Fulfillment-Stream Measurement Systems: Driving Action in Real Time
"Metrics should focus on and encourage process excellence and not, as they traditionally have, focus on results or numeric goals."
Derek Browning is executive, lean deployment, for LeanCor, a Florence, KY-based, provider of third party logistics and supply chain management services to companies pursuing lean transformations. Browning is responsible for helping customers implement lean and six sigma. He also is responsible for creating and improving LeanCor’s training programs, publications, and simulations. He spoke with business journalist Tonya Vinas about supply chain measurement problems.
Q: What is the most common supply-chain/fulfillment stream measurement mistake?
Browning: Often, companies quickly "adopt" standard measurement systems or standard benchmark measures that are more traditional in their makeup. They either pull in a measurement system that is too complex for the people doing the measuring to understand, or the system is so simple and results-focused that it drives inappropriate behavior to "make the numbers."
Q: What effect does this have on the supply chain and the larger fulfillment stream?
Browning: It creates a lot of the traditional non-lean practices that cause waste in the form of too much inventory, or poor quality in terms of not being able to meet customer needs — large-batch production, unlevel flow, undisciplined logistics, etc. . . .
Q: What do you mean by "standard" or "traditional" measurements?
Browning: The measurements that traditional companies use are derived mostly from historical data, are often too complex to be actionable, and are tracked and reported in silos. So there's no real-time, cross-functional view of the fulfillment stream that makes process problems and drivers of demand variability visible. If they can't see it, they can't respond to it.
Q: What do you mean when you say "measurement by means, not results"?
Browning: LeanCor follows the principles put forth by pioneering leaders in this area, such as Orest Fiume and Dr. Deming — metrics should focus on and encourage process excellence and not, as they traditionally have, focus on results or numeric goals. Think about when a baker makes a cake — ingredients and technique determine the quality of the desired outcome. If a client orders a chocolate cake, the baker can deliver a tasteless, rock-hard chocolate cake; or a light, moist, delicious cake. Either way, the order — or result — is met. But by focusing on ingredients and technique, the baker makes a cake that is much more valuable to the customer. The ingredients in a lean culture are purpose, people and process; and the technique is disciplined application of lean tools.
Q: Is there one optimal measurement system for all lean supply chains?
Browning: No. The actual metrics used will vary not only by individual organization but also over time as that organization's needs change. But there are some guidelines for what a measurement system should do: create a self-checking environment in which performance is visible; cultivate an environment that uncovers problems; define standard time-frames for plan-do-check-act; include regular gemba checks for validation and analysis; and check for adherence to standard work.
Q: How can an organization determine if a metric it is using is worth tracking and reporting?
Browning: All metrics should add value to the monitoring of a process and the subsequent improvement of that process. For example, if you are measuring your suppliers on on-time delivery, and they are not improving in that area, you might be focusing on the wrong behavior and not seeing the real problem. Another way to check is to define the purpose for each metric being used and identify the actions and/or behaviors that it drives. If the actions/behaviors go against lean principles or your organization's core purpose, then don't use it. And finally, focus on metrics that reveal how stable or unstable a process is. Instability is where you will find problems and improvement opportunities.
Continue learning about this topic …
- If you are ready to connect your plant to the supply base, read about the curriculum for the workshop "Building the Lean Fulfillment Stream: Supply Chain and Logistics Management."
- Download slides and listen to the webinar "Lean Logistics & Supply Chain Networks: 8 Guiding Principles" with Robert Martichenko and Kevin von Grabe, coauthors of the workbook Building a Lean Fulfillment Stream
- Download excerpts from the workbook Building a Lean Fulfillment Stream
- Read a Q & A that explains use of the term "fulfillment stream" as opposed to "supply chain."
Go and See the Lean Supply Chain: Gemba-Based Workshop
This two-day workshop is part of our new series of special programs which combine classroom learning with practical experience at the gemba. The workshop is conducted at the LeanCor Supply Chain Group Operational Center in Florence, Kentucky to allow the program attendees to see firsthand how lean principles are applied to logistics and supply chain processes in order to create an extended lean enterprise. It defines logistics and supply chain management and discusses what organizations need to do to successfully implement lean in order to build a Lean Supply Stream.
Lean Warehousing and Distribution Operations: Gemba-Based Workshop
Learn how to begin implementing lean principles step-by-step into a warehouse and/or distribution center, using techniques such as lean storage, operational diagramming, standardized work, workload planning, and visual management.