng brings AI to manufacturing

Artificial intelligence pioneer Andrew Ng launched a new AI company Landing.ai on Thursday.

On the same day, the company announced a strategic cooperation with electronics contractor Foxconn to develop a program that aims to bring AI and machine learning technologies to the manufacturing industry.

According to Ng’s statement, his company is developing a series of programs to help enterprises transform for the age of AI, including providing new technologies to optimize companies’ organizations structures, train employees, and more. The company’s businesses will start in the manufacturing industry.

Ng said the AI technology is conductive to manufacturing enterprises to improve quality testing process, shorten products’ design cycle, remove bottleneck of supply chain, reduce waste on materials and energy and raise output.

AI will revitalize manufacturing industry and generate jobs in the industry, he said. I In the age of AI, the employees need to accept new skills training to fit jobs that will be more complex than before, Ng added.

Landing.ai will provide solutions to some employees who are likely to be laid off, Ng said. Currently, the company is discussing the training plan with some potential partners including local governments.

Read more at Scientist Ng brings AI to manufacturing

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Comment: Industry 4.0 is disrupting the supply chain for good

The impact of Industry 4.0 could easily be identified as a threat and a disruptor to the traditional supply chain. The truth is that, when deployed correctly, this dynamic combination is the antidote to supply chain disruption.

In 2016, global supply chains were impacted by a series of unfortunate natural disasters including earthquakes and typhoons that ravaged nations throughout Asia. In 2015, analysis by insurance firm Allianz Global Corporate and Specialty found that between 2010 and 2014, the top five causes of business interruption loss globally were fires and explosions, storms, machinery breakdowns, faulty equipment or materials, and workforce strikes.

Current events that are continually unfolding must also be considered, such as the economic nationalism propelled by the election of Donald Trump and the UK’s impending exit from the European Union. However, there are less dramatic situations that can cause supply chain disruption on a more frequent basis – small acts than have a large impact, such as human error causing delays on the production line. This creates an obvious knock-on effect that directly impacts the rest of the supply chain.

It is clear that the supply chain is vulnerable to disruption. The traditional supply chain ecosystem is built around a rigid process that does not provide supply chain organisations with the flexibility to adjust to disruptions that will impact the bottom line, or the opportunity to predict or prepare for those disruptions.

The traditional process is typically governed by inaccurate analysis of the market that dictates supply chain operations in order to meet the predicted sales. A digitised reinvention of the supply chain will replace this inaccurate, siloed process with a flexible and agile solution that utilises data to severely diminish the impact of disruption.

Industry of Things

The moniker Industry 4.0 represents the fourth industrial revolution which in turn refers to the rise of data exchange and automation in manufacturing technologies. ‘Internet of Things’ (IoT) is a similar term that supports the same notion of the world becoming more connected and is widely used to describe connected devices used in both industrial and domestic environments. In theory, connected devices, whether in a factory or in the home, bring all of these environments together to create one interconnected eco-system.

Disseminating the data

From the shop floor to the factory floor, each connected device provides important data that can be fed into the digitised supply chain. To be of true value, this data must be tracked and visualised. Visibility is a key area of focus in leveraging data in the evolution of Industry 4.0, and it’s equally as important in the supply chain. Once the data is feeding into the supply chain and clearly visualised, the organisation can begin to think about disruptions before they occur. This can be achieved by manipulating the data in three key areas; supply chain design, event simulation and decision support.

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How incorporating IoT into the cold supply chain could save florists millions this Mother’s Day

A leading expert claims that the flower industry could save hundreds of millions of dollars just by ensuring supply chain efficiency in the lead-up to Mother’s Day.

Shipments in the floral industry spike ten-fold in the lead up to Mother’s Day and an estimated $2.6 billion is expected to be spent in 2017 even though it’s estimated that 40 per cent of flowers are never even sold.

David Bairstow, Product VP at location specialists Skyhook, reckons that incorporating the internet of things into the cold supply chain could result in massive savings.

