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A Better Way to
Supply chain benchmarking has always been costly and cumbersome. But a new benchmarking resource allows companies across all industries to readily gauge how well they’re doing on key supply chain metrics. A joint effort of APQC and CSCMP, the benchmarking tool is a sort of “metrics users club.” Participants input their data andin return receive a comparative report with qualitative and quantitative information that identifies improvement opportunities. By Chris Gardner, Cheryl Harrity, and Kate Vitasek

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Most standardized units of measure were agreed upon centuries ago. For instance, businesses have long been speaking a common financial language. But factories, distribution centers (DCs), and logisticsfacilities have few shared terms for crucial operating measures. Talk about speaking in tongues! The following are three quite different ways to interpret the simple concept of order fill rate. Company A receives an order on Monday but postpones sending it to the DC because a SKU that is part of the order is out-of-stock. When the SKU is restocked on Thursday, the order is forwarded for fulfillment onFriday. By now, the customer has waited four extra days. Nonetheless, Company A, which measures fill rates by how quickly the order is filled once it hits the DC (not from the time the order was received), proudly reports a 100-percent fill rate. Similarly, Company B receives an order on Monday. Although its normal cycle time is two days from order to shipment, the company quotes a five-day cycletime because it is experiencing unusually high demand. When the order ships on Friday, Company B reports a 100-percent fill rate

because it shipped when it said it would (but not when the customer needed it). At Company C, the language is different again. This company runs a 24-hour operation; all orders received before noon are targeted to ship the same day. Although the company works around theclock, the cutoff for trucks leaving the DC is 9 p.m. During the peak demand period, the company gets slammed with same-day ship requests.

Chris Gardner is manager of the Center of Excellence of APQC, the international research organization dedicated to process and performance improvement. Cheryl Harrity is APQC’s supply chain practice lead. Kate Vitasek is managing partner of Supply ChainVisions, a consulting firm specializing in supply chain strategy and education.
SUPPLY CHAIN MANAGEMENT REVIEW · APRIL 2005 www.scmr.com

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Unfortunately, the pick/pack and ship function falls behind schedule, and the order misses the truck. The DC keeps working on the order and finally sends it to the loading dock at 10 p.m. where it sits until the next evening.Although the order languishes for nearly 24 hours until the next truck leaves, Company C’s computer system shows the order as shipped because it was completed before midnight. It also reports a 100-percent fill rate. So Company A ensures high order-fill rates by defining it in terms of DC performance, while supply chain managers at Company B believe that the company is performing well because they havereset customers’ expectations. For their part, Company C’s managers are happy because they have arranged the time boundaries so they score complete orderwww.scmr.com

fulfillment success on paper. In each case, the company appears to “win”—but in every case the customer fails to get what they want. Regrettably, these examples are absolutely typical of supply chain activities worldwide. Manyefforts have been made to create practical systems for measuring and tracking the performance of familiar business operations. Yet business executives still lack a standardized performance “language” that makes it easy to compare business processes and performance measurements. And they lack consistent, reliable, and affordable sources for benchmarking data that allows them to compare their...