Our exploration of supply chain excellence divides financial metrics into four categories. Growth, profitability, cycle and complexity are the four components of the Supply Chain Effective Frontier. We believe supply chain leaders have to make conscious trade-offs of these four priorities in order to improve supply chain performance in a calculated and controlled manner. Many of you are familiar with our seesaw of the Supply Chain Effective Frontier.
One of the most common questions we get in our discussions of supply chain excellence is "where are the customer service metrics?". Unfortunately, for the time being, they are not here. For several reasons we are not comfortable including customer service metrics. There are no objective standards for customer service metrics. Because they are not reported in annual reports (with the rest of our metrics), we do not believe companies can be expected to objectively measure and report their performance.
Inventory is a proxy for customer service. Large swings in inventory are evident in financial metrics including days of inventory or inventory turns. Excessive fluctuation in these indicates an underlying issue within the supply chain which may manifest in reduced customer service levels. It is not perfect, but it is the best we have for the time being.
Finally, when we conduct deep dives into divisional data for clients, we are able to get a more nuanced look including some measures of customer service levels. After signing an NDA, companies are more willing to share that data and we can look at performance across different divisions or categories. The figure below illustrates an example of inventory turn and case fill percentage across three different categories.
If you're interested in complimentary benchmarking or a deeper dive into your company's financials, send me a note at firstname.lastname@example.org. If you're developing a measure of customer service based on financial performance or other objective measures, definitely let me know. In the meantime, thanks for following along!