4 ways to use metrics to your advantage
Reaching new levels of productivity is a matter of picking the right metrics to improve your processes and then following through on measuring and communicating them to your employees.
Bob Trebilcock, Editor at Large -- Modern Materials Handling, 12/18/2008
“If you don’t know where you’re going, any road will get you there.” So goes the lyric to Any Road, a George Harrison song. That sums up the way many companies approach improving their operations: They may not know exactly where they ought to be, but they sure want to get there in a hurry.
“Benchmarking and metrics need to be used as a lantern, and not as a carrot and a stick,” says Chris Ferrell, a principal with Tompkins Associates and the associate director of the Supply Chain Consortium. “If you develop metrics around the processes in your operation where you’re not good and then look for ways to improve them, metrics work great. If all you do is tell your employees that they have to hit a specific number by the end of the year or they’re in trouble, you’ll hit that number, but your processes may not improve.”
In other words, your employees won’t really know where they’re going, but they’ll find some way to get there.
How can metrics best be used to get you where you know you ought to be? Ferrell has four suggestions:
1) Narrow the focus to start: Too many logisticians create a big list of the things they want to benchmark. Instead, Ferrell suggests narrowing that list down to two or three metrics for each operational silo that are meaningful and quantitative, and begin measuring those. “Once you work with those metrics, you might find they’re too narrow and that you need to add a few more,” says Ferrell. “But you want to start slow.”
2) Balance the metrics: When they begin benchmarking, most people start with financials. But a business is about more than cash flow. Or, put another way, how you are performing operationally – and how your vendors are performing – will impact those financials. “Yes, you need to choose metrics that are relevant to your financials,” says Ferrell, “but you also need to look at your internal operations and externally as well. You want to know how you’re performing relative to your customers’ expectations and how your vendors are performing as well.”
3) Benchmark internally first: There’s a wealth of information available today that allows you to compare your warehouse or distribution center to other distribution centers in your industry or other industries. Before seeing how you stack up to the competition, take a hard look first at operations across your own company. If your company has more than one distribution center serving similar customers with a similar product mix, that’s the first place to look.
“This might be as simple as having the manager from Miami meet the manager from Chicago for a week to see what each is doing.” Within any organization, there will be managers who have built a better mousetrap and figured out a better way to do things. Identify those managers and share what they’re doing with the rest of your organization. “That’s going to be low hanging fruit,” says Ferrell. “It’ll be easier to get and implement than anything you’ll get from benchmarking other facilities.”
4) Don’t forget best practices: When you do benchmark, don’t just look at the numbers. Also look at the best practices. “When benchmarking, too many companies get hung up on finding another company in their industry to compare themselves against,” says Ferrell. “The trick is to find companies that go to market similarly as yours, even if they’re in disparate industries.” Example: When Federal Express wanted to learn how to service and turn its airplanes more quickly, it didn’t look at United or Delta; managers spent time in the pits with NASCAR crews. “They learned how a NASCAR crew is organized so it can change a tire and fill a gas tank in 14 seconds and applied that to their operations.”
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