"Measure twice; cut once" doesn't just apply to carpentry work -- it has applications within supply chain management as well. Consider warehousing and distribution, for instance. A key factor in minimizing the cost of distribution is the ability to effectively capture and monitor distribution center (DC) costs and operational performance.
According to a recent study conducted by the Supply Chain Consortium, supply chain executives rate information technology (IT) and mobile material handling systems as top investment priorities in the upcoming year.
How did these supply chain executives determine which areas should receive greater capital
investment?
As Thompson Brockmann, principal of consulting firm Tompkins Associates and author of the study, explains, they used the old carpenter's motto.
"It takes careful planning and proper analysis of business requirements to balance the amount of investment between the size of the facility, automation, and system technology so that organizations get the best return on investment," Brockmann says.
It's important that companies document their capital investments because this will help them set a baseline and interpret performance metrics.
Subsequently, companies must determine and track the best ongoing performance metrics, identify improvement opportunities, implement changes and track the results. If the metrics do not improve, additional actions will need to be taken.
"With the proper performance metric tools and processes, you can continually improve operations while still meeting business requirements," he adds. "Whether you are starting a new operation or attempting to implement continuous-improvement strategies, performance metric management and benchmarking and best practices are extremely useful tools in today's competitive business arena."
Performance metrics monitoring allows companies to:
- Identify improvement opportunities.
- Quantify and prioritize improvement opportunities.
- Track changes and results.
- Quickly flag changes in business to remain flexible.
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