Distribution and manufacturing scramble for common ground

Conflicting metrics among a company’s internal organizations can cause havoc in its supply chain. Manufacturing and distribution groups are finally bridging their communications gap.

By Tom Andel, Editor-in-Chief -- Modern Materials Handling, 9/26/2008

Many industrial organizations are built around a Tower of Babel. Surrounding this tower are four-walled fiefdoms representing conflicting warehousing, distribution and production interests.  As a result, inbound and outbound logistics often do not work together effectively with production. Plant and warehouse metrics may even put facilities in conflict.

That’s why MESA International (an association of manufacturers/producers, solution providers and industry professionals), WERC (the Warehousing Education and Research Council) and two product sections of the Material Handling Industry of America (the Order Fulfillment Council and the Supply Chain Execution Systems and Technologies Group), are collaborating on a joint project. The goal is to establish a common framework that moves them toward a more holistic view of how they and their members measure performance across plants and warehouses.

For instance, the key metric for a plant manager may be throughput. To meet this goal, lot sizes are large, regardless of demand, to minimize changeover costs and maximize throughput of the product. If the warehouse manager’s key metric is inventory turns, he or she will be frustrated. They will always be performing sub-optimally, through no fault of their own. 

A white paper is now available through MHIA to help managers in plants and distribution centers establish some common understanding. Titled “Improving Order Execution Performance: A Holistic View of Metrics Across Plant & Warehouse,” it identifies approximately 50 joint metrics in six major categories: order fulfillment, flexibility, inventory, productivity, quality and compliance and financial or business metrics. Cost of the report is $50 for non-members.

“It’s important to treat this not as a one-time analysis, but as part of the annual planning and target-setting process,” the paper’s authors wrote. “As strategies, market conditions, and execution capabilities change, the priorities for the operation will as well. The companies who are able to adjust their business models and their performance metrics to new realities on an evolving basis will be best positioned to succeed.”