Develop Effective Metrics for Supply Management


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ISM's 90th Annual International Supply Management Conference

San Antonio, Texas
May 2005

Author(s):

Roberta J. Duffy

Carol L. Marks, C.P.M., A.P.P.
Director of Purchasing and Business Management Systems
Industrial Distribution Group

Understanding the importance of metrics, variation, time series charts and the data collection process were the objectives of Carol Marks' session. She defined a process as any input or output adding value to an organization. The supply management process is to support customers, decrease cycle time, decrease variability, increase velocity of supply and increase the quality of service/goods. The metrics used in supply management include service level, endurance, fill rate, cost savings and inventory terms. Marks explained that we take these measurements to improve, manage, and know how we are performing versus a goal. "If you base your metrics on the vision of your organization first, those metrics will link to that vision," she said. "You want metrics that will make a difference to higher-level people in your organization."

To understand metrics, Marks contended that you must understand the concept of variation, which exists in all measurements. There are two types of variation — common causes and special cause — that help determine how to change the process.

Finally, Marks discussed the 10 steps in the data collection process. These include:

  1. Writing down what you want to measure
  2. Defining the purpose of the data collection
  3. Determining if other measure are appropriate for the process
  4. Developing the operational definitions for the measure
  5. Determining if the measurement is currently being taken and if there is historical date available
  6. Determining who will collect the data
  7. Determining how the data will be collected and displayed
  8. Determining how to ensure the data collection process takes place
  9. Determining who will review the data and how often
  10. Implement the process

By Roberta J. Duffy, editor of Inside Supply Management®

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