Quality in Action Perspective: Measuring Customer Delivery
One of the best ways to know what your customer wants is to ask. Then, align your dashboard metrics with customer expectations. Since customers are only inclined to pay for actions that drive value for them, nothing else really matters. Get metrics right early is a boon to a rapidly growing company. With specific regard to supply chain, customers typically want to know whether their order will arrive when they need it. This is a lot more important that may appear on cursory inspection, as variation in delivery receipt affects warehousing, production, and cash flow. Customers are often forced to build in a “fudge factor” with their vendors that takes into account the variation they experience. For example, if Vendor A is always late two weeks on delivery, then the customer tends to order two weeks earlier. In practical terms, this works until Vendor A actually delivers on time (the projected delivery date). However, profiling delivery behavior for all vendors is time consuming and adds no value to the relationship. Many companies track on time delivery by the date the carrier picks up product at the loading dock. The argument is that what happens after the carrier picks up the carton is beyond their control. However, this is clearly unsympathetic to the customer experience. Great vendors do two things for on time delivery tracking:
I once heard a colleague explain variation in terms that cannot be improved and should be repeated here. If a person has one bare foot in hot ashes and the other bare foot in a block of dry ice, then on average they are comfortable; but, the variation is crippling. The variation measure is called “span.” Depending on the sample size, it conveys the span between representative percentiles—for example, the 5th and 95th percentiles. Supposed that relative to the projected delivery date, the 5th percentile for the actual delivery date was 13 days early and the 95th percentile for the actual delivery date was 17 days late. The span experienced by the customers is 30 days (13 + 17). In simple terms, the customers “feel” delivery variation of a month! Would you want to be this customer? Would this customer want you as a vendor? One of the amusing things about good measures is that they debunk myth and defy conventional wisdom. Objective actual data, collected without process bias, typically sheds unfavorable light on what really happens. One of my particular favorites was a rather smug assertion that there was no span in customer delivery. As it turns out, the span was 111 days! Most businesses cannot get Lean and manage cash effectively with these kinds of impediments. Eliminating the variation in deliver span is a competitive differentiator. World class companies aren't afraid to measure because they are committed to excellence. They prefer detecting their business model flaws before their competitors beat them over the head with them. |