We are sure that many of you are already familiar with the S.M.A.R.T. (SMART) acronym for goals and metrics. The SMART stands for:
Virtually everyone is measuring things that are, indeed, measurable (that’s the ‘M’ part). After all, you can’t have metric for things that cannot be measured or quantified.
However, we hear a lot of goal-setting that is not quantified.
Here’s a big one that seems to be getting a lot of attention these days:
Improve forecast accuracy
Everyone wants to improve forecast accuracy!
However, if you’re like most supply chain executives and managers, you’ve had this goal for a long, long time.
You may have spent hundreds of thousands of dollars, and thousands of man-hours, trying to improve forecast accuracy.
But, also if you’re like most supply chain executives and managers, you have barely moved the needle toward any real, long-lasting improvement.
Sure! You’ve seen some improvements.
But, my guess is that most—if not all—of that improvement has come in the fewer than 20 percent of SKU-locations (SKULs) that were already pretty consistent movers, and were already the easier to manage SKULs for which you are accountable.
Nevertheless, you’re still struggling almost daily with the 50 percent or more of your SKULs where demand is volatile and your typical forecast (on average) has error rates (at the SKUL-level) of 40 percent, 50 percent, or even more!
So, what’s my point here?
My point is: Why?!?
Why are you spending so much time, energy and money measuring and attempting to change something over which you clearly have very, very little control?
Are your forecast accuracy goals specific? Do you set specific targets for the really hard ones—the ones with lower demand levels and higher volatility?
Are they measurable? Are they achievable? (Now, there’s a big question!)
If they’re not achievable—and I think your history of effort and investment over months and years probably proves that point—then why are you still beating your head against that wall? (It will feel so much better when you stop!!)
Measure what you’re after
What you’re really after, we believe, is to improve FLOW in your supply chain, so that you can improve ON-TIME PERFORMANCE, so that you can MAKE MORE MONEY.
So, what you should be applying SMART metrics and goals to are these:
- How much VISIBILITY do you have across your supply chain of ACTUAL DEMAND? (Compare to this: How much of the VISIBILITY is obscured by FORECAST data that is almost always going to be wrong to some degree or other?)
- How much VARIABILITY is being passed up and down your supply chain due to actions being taken based on FORECASTS rather than ACTUAL DEMAND?
- How likely are your supply chain BUFFERS—literally, any given buffer—going to PROTECT FLOW? Do you have EARLY WARNING VISIBILITY of buffers that are in danger of NOT PROTECTING FLOW based on ACTUAL DEMAND (not clouded by FORECASTS)?
- Are your actions leading to IMPROVED CASH VELOCITY, or are firefighting efforts, overtime, and expediting eating up all of your supposed “improvements”?
- Is your ROI actually improving as a result of your efforts, or are you in the same profit position you were in years ago, even though you have spent “the big bucks” on things others promised (or, you thought) would lead to improvement?
It’s your turn
What do you measure in your supply chain? Are forecasts clouding your visibility? Are you achieving real, long-lasting improvements that lead to MAKING MORE MONEY? Or, are you just getting better at putting out recurring fires?
We would like to hear your comments. Leave them below, or feel free to contact us directly, if you prefer.