WHICH METRICS MATTER MOST?
When it comes to the performance metrics used by
DC professionals, the survey once again showed that
the top choices don’t vary much from year to year. In
fact, this year’s list of the Top 12 metrics pretty much
mirrors last year’s list, with minor changes in the
rankings. (See Exhibit 1.)
However, there’s a longer-term trend taking shape
here that’s a little worrisome. Research has shown
that companies that use a balanced set of measures—financial as well as customer-, employee-,
and process-centric metrics—outperform those that
use a more limited set of measures. Unfortunately,
our research indicates that where the 12 most popular metrics are concerned, the mix has become less
balanced over the years—a trend first noted in 2011.
This year’s study showed that nothing had changed
on that front—in both the 2013 and 2014 surveys,
nine of the Top 12 metrics were either customer or
operational measures.
In fact, since 2011, there’s been a
marked shift toward the use of oper-ations-focused metrics. (Operational
metrics measure internal performance,
such as order fill rates and lines received
and put away per hour.) While those
are undeniably important to DCs, companies should be aware that focusing
too much of their attention on operations could lead to adverse effects in
other areas, such as costs. For instance,
an operation that’s intent on achieving
a 99-percent order fill rate might be
tempted to expedite shipments. While
that would go a long way toward keeping
customers happy, such a move could
send the cost per unit shipped through
the roof.
HOLDING THEIR OWN—MOSTLY
As for how facilities are performing
against those metrics, the news is gen-
erally good. The results from our 11th
annual survey show continuous improve-
ments in operational performance across
a majority of measures when compared
with the 2013 study.
However, there were also some disappointing findings. With three of the Top 12 metrics focused on supplier performance, we expected to see big gains here.
But that didn’t happen. Performance against supplier-related metrics has either slipped or remained flat.
As for why that would be, we have some thoughts.
Having spent the past seven years researching supplier and buyer relationships, we believe the root cause
of the stagnant performance is “status quo” practices
in supplier management. In particular, we think the
problems can be traced to a lack of the kind of collaboration necessary to tackle the problems and issues
that DCs and their suppliers face.
On a brighter note, “best-in-class” (top 20 percent)
and typical (middle 20 percent) performers showed
improvement against more than 70 percent of the
metrics. However, even that wasn’t enough to earn
them a place in the sun. It’s the “major opportunity” performers that deserve a standing ovation this
Metric (by rank in 2014 survey) and category 2013 Rank 2012 Rank
1. On-time shipments (Customer) 1 1
2. Internal order cycle time (Customer) 2 5
3. Total order cycle time (Customer) 4 6
4. Dock-to-stock cycle time, in hours
(Inbound operations) 3 4
5. Order picking accuracy (Quality) 5 2
6. Lines picked and shipped per hour
(Outbound operations) 6 8
7. of supplier orders received damage free
(Inbound operations) 8 12
8. Average warehouse capacity used (Capacity) 9 3
9. Peak warehouse capacity used (Capacity) 12 7
10. Lines received and put away per hour
(Inbound operations) 7 11
11. Back orders as a of total orders (Customer) *
12. of supplier orders received with correct
documentation (Inbound operations) 11 *
* Did not appear in Top 12
EXHIBIT 1
The Top 12: The most commonly
used DC metrics