He said: “Supply chain is an industry born out of economies of scale. The same applies to the cost of implementing IoT, as scale increases, return on investment increases. It costs pennies to ship individual flowers; however, using supply chain insights to increase efficiencies and reduce waste, can quickly pay for itself.

“Factoring in that the 40% waste due to unsold flowers amounts to $1.04 billion, it is evident that there is massive scope for improvement. If introducing IoT into the cold supply chain leads to decrease in waste by even 10%, that would result in more than $100 million of savings.”

Companies like KaBloom are constantly optimizing the day-to-day supply chain over time to achieve the most efficient path to the consumer. They see a ten-fold increase in volume on days like Mother’s Day and Valentine’s Day and their supply chain remains largely the same, except for the increased volume on those holidays so if the day-to-day efficiencies are optimized, the likelihood of failures happening on the busiest days can be drastically reduced.

Read more How incorporating IoT into the cold supply chain could save florists millions this Mother’s Day

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Great Suppliers Make Great Supply Chains

As an analyst who covers supply chain management (SCM) and procurement practice across industry, I tend to keep my keyboard focused on the disruptive themes that continue to re-define it. That said, if you’re expecting me go on about the unprecedented growth of the SCM solution markets, the accelerated pace of innovation, tech adoption, social change, etc., don’t hold your breath. I can’t, as the data argue otherwise. Too many of us conflate diversification with acceleration –and there’s a difference.

The most notable, defining advances of the last decade (Amazon, Twitter, Google, etc.) share something in common: they do not require consumer investment. If you take those monsters out of the equation and focus on corporate solution environments, the progress, while steady, has not been remarkable. Let’s just say there remains plenty of room for improvement, especially in supply chain and procurement practice areas.

I fell onto this tangent unexpectedly. It happened while interviewing Mr. Dan Georgescu, Ford Motor Company, adjunct Professor of Operations and Supply Chain Management, a highly regarded expert in the field of automotive industry supplier development. “For supply chains to be successful, performance measurement must become a continuous improvement process integrated throughout,” he said. “For a number of reasons, including the fact that our industry is increasingly less vertically integrated, supplier development is absolutely core to OEM performance.”

Read more at Great Suppliers Make Great Supply Chains

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Six signs that your Big Data expert, isn’t

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This is so far the best article that I have been reading about the Big Data. It is what I have been advocating to people.

1. They talk about “bigness” and “data,” rather than “new questions”

… It seems most of the tech industry is completely drunk on “Big Data.”

… most companies are spending vast amounts of money on more hardware and software yet they are getting little, if any, positive business value.

… “Big Data” is a terrible name for the revolution going on all around us. It’s not about Bigness, and it’s not about the Data. Rather, it’s about “new questions,” being facilitated by ubiquitous access to massive amounts of data.

… If all you’re doing is asking the same old questions of bigger amounts of the same old data, you’re not doing “Big Data,” you’re doing “Big Business Intelligence,” which is itself becoming an oxymoron.

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2016: The Year of Wearable Technology in the Supply Chain

Wearable technology, and the use of cloud software, will become much more widespread across the industry in 2016. The ability to access and input data in real time is the key way in which suppliers will be able to meet the stringent demands of supermarkets.

The adoption of cloud software will be aided by the fact that the price of good quality laptops has fallen below £200, with good quality tablets available for under £50. These prices, which may fall even further in 2016, mean the bar to entry associated with cloud technology in the supply chain has been significantly lowered.

With the ability to put these powerful devices in the hands of everyone, 2015 required us at Linkfresh to think about making core lines of business software available across these devices. That sea change has laid the foundations for what we will see in the industry in 2016.

Supermarkets are pushing suppliers harder than ever, a situation which looks certain to continue throughout the coming year. Dealing with this pressure is the biggest challenge the industry faces.

Read more at 2016: the year of wearable technology in the supply chain

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