Most of the executives and managers with whom we come into contact already have a pretty good idea about where improvements need to be made, or could be made, in their operations and their supply chains.
Typically, we hear about areas like
- Better customer service levels
- Reduced inventory
- More accurate demand planning
- Increased transportation efficiency
- Improved visibility
- Enhanced procurement processes
Setting goals for improvement projects
By now, almost all our readers have probably heard the popular acronym for goal-setting. Using S.M.A.R.T., these state that all goals should be
Let me say from the outset that I, personally, do not see a lot of distinction between “attainable” and “realistic.” Clearly, in my mind, an unattainable goal is not a realistic goal either; and an unrealistic goal is likely unattainable for one reason or another.
The How-To of setting S.M.A.R.T. goals
Let’s walk through how we might help a client start to set S.M.A.R.T. goals for an improvement project. For this example, we will say that the company’s current customer service levels average around 84 percent as calculated using this formula:
Average Number of Customer Order Lines Shipped Complete and On-Time / Average Total Number of Customer Order Lines to be Shipped
Or, in this specific case,
18,480 / 22,000 (per month) = 84%
Next, for our hypothetical case, we will say that their cross-functional team has created a plan to move to a full-fledge Demand Driven MRP (DDMRP) implementation. They have laid out a rational plan, with our help, that says they can complete the implementation in about 90 days to 120 days. They believe that improvement will begin to be manifested at 60 days into the implementation, and that the company will improve to a 98 percent customer service level within six (6) months.
Furthermore, the plan suggests that they can achieve this improvement in customer service levels without any additional net investment in average inventory dollars.
This gives us two factors to measure:
- Customer Service Levels
- Averaged Inventory Dollars
This satisfies the first two S.M.A.R.T. requirements: we have specific metrics, including rules for calculating them. And, with the rules in place, we know how to measure them. They are, therefore, measurable.
We have also factored in a time-related element.
It will be simple enough to create a Microsoft Excel® workbook that can track and chart over time Inventory Dollars on-hand against the baseline average. In the same workbook, we can create a sheet—and a chart—that tracks week-by-week Customer Service Levels. This would be compared to a forecast improvement that begins at 84 percent 60 days after the commencement of the DDMRP implementation, and follows a straight-line trend up to 98 percent over six months.
That takes care of the ‘T’ in S.M.A.R.T.
Now, let’s talk about Attainable and Realistic
The ‘A’ and ‘R’ are at the very heart (literally) of S.M.A.R.T. Nevertheless, they are the most overlooked part of creating truly “smart” goals for improvement projects.
Read that paragraph again, above, that begins “Next, for our hypothetical case, we will say….”
In a great many cases, the attainable and realistic analysis never gets much beyond the kind of language contained in that paragraph. The fact that someone—or some group of folks—have convinced themselves that their actions will improve customer service levels from their current level of 84 percent to 98 percent over six months does not, in itself, make the goal either attainable or reasonable.
Unless a cross-functional team has clearly identified the bottlenecks in the current modes of operation that have, heretofore, kept the firm and the supply chain from achieving a consistent 98 percent customer service level, then the “goal” is little more than wishful thinking.
I say this because, if such an improvement could be achieved without a clear comprehension of what is presently keeping it from being achieved, then it would already be done.
Our approach is to help the supply chain’s (or, company’s) cross-functional team come to an indisputably clear understanding of their current situation and its bottlenecks by helping them apply the Thinking Processes originating with Eliyahu Goldratt (Theory of Constraints). By constructing and refining a Current Reality Tree (CRT), the team comes to find real clarity about the causes of their current situation and the fundamental changes that need to be made.
Building on this understanding as a solid foundation, they are then able to extrapolate to the clear and concise strides that are needed to carry out step-by-step improvements necessary to actually achieve the targeted 98 percent customer service levels.
In the absence of this clarity and detail, there is no “attainable” or “realistic,” there are only wishes and desires.
Smart cannot be spelled without the ‘A’ and the ‘R.’
Proceeding without these two elements makes your team only ‘S.M.T.’, not S.M.A.R.T.
We would be delighted to hear from you. Tell us about your successes with using S.M.A.R.T. goals for improvement. Or, if you have questions, we’d be happy to field those, as well.