We observed that there were no performance measures for the complete supply chain. Many companies have this problem. Those that do have such metrics often do not monitor them regularly. Or their metrics are not directly related to customer satisfaction. For example, some companies use inventory turns for all supply chain inventories as the main performance measure. Yet they do not measure their response time or service fill rates to customers. We contend that supply chain metrics must be oriented to customer satisfaction. This leads us to the second pitfall.
Pitfall 2: Inadequate Definition of Customer Service
A supply chain must ultimately be measured by its responsiveness to customers. However, there are different definitions of responsive customer service. Most companies measure the average line item fill rate (percentage of line item requests shipped prior to customer due dates). There are variations, such as weighting fill rates by dollar volume. Yet these may not satisfy customers.
A customer order usually involves multiple line items. For example, a personal computer (PC) dealer may order printers, computers, accessories, and software in one order. As the dealer is merely replenishing its own stock, which will be sold to end users, the supplier can ship individual items separately, depending on the availability of these products, without adversely affecting the dealer’s business. Line item fill rate would be a good indicator of customer service. Other customers demand a single shipment of all items, such as customers who need service parts to complete a repair job. In these cases, it is important to measure the fill rate in terms of completed orders.