As the producer of hats worn by such notables as country singer Toby Keith, Dorfman Pacific of Stockton, Calif., can't afford to mess around when it comes to performance. That's why for the last 18 months, this purveyor of labels like Scala (worn by Keith), Callanan, The Red Hat Society, and Indiana Jones has been using metrics to measure performance at its 275,000-square-foot production facility.

Every division manager in the company is responsible for developing metrics for analyzing performance in such areas as quality and inventory control, says Mark Dulle, director of information technology services. Recently, for example, a lagging embroidery division was brought up to speed with a new "10 days or free" delivery guarantee. "Without metrics," says Dulle, "we wouldn't have been able to recognize [that there was a problem] and improve that division."

But simply measuring internal goings-on isn't good enough for the folks at Dorfman Pacific, who now have their eye on a program that will take metrics beyond their own walls. The company will soon begin measuring its vendors' performance using a "scorecard" function in its warehouse management system (WMS). Via an extranet, the manufacturer will hand out metrics-based "vendor report cards," which are expected to help its partners improve their performance in a number of areas.

Dorfman Pacific is just one of many shippers that are using metrics to get a handle not only on their own operations but also on the activities of their business partners. "Order-to-delivery times are shrinking and companies are heavily outsourced, which means reliability and consistency of performance are more critical than ever," says Adrian Gonzalez, director of ARC Advisory Group's Logistics Executive Council. "Companies are striving to meet service levels at the lowest possible cost and are turning to carrier- and vendor-performance metrics to do that."

And it works: By tracking and analyzing such metrics as on-time performance, service consistency, billing accuracy, and price competitiveness, companies are gaining an edge against high transportation rates, an ongoing capacity crunch, and other competitive forces.

The fact that vendors of transportation management systems (TMS) and warehouse management systems (WMS) are integrating performance-measurement tools into their solutions makes the casefor applying metrics to logistics even more compelling. Leading the charge in this arena, says Gonzalez, are Manhattan Associates, RedPrairie, Descartes, G-Log (now part of Oracle), Manugistics, and i2 Technologies. But they're not the only companies offering such capabilities. "Metrics are very high on the list for supply chain executives and supply chain users," says Gonzalez. "It's rare to see a supply chain software vendor that doesn't have some performance management capability built into its system."

Interest in performance-measurement capabilities in supply chain software does appear to be growing. Over the past year, says Chris Heim, president of HighJump Software, he's seen a significant increase in the number of shippers that are interested in using metrics to track suppliers' performance and build better relationships with their customers.

Razat Gaurav, vice president of i2 Technologies Inc.'s Global Transportation and Distribution Group, says he also sees more shippers looking to benchmark vendors' rates and performance. "Transportation logistics by its very nature is a link between a company and its suppliers and customer base," Gaurav says. "It makes sense that companies would want to measure inbound and outbound freight movement and the various metrics surrounding it.

Growth in the actual use of supplier-performance measurement programs, though, is stagnant even though interest levels remain high, says Kevin Fitzgerald, Aberdeen's vice president of supply chain management. Aberdeen's research found that 51 percent of companies currently use such programs, up just 1 percent since 2002.

"We haven't seen a significant increase in use, but we do see a lot of interest in this area," says Fitzgerald, who adds that software vendors could be "doing a lot more" to promote the use of metrics capabilities in their systems. Continued...

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