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PERFORMANCE METRICS

Measuring Supply Chain and Improvement Opportunities


In order to measure how well the whole supply chain is performing, we surely need Supply chain metrics which are the measures that will indicate the strength, weakness and opportunities for improvements of a particular Supply Chain. There are two main areas of supply chain performance to be measure: (1) first one is that focus on the performance to the customer, i.e. customer service, and (2) metrics that focus internally on the efficiency of the process, particularly the cost of carrying out the process. Beyond the internal and external performance of supply chain in focus, we must also consider measuring the performance of the supply chain links. 1. CUSTOMER SERVICE In order for defining which metrics to use to measure customer service, it is important to first identify who the final customer is and what is important to them. There are 2 kinds of customers for our supply services. The Direct Customers are the programme staffs who raise supply requirements for their respective programmes. Another is the Indirect Customers who are the end-users of our supplies. In humanitarian aid situations, the final customers are the people placing demands/requests on the supply chain. In the context of SCILaid Betaland , the refugee are the final customers whereas the programme staff from SCILaid are direct customers to our supply section. The following Attributes of service that are important to be monitored and measured: _ Quality of the goods and service provided. _ Speed that the supply chain can respond to the requirement of customers/end-user. _ Dependability of the supply chain. _ Flexibility of the supply chain, i.e. readiness to adapt to the changing environment. The following are examples of metrics that can be used to measure customer service in SCILaid : (a) Delivery Performance this is defined as the percentage of requests/orders that are fulfilled. A widely accepted definition of a good performance in delivery of good must be conformed to three criteria as follows: 1. Right Time 2. Right Quantity/ Quality 3. Free from Errors Right time means that the orders should be delivered on or before the date requested. Right Quantity and Quality means that every purchase order must be fulfilled as per PO specified quality, brand, technical specifications, quantity and packing.

Free from Errors is all kind of shipping documents, insurance documents and FDA certified documents must be free from errors and all labelling and packing must be in accordance with POs. (b) Supply Chain Response Time/Lead Time this is defined as the time taken between a customer/end-user making a request and that request being fulfilled. Too ambitious to set up a shorter frame of lead-time may hamper the quality of supplies. (c) Information on Status of Orders this is the time taken to provide information on the progress of orders and where goods currently are in the supply chain. Targets can be set and agreed with the customer and performance can then be assessed against these targets. Improvement Opportunities for SCILaid Betaland SCILaid is mainly providing foods materials to the refugees at camps in the border area. In this case, the exact quality and quantity of the foods items required by the beneficiaries should be delivered before or on the date requested. We can check how many percentages of foods (in volume and in monetary value) arrived the destination in time and what is the percentage of delayed arrival. If there is no delay and 100 % fulfilled in time, we need to check that (a) whether set TADs are too flexible or (b) whether we use unreasonable level of transport cost. The target for SCILaid is that 80% of goods should be delivered within the practical TADs and reasonable transport cost. In this regard, SCILaid must set up a matrix indicating the earliest possible TADs framework for various types of goods needed to be procured. Another way to measure customer service is to conduct a survey of Subjective measures which include the views and perceptions of people that cannot be supported by quantitative analysis. Customer satisfaction surveys or customer review meetings must be regularly conducted for identifying the problematic areas in the supply chain. 2. EFFICIENCY OF THE PROCESS In addition to providing good customer service as a sole aim of the supply chain, it is also important to consider that that all process in supply chain must be done efficiently. Onesidedly focus on measuring and managing customer service can lead to imbalance of cost and benefit. It is therefore important to measure Cost of the overall process of Supply Chain. In this regards, the following are metrics that can be used to measure the cost of the supply chain: Total Supply Chain Costs It can be defined as the sum of all the supply chain costs including people, inventory carrying, goods acquisition and order management costs. These costs are started with customers/end-users requirement and ended with the delivery of goods and services to them. The overhead cost such as staff salaries, transportation and

