“When I ask my team about customer service, I get high-five reviews. When I meet with my customers, I get thumbs-down feedback. I find the measurement of customer service to be one of the most difficult.”
Supply Chain Leader
Interview for Metrics That Matter
My kitchen table is piled high with interviews for the upcoming book, Metrics That Matter. The manuscript is due to Wiley on March 1st for an August 2014 publish date. I am behind. The heat is on. No backing out. I need it for my conference on September 10th-11th, 2014.
Writing a book is a labor of love. I wrestle with theme and content in each chapter. It starts with a blank screen and slowly starts to shape from my fingers. When I get stuck, I go for a swim. And, slowly through the repetition of the laps in the pool, I figure it out.
I love writing. It is an amazing process.
A 90,000 word deadline looms in front of me. I have working drafts of two chapters and two months to go. I can produce 3,000 words a day. I have completed sixty-five interviews. They all need to be approved by corporate communications departments. So, I have a couple of long months ahead of me. I will be in the pool a lot.
It is my second book. The research is the fun part of the process. I loved the quote that I captured today in my interview (see above), and I have enjoyed interviews with supply chain leaders like Peter Gibbons. To give readers a sneak peek for the book, here I share my interview with Peter.
As background, Peter Gibbons is the Executive Vice President, Global Supply Chain for Mattel, Inc. He is responsible for manufacturing, procurement, supply chain planning, logistics, quality, social responsibility and final product engineering. He has more than twenty years of international experience. Prior to Mattel, Peter was the Executive Vice President of Global Supply Chain Operations for Starbucks where he was responsible for the supply of the products that contribute to the Starbucks Experience: from the supply of coffee, to the procurement of the cup, to delivering the table it rests on. Prior to joining Starbucks, he worked at the executive leadership level in Europe, Latin America and North America at ICI, a global chemical company. He joined ICI Fibers after graduating college. He holds an MBA from Strathclyde University and a B.SC in Physics from the University of Edinburgh. I recently interviewed him for my upcoming book, Metrics that Matter, that publishes in August 2014. Peter is one of sixty-five companies that I have interviewed for the book. Here is an excerpt from the interview.
Peter, thanks for joining us today. Which metrics do you think matter to supply chain excellence?
For me, fulfillment is the fundamental measure of end-to-end supply chain performance. I believe that the challenge for the supply chain is to deliver exactly what the customer asks for the first time. Therefore I use the ‘perfect order’ metric to assess our overall performance and to “peel back the onion” and ask questions about what we need to do to satisfy customer requirements and demand. In my experience this has been a powerful metric to generate profound change.
Of course, the achievement of 100% ‘perfect order’ performance is not possible. But, that is not the point. It is a goal. We want to strive for ultimate performance to understand what needs to change or improve to allow our supply chain to satisfy customers – and some of those changes may have to come from the customer– to be reflected in how we manage demand.
I have come across customer service metrics and fulfillment metrics that overstate performance. Previously, we had a definition that did not truly reflect what the customer was asking for (example was case fill rates versus perfect order fill rates). Many organizations have encouraged allowances and adjustments that inflate the service numbers – all that does is create a false sense of organizational confidence and tension between Supply Chain organization and Sales and Marketing.
No matter the metric, I like to measure performance ‘in a manner that provokes improvement’ in a way that focuses on processes and not the people. My mantra is ‘let the metrics measure the process but let the people improve it.’ As leaders, when we remove fear and instill confidence, it is easier to go fix the process.
How do you define the metrics that matter? And, what have you learned?
There are three metrics at the core of how I lead supply chains: Safety, Customer Satisfaction and Total Delivered Cost. Approached correctly, I have found them to be effective levers that get to the heart of how the supply chain is performing.
Safety is about ensuring your people go home after their shift as well and healthy as when they arrived. It measures how much you care for your people, the control of your physical processes and the alignment of your leadership team. It’s hard to be world-class at anything if you can’t be world-class at safety.
We touched on Customer Satisfaction already. Considered broadly it becomes a lens for how you view quality, new product launches, product promotions, supply chain design changes as well as day-to-day business. It measures if the end-to-end machine (the supply chain) is operating the way we need it to.
Total Delivered Cost means capturing the end-to-end cost of the global operation: inbound freight, material purchases, inventory losses, yield losses, internal and external manufacturing, distribution, inter-facility freight, outbound freight, overhead, duties, taxes, tooling, etc. When it comes to the total supply chain costs, I want to measure the ‘global financial footprint’ and not be constrained by how the enterprise manages the accounting or the ownership of cost centers or legal entities. It is easy to become trapped in cost accounting and lose your way.
These three metrics can create transparency (‘how are we doing?’), the motivation to change (‘we can do better’) and the signal that we are making progress (‘results matter’).
Finally, over the years I have learned that while Supply chains are complex and dynamic it is best to keep things simple:
- Are our processes in control – are they reliable and predictable?
- Are we improving – are we delivering improved customer satisfaction, launching more new products, helping grow the company’s sales, improving our profits?
- Do our people think we are a good place to work – is their environment improving?
What do you measure for Corporate Social Responsibility?
The Mattel approach to Corporate Social Responsibility revolves around setting clear standards and strategic priorities to achieve our vision and engage cross-functionally to support the company’s business goals. When it comes to how our products are produced, our Global Manufacturing Principles (GMP) set these standards. Our CSR mission is: “Act with integrity in all we do to bring the world safe toys that grown-ups trust and children love. We are committed to positively impacting our people, our products and our world by playing responsibly.”
Over the past few years we have improved our tracking of key performance indicators, which has enhanced our abilities to inform business decision-making.
A good example from my previous role at Starbucks would be the Starbucks CAFE Practices (Coffee and Farmer Equity Practices), which was developed with an independent third-party. The ultimate metric of success used by Starbucks was the percent of coffee purchased from CAFE Practices verified farmers. When I left Starbucks, we were up to about 85%. The program helped farmers improve crop yields, monitor water usage, share insights on the best way to fertilize the crop, and provided transparency on what we paid and what we purchased.
What have you learned?
It’s important to think about how best to align metrics and how you manage them with the culture of the company. Companies are different.
For example, ICI was a highly technical and analytic company. So when we reviewed metrics, the numerical outcome (say 70%) was likely to be provocative. We were driven more by trends and data; and less by emotion.
Starbucks was different. It is a more relationship-based company focused on creative outcomes. There, we talked less about the number and more about the impact on the success of the store employees. Guaranteeing the right delivery every day to a store meant that when the store manager opened the store for business that they could focus on delivering a successful Starbucks experience to the customer. We wanted no distractions due to replenishment issues.
In short, every business is different. It is important to align with the key cultural and business drivers.
Finally, talent is the foundation of our success. I believe in investing in talent and developing people from the earliest stage of their careers. I also believe in providing challenging jobs and tasks early in careers. I want to make sure that entry-level supply chain professionals have “water up to their chins…” but no higher.
You build capabilities by stretching people in challenging assignments, and showing that you trust them and have faith in their potential.
Thanks Peter. I love the thoughts on the alignment of metrics based on business drivers and culture. So many times, clients call me to ask how to measure XYZ without thinking about these points. I appreciate you sharing your insights. I look forward to including your interview in the book. Right now, you are deeply nestled into Chapter 4.
I would love to hear from you on Metrics that Matter and your approaches to measurement. I have a couple more weeks to finish the interviews. Let me know if you are interested in participating.