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Measurements in Supply Chain have a huge impact on the direction of improvement.
I was recently working with a pharmaceutical company where the team was grappling with the twin issues of stockouts and obsolescence. The supply chain team said they were ensuring 100% availability of the products. I was intrigued that 100% availability couldn’t co-exist with rampant stockouts and loss of sales.
When I dug deeper and asked them how they measured availability, they said ‘Of course, availability is measured against forecast! We ensure that all the products are made available at the depots as per the forecast. What can we do if the forecast itself is wrong, leading to stockouts?’
Given the current measurement system, their improvements were directed towards improving the forecast accuracy. Responsibility for stockouts was plainly on the Demand Planning team, not on the Supply team.
A simple change in measurement was instrumental in setting up a dynamic demand-supply synchronisation leading to a sharp reduction in stockouts.