Editor's Note: No two successful performance management programs are the same, but all successful performance management programs share common principles. To shed some light on what separates a good company from a great company with regard to performance management, DC VELOCITY will publish a column on one of the 12 Commandments of Successful Performance Management each month. This month we drill into the fourth commandment: Beware.
The Fifth Commandment Beware: Know the point of your metrics and be careful not to get sidetracked
The scenario is all too familiar: Tired of fielding complaints from customers about poor service, senior management decides to crack down on the DC staff. It gathers the supervisors, planners and expeditors together to announce that it expects everyone to pull together to improve delivery reliability. As an incentive, it's establishing a bonus program; workers will be rewarded based on their performance against a standard metric, say, the DC's fill rate.
The
12 Commandments of
Performance Management
1Focus:
Know
your goals 2Balance:
Use a balanced approach 3Involve:
Get employees engaged 4Apply:
Be metrics "users", not just "collectors" or "posters" 5Beware: Know the point of your metrics 6 Anticipate: Use metrics
as your headlights 7 Integrate: Layer your
metrics like an onion 8 Listen: Pay attention
to what your customer is saying 9 Benchmark! 10 Be flexible: There's
no such thing as the holy grail of metrics 11 Lead: Practice what
you preach 12 Be Patient: Crawl
before you walk (or run!)
In the following days, managers draft "expedite" lists and workers spend hours chasing orders that are due to ship in hopes of achieving world-class performance. What they don't realize, however, is that the company will never achieve world-class performance by focusing on an isolated metric—be it fill rate, inventory turns or order cycle time.Worldclass performance is a result of world-class process—devising a system for perfectly executing not a task like getting a box to the dock, but a comprehensive multi-step process, like order fulfillment.
Focusing exclusively on one small task is like painstakingly caulking a window frame while the ceiling collapses around you. Nonetheless, companies fall into this trap all the time.What follows are a few true-life examples (with identifying details changed) of how companies have gotten sidetracked from their main mission by a metric (in this case, fill rate):
Company A receives an order for a printer cartridge on Monday but holds off sending the order to the DC because that particular cartridge is out of stock. When the cartridges are finally restocked on Thursday, the order is forwarded to the DC for fulfillment on Friday. By now, the impatient customer has had to wait five extra days for the cartridge. Nonetheless, Company A, which measures fill rates by how quickly the order is filled once it hits the DC (not from the time the order was received), proudly reports a 100-percent fill rate.
Company B receives an order for a truck engine on Monday. Though its normal cycle time is two days from order to shipment, the company quotes the customer a five-day cycle time because it's experiencing unusually high demand.When it ships the engine out on Friday, Company B reports that it has achieved a 100-percent fill rate because it shipped the product when it said it would (but not when the customer needed it).
Company C, a videogame manufacturer whose plant runs 24 hours a day, ships games to DCs nationwide. The cutoff for trucks leaving the plant is usually 9 p.m. During the peak demand period, production falls behind and an order misses the truck. However, the plant continues assembling the order and finally sends the carton to the shipping department at 10 p.m. Shipping clerks fill out the manifests and send the carton to the dock—where it sits until the next evening. Though the carton languishes on the dock for nearly 24 hours, Company C's computer system shows the order as "shipped" and reports a 100-percent fill rate.
Company D boasted of stellar fill rates (98.5 percent) for books shipped from its DC to retailers.Nonetheless, customers were constantly on the phone complaining about lousy service. An investigation revealed that though the books left the DC on time, they rarely arrived at the customer's receiving dock during the scheduled delivery window. When they failed to show up, the retailer was forced to reschedule the delivery, which meant delays of up to three days.
Company E's delivery performance had slumped, with fill rates dipping into the low 70th percentile. Management stepped in to offer bonuses if workers could raise that to 99 percent. In short order, they were hitting the target regularly. What no one noticed was that a spike in expedited shipments had cost the company over $1 million.
Are your orders perfect?
It's safe to say that claims that a company regularly achieves a 100-percent fill rate or ships products "on time" is no guarantee that the customer will receive the goods on time. Nor does it mean the customer will get the products it ordered in the quantity ordered or that the box will arrive undamaged and with a correct invoice. It simply tells you that the company has found a way to hit one particular target consistently.
To measure what's truly important to the customer, you must turn to the Perfect Order. Though slight variations exist, the Perfect Order is usually defined as an order that's delivered on time, complete, damage free and accompanied by the correct invoice.
And it's not even that complicated to calculate: You simply multiply scores for the various component measures. For example, if a company reports that it has a 95.0-percent performance record for on time deliveries, fill rates, correct invoices and damage free shipments, the resulting Perfect Order index would be 81.4 percent (95% x 95% x 95% x 95%). Had each of the scores been 90 percent, the Perfect Order index would drop significantly—to 65.6 percent.
The lesson is simple. Manage your business with process metrics, and evaluate your business using results metrics. Used properly, process metrics drive the desired results.
Supply chain planning (SCP) leaders working on transformation efforts are focused on two major high-impact technology trends, including composite AI and supply chain data governance, according to a study from Gartner, Inc.
"SCP leaders are in the process of developing transformation roadmaps that will prioritize delivering on advanced decision intelligence and automated decision making," Eva Dawkins, Director Analyst in Gartner’s Supply Chain practice, said in a release. "Composite AI, which is the combined application of different AI techniques to improve learning efficiency, will drive the optimization and automation of many planning activities at scale, while supply chain data governance is the foundational key for digital transformation.”
Their pursuit of those roadmaps is often complicated by frequent disruptions and the rapid pace of technological innovation. But Gartner says those leaders can accelerate the realized value of technology investments by facilitating a shift from IT-led to business-led digital leadership, with SCP leaders taking ownership of multidisciplinary teams to advance business operations, channels and products.
