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If your company is able to answer these mission-critical questions pertaining to strategic shareholder value creation, then you may NOT need our Association's guidance on Value Chain Management "open standards", best practices and processes... 1.) Product Investments - What is the correct approach for making Product Investment Decisions? Should they be made on a business profitability basis or on a product profitability basis, and Why? 2.) Capacity Investments - What is the correct approach for making Capacity Investment Decisions? Should they be made on a workflow management basis or on a resource utilization basis and Why? 3.) Factory Improvement Investments - What is the correct approach for making Factory Improvement Investment Decisions? Should they be made on a factory throughput basis or on a cost savings basis and Why?
Supply Chain Council Guidance on KPIs
MemberSupport posted a blog entry in Cannabis Connect SII (Shared Industry Intelligence) BLOGThis blog was first published on Brook Software Solutions' blog: http://insights.brook.ie/blog/7-critical-kpis-for-the-best-supply-chain-management-process We thank Stephanie Davies from LinkedIn for her contribution! The effectiveness of a company's Supply Chain Management acumen (Member Support note: On our site we use the Value instead of Supply) can be measured in different ways, and the measurements chosen by a company are usually specific to the kind of business being done, so they will include those aspects of effectiveness which are most important to the business. For instance, a company focused on transportation would probably want to measure it on-time deliveries, and a company focused on sales might prefer to measure inventory against customer service. In general though, the Key Performance Indicators (KPI's) established by a company illustrate the gap between planning and execution in the supply chain, and are metrics set up to monitor one or more of the following: cost, value, service, and waste. Within these broad categories, there are more than 200 KPI's identified by the Supply Chain Council as being critical to supply chain management and having a direct bearing on how well the company is performing. Here are seven of them that are among the most commonly used KPI's, and are relatively independent of the kind of business being conducted. Critical Key Performance Indicators Total Delivered Cost. This is one of the two enterprise-level KPI's (the other being Customer Service) that helps determine overall profitability for a company. Factored into this high level metric are operating costs, demand variability, supply variability, and inventory. One of the ways to support total delivered cost measurements are with a complementary metric on total cycle time, which measures the total amount of time it takes for a product to pass through the supply chain. Customer Service This KPI is also monitored at the enterprise level and is comprised of demand variability, supply variability, and performance to plan. The favored approach to measuring customer service in its broadest sense is with metrics for on-time full deliveries or line item fill rate, which are the most meaningful aspects of customer service. The overall goal of the two enterprise-level KPI's is to manage total delivered cost and customer service against the strategic goals of the company. Supply Variability Supply variability KPI's measure the status of Inventory against conformance to lead times and promise dates. Included are metrics for performance to the production plan, schedule attainment, asset utilization, capacity utilization, vendor deliveries, and item availability at all stocking locations (including the customer's location). Demand Variability Demand variability is comprised of measurements for inventory, lead times, adherence to process capability, improvement to process capability, conformance to plan, actual demand versus forecast demand, forecast accuracy, and forecast error. Operating Costs All departmental costs are rolled up in this metric, including distribution costs, procurement costs, warehousing costs, transportation costs, and manufacturing costs. From these, it is possible to calculate cost of goods sold, cost per unit, or cost per kilogram,which are all useful KPI's relative to total cost. Performance to Plan Within Performance-to-Plan are measurements for how well the company has adhered to the procurement schedule, the distribution schedule, the warehousing schedule, the transportation schedule, and the manufacturing schedule. Inventory Metrics which support the Inventory KPI are in the areas of total inventory, inventory turns, record accuracy, obsolete inventory, working inventory, non-working inventory (along with working inventory, this measures the quality of your inventory), and item availability. Other KPI's A whole catalogue of KPI's can be used to measure performance, but as stated above the whole purpose of using them is to shine a light on the difference between what is planned by a company and what is really executed in its Value Chain Management execution. Making best use of these indicators should help a company to improve on and correct weaknesses identified in the value chain. If you would like to contribute to this discussion with a post, survey or Blog, please let u know at Member Support chvaluechains (at) gmail (dot) com.
Value Chain Management explained
MemberSupport posted a blog entry in Cannabis Connect SII (Shared Industry Intelligence) BLOGWhat's the definition of value chain management? Value Chain Management (VCM) are those "management strategies" which a company puts in place in order to integrate company functions, departments and processes to achieve process excellence and consistent performance. VCM practices include cost reduction methods. and process improvement approaches such as business role and process automation. Lean and Agile practices are those proven strategies, methodologies and methods which take Value Chain Management, as a operational science, to the next level in order to pursue and achieve enterprise excellence. How do you define value chain? A value chain is a set of activities that a firm operating in a specific industry performs in order to design, engineer, create, produce, market, sell and deliver a valuable product (i.e., good and/or service) for the market. The Value Chain encompasses the Supply Chain and Supply Chain of processes. In essence, Value Chain Management sees the Supply Chain as only a portion of the overall business. Why not Supply Chain? The phrase "Supply Chain Management" is often used as a synonym to Value Chain Management. But, this is not the entire picture. The Supply Chain consists of the sourcing, acquisition, stocking and replenishment of goods and services which support the Design and Supply Chains. "Supply Chain" processes and "Design Chain" processes can all be identified and managed as a part of the entire business. Design Chain, too? The Design Chain consists of those processes which relate to the design and engineering-related processes. A Design Chain is a component of the overall Value Chain. Value Chain Management is the way to create significant shareholder value in both operational and financial contexts. Thus, Value Chain Management practices and methods are many. They focus on processes, business rules (such as policies and procedures) and practices, or methods, which a company deploys in order to manage the processes which, together, form the backbone of the company's business. Value Chain Management is centered on the concept of integrating all of the areas of a business in an effort to minimize waste and maximize output. This is referred to as "enterprise integration". In other words, value chain management assesses every step the business takes to produce the product or service it is selling in order to make the process as efficient and effective as possible.