The digital factory in manufacturing: Supply chain

This post is the second in a three-part series that examines elements of the digital factory.

A few years ago, the supply chain was simply an array of silos. The factory IT network was completely separate from its operational technology (OT) assets, which might include machines and software that monitor and control processes.

Today, however, there’s a push to digitize and connect the entire supply chain.

As SCM World VP, Research Pierfrancesco Manenti writes, the purpose is to create “an environment where all available information – from the plant floor and across the supply chain – is captured in real time, made visible and turned into actionable insights. The journey begins with manufacturers connecting the factory machines and other assets with manufacturing IT solutions, but the ultimate objective is to orchestrate the supply chain.”

This is especially significant because, according to a recent Forrester survey, only 6% of managers surveyed say they have complete visibility across their supply chains today; 77% of respondents reported having no or restricted visibility. Bringing these disparate technologies together takes time and effort. Making the switch successfully, however, requires going one step further, using key performance indicators to track progress.

No single set of key performance indicators (KPIs) will work for every manufacturer, according to Garter Inc. Executive VP of Research Peter Sondergaard, who says, “Some leaders measure themselves on the number of partners in their ecosystems. You might measure yourself on the numbers of ecosystems you participate in and the outcomes of each.”

Some KPIs may work for many, though. Below are the top three and what you need to know about each.

Check for mistakes

You can’t streamline a supply chain unless you know where progress is needed. Tracking mistakes — either on the machine or on the factory floor — can be done via a quality-assurance process that keeps track of issues.

In fact, defect and acceptance rates are one of the top five KPIs, according to Keith Peterson, president and CEO of Halo Business Intelligence. Once you know what’s wrong, you can use technology to close the gaps.

Make sure orders go out

Factory owners have been aware of order fill rates – the percentage of orders that can be filled based on the inventory at hand – for years. This important KPI can mean the difference between disappointed and delighted customers. It is also something that can be improved through technology.

Supply chain management tools can help you keep the right supplies and parts on hand, while analytics can help you predict future sales trends so you can proactively adjust supply rates on the fly. One consulting company says order fill rates should hover around 95%, with a goal of 100% – so if you’re not tracking this metric, you’re probably already behind the competition.

Take your customer’s pulse

This seems like a no-brainer, but metrics related to customer satisfaction are often overlooked. Choose metrics such as overall customer satisfaction that can inform your supply chain, writes Rob O’Byrne, group managing director at the Logistics Bureau:

“For instance, average customer satisfaction tells you about what your customers think of you after the different deliveries you have made and other factors from the past. However, the same indicator can also point to likely customer retention rates, new customers acquired through referrals, and thence to changes in S & OP costs and, ultimately, to future supply chain profitability.”

Read the rest of the series, "The digital factory in manufacturing":

• Part 1 – The digital factory in manufacturing: Connectivity
• Part 3 – The digital factory in manufacturing: Automation

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