“A sound data governance strategy supports advanced technologies, such as composite AI, while also facilitating collaboration throughout the supply chain technology ecosystem,” said Dawkins. “Without attention to data governance, SCP leaders will likely struggle to achieve their expected ROI on key technology investments.”
The U.S. manufacturing sector has become an engine of new job creation over the past four years, thanks to a combination of federal incentives and mega-trends like nearshoring and the clean energy boom, according to the industrial real estate firm Savills.
While those manufacturing announcements have softened slightly from their 2022 high point, they remain historically elevated. And the sector’s growth outlook remains strong, regardless of the results of the November U.S. presidential election, the company said in its September “Savills Manufacturing Report.”
From 2021 to 2024, over 995,000 new U.S. manufacturing jobs were announced, with two thirds in advanced sectors like electric vehicles (EVs) and batteries, semiconductors, clean energy, and biomanufacturing. After peaking at 350,000 news jobs in 2022, the growth pace has slowed, with 2024 expected to see just over half that number.
But the ingredients are in place to sustain the hot temperature of American manufacturing expansion in 2025 and beyond, the company said. According to Savills, that’s because the U.S. manufacturing revival is fueled by $910 billion in federal incentives—including the Inflation Reduction Act, CHIPS and Science Act, and Infrastructure Investment and Jobs Act—much of which has not yet been spent. Domestic production is also expected to be boosted by new tariffs, including a planned rise in semiconductor tariffs to 50% in 2025 and an increase in tariffs on Chinese EVs from 25% to 100%.
Certain geographical regions will see greater manufacturing growth than others, since just eight states account for 47% of new manufacturing jobs and over 6.3 billion square feet of industrial space, with 197 million more square feet under development. They are: Arizona, Georgia, Michigan, Ohio, North Carolina, South Carolina, Texas, and Tennessee.
Across the border, Mexico’s manufacturing sector has also seen “revolutionary” growth driven by nearshoring strategies targeting U.S. markets and offering lower-cost labor, with a workforce that is now even cheaper than in China. Over the past four years, that country has launched 27 new plants, each creating over 500 jobs. Unlike the U.S. focus on tech manufacturing, Mexico focuses on traditional sectors such as automative parts, appliances, and consumer goods.
Looking at the future, the U.S. manufacturing sector’s growth outlook remains strong, regardless of the results of November’s presidential election, Savills said. That’s because both candidates favor protectionist trade policies, and since significant change to federal incentives would require a single party to control both the legislative and executive branches. Rather than relying on changes in political leadership, future growth of U.S. manufacturing now hinges on finding affordable, reliable power amid increasing competition between manufacturing sites and data centers, Savills said.
The British logistics robot vendor Dexory this week said it has raised $80 million in venture funding to support an expansion of its artificial intelligence (AI) powered features, grow its global team, and accelerate the deployment of its autonomous robots.
A “significant focus” continues to be on expanding across the U.S. market, where Dexory is live with customers in seven states and last month opened a U.S. headquarters in Nashville. The Series B will also enhance development and production facilities at its UK headquarters, the firm said.
The “series B” funding round was led by DTCP, with participation from Latitude Ventures, Wave-X and Bootstrap Europe, along with existing investors Atomico, Lakestar, Capnamic, and several angels from the logistics industry. With the close of the round, Dexory has now raised $120 million over the past three years.
Dexory says its product, DexoryView, provides real-time visibility across warehouses of any size through its autonomous mobile robots and AI. The rolling bots use sensor and image data and continuous data collection to perform rapid warehouse scans and create digital twins of warehouse spaces, allowing for optimized performance and future scenario simulations.
Originally announced in September, the move will allow Deutsche Bahn to “fully focus on restructuring the rail infrastructure in Germany and providing climate-friendly passenger and freight transport operations in Germany and Europe,” Werner Gatzer, Chairman of the DB Supervisory Board, said in a release.
For its purchase price, DSV gains an organization with around 72,700 employees at over 1,850 locations. The new owner says it plans to investment around one billion euros in coming years to promote additional growth in German operations. Together, DSV and Schenker will have a combined workforce of approximately 147,000 employees in more than 90 countries, earning pro forma revenue of approximately $43.3 billion (based on 2023 numbers), DSV said.
After removing that unit, Deutsche Bahn retains its core business called the “Systemverbund Bahn,” which includes passenger transport activities in Germany, rail freight activities, operational service units, and railroad infrastructure companies. The DB Group, headquartered in Berlin, employs around 340,000 people.
“We have set clear goals to structurally modernize Deutsche Bahn in the areas of infrastructure, operations and profitability and focus on the core business. The proceeds from the sale will significantly reduce DB’s debt and thus make an important contribution to the financial stability of the DB Group. At the same time, DB Schenker will gain a strong strategic owner in DSV,” Deutsche Bahn CEO Richard Lutz said in a release.
Transportation industry veteran Anne Reinke will become president & CEO of trade group the Intermodal Association of North America (IANA) at the end of the year, stepping into the position from her previous post leading third party logistics (3PL) trade group the Transportation Intermediaries Association (TIA), both organizations said today.
Meanwhile, TIA today announced that insider Christopher Burroughs would fill Reinke’s shoes as president & CEO. Burroughs has been with TIA for 13 years, most recently as its vice president of Government Affairs for the past six years, during which time he oversaw all legislative and regulatory efforts before Congress and the federal agencies.
Before her four years leading TIA, Reinke spent two years as Deputy Assistant Secretary with the U.S. Department of Transportation and 16 years with CSX Corporation.