warehousing, and customs clearing charges must not exceed 25% of the total supply value. Inventory Costs - this is the cost of holding inventory in the whole supply chain including warehouse rental charges, staffing costs, water and electricity cost and technical inspection and fumigation (if necessary) costs. These costs should not exceed 10 % of total supply value. Inventory Value This is one of the most important parts of the supply chain since this is the value of inventory being held in the supply chain. Unreasonably high level of inventory value kept in the warehouse is very undesirable and unprofessional because these goods are intended to be distributed to the beneficiaries/end-users instead of lying in the warehouses. In this case, a level of minimum balance for each and every single type of items should be standardized depending upon the market situation and product availability, shelf life and expiry dates and transport lead-time. Here also too low level of inventory is as undesirable as very high inventory level. Total inventory value should not exceed 30% of total supply value for respective projects. Order Management Costs - This is the cost involved in processing and managing an order mainly reflecting the cost of telecommunication, fax and email charges. These costs should not exceed 10 % of total supply value. Moreover, in terms of order management and procurement, the following metrics are needed to measure the SCILaid management of supply chain: Market Analysis- the overview of prevailing and future market potentials Supplier Assessment-the strength and weakness of regular suppliers Procurement Techniques-the compliance of procedures of procurement Negotiation Approach-the strength and weakness of price negotiation Commodity Strategy-selection criteria of the most appropriate goods Contract Administration-setting correct terms and condition and follow up Requisition to Pay-thoroughness in checking, approving and finalizing payment Data / Information Technology-utilization of the most suitable software

Cost of Waste All supply movement and transaction are always flawless, sometimes, there might be mistakes and errors both in terms of documentations and type and quantity of the goods. In that case, there is the cost involved in managing, returning or disposing of goods that for different reasons are never used by the customer. In the context of SCILaid Betaland, this can include wrong goods, damaged goods and bad quality of ration food, and goods arriving too late to be used and goods beyond their expiry dates. Not more than 5% of the total supply value is acceptable for cost of waste. Improvement Opportunities for SCILaid Betaland

In the working process of SCILaid, there are some general areas of opportunities where improvements can be made to the performance of the supply chain and to the way the supply chain contributes to her disaster relief programmes in Betaland . These areas of opportunity are mentioned below: (a) Supply chain preparedness. Making improvement in the preparedness of the supply chain, especially for the disaster situation, will have a positive effect on the performance of the SCILaid supply chain, particularly in the early part of a disaster relief situation. SCILaid must put a certain amount of funding for emergency preparedness and the amount depends upon the geographical situation and demographical data of a given area that is prone to be affected by the man-made or natural disasters. There are some Opportunities to improve for SCILaid for the sake of preparedness for the disaster situations. These points can be mentioned as follows: In order to learn from past experiences, SCILaid can do evaluating the performance of the supply chain, at the end of any relief operation. The learning can then be analysed and recorded so that it can be used for future operations. In order to get ready for specific natural or man made disasters, SCILaid can set up a detail and specific plans for both strategic and operational levels for high risk seasons and areas. SCILaid can participate to work with other aid organisations to develop these plans. SCILaid can stockpile such essential supplies as basic drugs, family kits and community kits, and other appropriate goods and equipment in permanent warehouse facilities for emergency situations. SCILaid should set up standard procedures and systems for the main supply chain processes. In terms of HR development, SCILaid can train her supply chain professionals in the processes, procedures and systems for setting up and managing supply chains. (b) Knowledge and use of processes and procedures. Generally speaking, regulations and procedures are backbones of any kind of organization. These processes and procedures are quite necessary for a number of the key activities that will be carried out when managing the supply chain. The people managing the supply chain should have a proper understanding of these procedures for the improvement of the performance of the supply chain. There are some Opportunities to improve for SCILaid for the sake of better understanding of process and procedures of supply chain. These points can be mentioned as follows: SCILaid should encourage supply section to provide regular orientation sessions for new staff member for better understanding of supply regulations and procedures

SCILaid should make coordination meetings among sections to review potential problem of processes and procedures. Otherwise, they can become too complex and bureaucratic, so they need to be regularly reviewed to ensure they are helping, not hindering, performance of the supply chain. SCILaid must keep herself up to date knowledge of local country procedures and legislation that need to be understood and followed. These might include local customs procedures, employment legislation, and traffic legislation. A knowledge and understanding of these local procedures is also important and can improve the speed at which the supply chain facilities and resources can be put in place and how quickly and efficiently goods can be moved once they arrive in the country.

