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When 95% efficiency is really 47%

Staff -- Modern Materials Handling, 12/1/2002

It's no longer enough to know your level of performance in filling orders accurately or shipping them on time. Now we need to determine the cumulative effect of all steps in the supply chain, says Eric Johnson, a professor of Dartmouth College's Tuck School of Business. "In fact, the accumulation of information and inventory across the supply chain isn't as good as we think," Johnson recently said to a meeting of the Logistics Execution Systems Association of the Material Handling Industry of America . He points out that total order performance is just 47% when all key steps are performing at 85-95% efficiency. "We kind of fake ourselves out on how well we're really doing when we just focus on the individual steps."

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