Metrics take center stage (page 2)
-- Logistics Management, 1/1/2006
Page 2 of 3 -- Turning data into action
If there's one thing logistics managers enjoy about using metrics, it's the ability to boot up their computers every morning and find a fresh report of the previous day's performance statistics. "The days when it took hours to create and distribute spreadsheets are gone," says Tom Kozenski, product marketing leader at RedPrairie. "Instead of waiting 90 days to find out today's performance, companies have instant access to the data."
That's certainly been a welcome development for GNC Corporation, the Pittsburgh-based retailer of nutritional supplements. The company, which operates three warehouses and 3,700 retail locations, has been measuring a variety of key performance indicators for the last 18 months. "The first thing our senior vice president of logistics does when he comes in every day is go right to the 'scorecard' and find out how many orders, how many cartons, and how many dollars went out the door yesterday," says Rich Swain, director of logistics systems.
GNC isn't measuring supplier performance yet, but Swain sees that coming. When the company does reach that point, it will realize a host of benefits that Kozenski says will translate directly into cost and time savings as well as performance improvements. "If a shipper spots a problem, it can be fixed right away—not next quarter," he says. "They can go right to the problem point while it's fresh on everyone's mind, find out what happened, fix it, and make sure it doesn't happen again."
But turning performance measurements into actionable steps isn't easy, particularly for companies that focus too closely on cost. "This is the biggest mistake that companies make," says Debra Hofman, service director, benchmarking, at AMR Research. She warns shippers not to use metrics simply to satisfy a CFO who's looking to slash costs. "Metrics aren't just about cutting costs," Hofman says, "so don't focus on cost to the exclusion of important metrics like quality, service, and time of that service."
Applying "tunnel vision" to any single metric can be dangerous, agrees Chris Jones, executive vice president of solutions and markets for software provider Descartes Systems Group. A company that focuses on fleet utilization, for example, may find itself maximizing the capacity of a vehicle only to spend more money on fuel to run it. "Companies tend to get wrapped up in the totals, like lower total delivery costs, without looking at the core components that make up those totals," Jones observes.
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. Continued...
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