3e2a1b56-dafb-454d-87ad-86adea3e7b86

376
Part Three
Planning and control
Figure 13.2 Taking a customer perspective of supply chain performance can lead to very different conclusions
Quality – the quality of a product or service when it reaches the customer is a function of
the quality performance of every operation in the chain that supplied it. Errors in each stage
of the chain can multiply in their effect on end-customer service, so if each of 7 stages in
a supply chain has a 1 per cent error rate, only 93.2 per cent of products or services will be
of good quality on reaching the end-customer (i.e. 0.99 1 ). This is why, only by every stage
taking some responsibility for its own and its suppliers’ performance, can a supply chain
achieve high end-customer quality.
Speed has two meanings in a supply chain context. The first is how fast customers can be
served, an important element in any business’s ability to compete. However, fast customer
response can be achieved simply by over-resourcing or over-stocking within the supply
chain. For example, very large stocks in a retail operation can reduce the chances of
stock-out to almost zero, so reducing customer waiting time virtually to zero. Similarly,
an accounting firm may be able to respond quickly to customer demand by having a
very large number of accountants on standby waiting for demand that may (or may not)
occur. An alternative perspective on speed is the time taken for goods and services to move
through the chain. So, for example, products that move quickly down a supply chain will
spend little time as inventory because to achieve fast throughput time, material cannot
dwell for significant periods as inventory. This in turn reduces inventory-related costs in
the supply chain.
Dependability – like speed, one can almost guarantee ‘on-time’ delivery by keeping excessive
resources, such as inventory, within the chain. However, dependability of throughput time
is a much more desirable aim because it reduces uncertainty within the chain. If the individual
operations in a chain do not deliver as promised on time, there will be a tendency
for customers to over-order, or order early, in order to provide some kind of insurance
against late delivery. This is why delivery dependability is often measured as ‘on time, in full’
in supply chains.