Metrics take center stage (page 3)

-- Logistics Management, 1/1/2006

Page 3 of 3 -- The experience of one HighJump client in the retail industry illustrates how metrics can play an important role in areas other than cost cutting. The shipper uses a vendor-compliance application and shares the data it generates with its suppliers in order to drive performance improvements. "Metrics allow this retailer to engage in meaningful conversations around the results and helps them solve problems, make improvements, and create stronger relationships," says Heim.

Measuring the Future

Although shippers have been slow to adopt metrics scorecards, some observers believe they will become more popular as they become easier to use. Software vendors are now building user-friendly interfaces that transform metrics-based information into readable reports, says Jon Chorley, vice president of product strategy, supply chain execution, and product life-cycle management at Oracle.

"You really don't need to hire a PhD to run this stuff anymore," says Chorley. "While there is a learning curve in terms of the mechanics of using these tools and turning them into an actionable plan, they are becoming increasingly easy to use."

Still, implementing a performance-measurement program can be time-consuming. At Dorfman Pacific, it took a few months for managers to figure out which metrics they wanted to pull from the system and exactly how to go about retrieving that information, says IT director Mark Dulle. Once they mastered those areas, managers used a "team-led" approach to teach the rest of the organization how to use metrics to track and analyze performance.

As Dulle learned, there's a risk of getting so much information that shippers can lose sight of the specific objective of a metrics project. "You can pull all sorts of interesting statistics out of these systems," he cautions, "but for metrics to be most useful, you must understand what you want to do with those statistics before you get into it for the sake of gathering numbers."

Despite that potential drawback, the benefits of performance metrics are undeniable, and shippers can expect more companies to use them to measure the effectiveness of their supply chains in the future.

"Performance management and business intelligence are hot topics right now," says Dawn Salvucci-Favier, director of solution management for software vendor Manugistics. "The trick is to be able to measure your own organization and those of your business partners from a 360-degree perspective. Metrics allows companies to do this."

Metrics for Measuring Your Software's Success
Metrics are not only keeping tabs on internal and supplier performance, they're also proving useful for tracking performance of the TMS and WMS software itself. An example of this trend, says Adrian Gonzalez, director of ARC Advisory Group's Logistics Executive Council, is Descartes Systems Group's "Descartes Challenge" offer for potential customers to "test drive" its software.
"Customers who take the Descartes Challenge pay only for the implementation, then pay for the solution itself later, once its value has been proven," explains Gonzalez. The measurements used to evaluate the software's performance are different than those for supplier performance, but the analogy is valid, he says.
"Software vendors are saying, 'Here are certain metrics that we're going to put in place to prove our value,'" says Gonzalez, who points to cost reduction and delivery improvements as two areas where vendors are vying to prove themselves. Some vendors also are including payment-for-performance "milestones" in their customer agreements. When those predetermined improvements, which are tracked and monitored via a metrics-based system, have been attained, the customer shells out another installment payment.
Expect to see more vendors using these metrics-based models in the future, forecasts Gonzalez, who believes the pay-for-performance approach will gain popularity among shippers. "The metrics help paint the 'before and after' picture and assist the vendor and the user in getting to that goal," he says. "That in turn triggers the customer's decision on whether they want to implement the system or not."

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Author Information

Contributing Editor Bridget McCrea is a freelance writer who frequently covers supply chain technologies.

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