Companies are obsessed with metrics, as a means of benchmarking their performance against competitors. "You need to measure how you're doing on a regular, continuing basis against standards that are meaningful to business objectives," Hill says.
Where to start? He recommends that companies first look internally, developing metrics to measure their use of supply-chain execution systems. From there, they can proceed to assess the performance of competitors and other entities outside their four walls.
The data that's necessary to making those evaluations has long been available, although many companies aren't making use of it, Hill says. They lack execution systems that can track both processes and people. Yet they don't have to wait for implementation of sophisticated warehouse-management or labor-management systems before they can begin monitoring basic activities. "You can get started right now," he says.
Companies today run the risk of "drowning in data." They need to decide which metrics are important - a determination that must be made by each part of the organization. One valuable measurement is warehouse costs as a percentage of overall sales revenue. Typically, says Hill, the number will range between 3 and 6 percent. "If you're down at the 2.5-percent level, you're doing something right." Still, the ultimate determination of performance efficiency depends on the nature of a company's business, the products it's selling and the systems it has in place to manage the supply chain.
Metrics "champions" achieve buy-in from both upper management and the workforce. Employees must be engaged in looking at all material and process flows, in order to determine how to streamline operations. "Gaining buy-in from the workforce during the early stages of the process sets the stage for broader buy-in once you begin to initiate change," Hill says.