(c) Use of information technology. In the information technology age, humanitarian supply chains can be improved for better performance by means of the utilization of information technology to manage day-to-day flow of information and to aid decision making. Since technology is a powerful tool it can enable information to be captured, transmitted, stored, analysed and shared. There are some Opportunities to improve for SCILaid for the use of information technology. These points can be mentioned as follows: SCILaid can establish a Track and Trace system in order to follow up the actual (real time) movement and flow of goods and information. This system will also enable customers to get a clear picture on the progress of goods and expected delivery. SCILaid can create standard software for production of various kinds of Reports to reduce time in collating information required for supply chain reports, e.g. donor reports, monthly fuel consumption report, reports on the current inventory level of warehouses. SCILaid can build up a hand-on Supply Chain Metrics to provide accurate and timely information on the performance of the supply chain so that performance can be better managed. SCILaid can construct an IT aided facilities for Storing and Sharing Preparedness Data in order to maintain preparedness data and information on feedback experiences and knowledge gained from previous disaster relief programmes. These data are to be recorded and made available and accessible. SCILaid can share information with other Aid Organisations by creating an IT aided common network of information held by individual organisations, e.g. preparedness data, supplier information for better visibility of the supply chain. SCILaid can put up a computerized supply management Processes to help Warehousing through the use of a warehouse management system or to help transportation with track and trace transport management system.

3. MEASURING PERFORMANCE OF SUPPLY CHAIN LINKS

A supply chain involves the following actors such as: Commercial Suppliers supplying NGOs or UN Agencies. UN Agencies supplying NGOs. Donors supplying NGOs or UN Agencies. Regional Warehouses supplying to local Warehouses. Transport Companies moving and delivering goods. Warehouses picking and preparing goods ready to be loaded on vehicles. Customs and transit.

Since the supply chains management involves different people and different department along the supply chain, if these different actors and their people and departments are not performing well, have different views about what performance is required, or are using different metrics to manage and measure performance, these can have a significant impact on the performance of the total supply chain. Therefore, it is also important to have metrics and to be able to measure different parts of the supply chain. There might be some areas of conflict of interest. For example, for the end-users, the speedy delivery of supplies is the most important thing for them but for a transport company it is the cost of transportation that is important. Another example is that, for the donor, the most important thing is to send the humanitarian aids to the targeted beneficiaries as soon as possible, but for a government authority, other politically related issues might be more important. Improvement Opportunities for SCILaid Betaland (a) Involvement in the disaster assessment process. Whenever a disaster happens, SCILaid should conduct a preliminary assessment of the situation of disaster. In the very beginning these assessments should be carried out by humanitarian organisations using an assessment team that is consist of professionals from different disciplines within the organisation. In these team, SCILaid must put the supply staff as a necessary part of preliminary survey of a disaster because the earlier the involvement of supply chain in the assessment, the earlier the scale, scope and location of beneficiaries and their needs, will be known. (b) Communication, co-ordination and cooperation with other aid organisations There will be a number of different humanitarian aid organisations involved in a disaster relief operation. UN Agencies, international NGOs and local NGOs may respond to the same disaster at the same time. Sometimes, some humanitarian organization, especially the NGOs, will all be setting up and then managing their own supply chains to be able to source, move and then distribute goods.

So SCILaid must coordinate and cooperate with other organizations in order to avoid overlapping activities and competing to acquire human resources, sourcing the supplies and renting the warehouse spaces. There is at least a positive aspect of competition that it is capable of encouraging aid organisations to continually improve its performance, as it will usually be the most efficient and effective organisations that will get first access to resources. But SCILaid should keep not to lose sight of the overall humanitarian performance of supply chain. WLEDGE AND USE OF PROCESSES AND PROCEDURES USE OF INFORMATION TECHNOLOGY . MANAGING THE LINKS IN THE SUPPLY CHAIN

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