predictive metrics for supply chains · no maintenance supply chain no product development...

PREDICTIVE METRICSFOR SUPPLY CHAINS

By: Linda HaydamousAdvisor: Dr. Larry Lapide

May 21, 2009

Massachusetts Institute of Technology

Outline

1. What are Predictive Metrics?

2. Research Question and Scope

3. Motivation

4. Approach

5. Results – A Framework for Predictive Metrics

6. Conclusion

7. Future Research2

This is what “reactive” metrics show …

This is what predictive metrics aim to show.

1. What are Predictive Metrics?

4

MetricsQuantitative or qualitative verifiable measures.Defined with respect to a reference point.

“Reactive” metricsBackward-looking – they measure past performance.Can be used, at best, for damage control.

Predictive metricsForward-looking – they assess future performance.Aim to prevent problems rather than correct them.

2. Research Question and Scope

What are the most effective metrics to predict supply chain future performance in the areas of:

CostScheduleQualityTechnical

Focused on Aerospace & Defense production programsNo maintenance supply chainNo Product DevelopmentEngineer-to-Order Type ProductNo Demand PlanningNo Inventory Policies

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3. Motivation

A&D companies develop large-scale systems Require numerous suppliersHave highly intertwined supply chains

Current performance management systems typically:Have a blizzard of metricsMeasure past performance to determine corrective actionLead to the wrong kind of behavior

Continuous performance “surprises”

Corrective action very costly6

4. Approach

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Predictive Metrics

Framework

Data Analysis

System Dynamics Models

Case Studies

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Sub-tier Supplier Performance

Root Cause Analysis of Supplier Position

Intrinsic Changes within Supplier

How to Predict Supply Chain Performance? (1/2)

Problem

Purchase Orders, Specifications

Parts, Technical Problems

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Data Trending

Statistical Process Control

Quality of Supplier Orders

How to Predict Supply Chain Performance? (2/2)

Critical Supply Chain Performance Factors

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Cost Schedule Quality Technical1 Skilled Labor x x x x2 Critical Skills Per Project x x x3 Employee Retention (or Attrition) x x4 Management Change x x x5 Employee Morale x x6 Labor Cost x

7 First‐Time Quality (or Rework) x x x8 Backlog x x x9 Expediting x x

10 Inspection x11 Process Improvement x12 Training x x

13 Plant Uptime x x

14 Research and Development x

15 Financial Stability x x x x

16 Growth x x

Factor

Peop

leProcess

Prod

uct

Busine

ss

Determined from System Dynamics ModelsRepetitive feedback loops across the 4 areas of performance :

CostScheduleQualityTechnical

Separated in 4 types:PeopleProcessProductBusiness

Comparing Predictive Metrics to “Reactive” Metrics

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Developing Predictive Metrics Framework

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Supplier SegmentationPower MatrixAdapted from Cox (2003)

Program SegmentationOperational Performance TriangleAdapted from Lapide (2006)

Customer Response

Efficiency Asset Utilization

Concept of Operation

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Root Cause Factors

Corrective Action

Predictive MetricsSupply Chain

OperationSystem Dynamics

ModelPredictive

Metrics

Program Focus(Objectives) Supplier Type

5. Results – A Predictive MetricsFramework

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• Attrition • Backlog• Critical Skills Per Project • Expediting • Financial Stability• Plant Uptime • Use of Substitute Material

Sample Predictive Metrics

6. Conclusion

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Predictive metrics:Provide early warnings of problems and early indications of successful completion.Do not eliminate the need of historical reporting, they provide smarter ways to look at them.

Business strategy, supply chain and predictive metrics should be aligned.

There is no “one-size-fits-all” – different metrics per program type and supplier type.

7. Future Research

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Predictive metrics for maintenance supply chains.

Predictive metrics for developmental programs.

Introduction of software

Thank you!

Q&A

email: lindahay@mit.edu

Backup Slides

Cost Causal Loop Diagram

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TotalCost

Profit

FinancialStability

CompanyRating

CustomerOrders

ProductionCapability

PlantCapacity

ProductionKnowledge and

Efficiency

Cost of Raw Material orSubassembly Components

Available Budgetfor Personnel

SkilledLabor

TraineesTraining

RateHiringRate

Skilled LaborLayoff/Quit Rate

-

+

+

+

-

+

+

+

+

+

BacklogOrder Rate Order Fulfillment

Rate

+

Defect RateDefect

IntroductionRate

DefectElimination

Rate

Rework

Pressure toCut Cost

Tendency toUse Substitute

Material

-

+

+

+

SchedulePressures

Ability to MakeOn-TimeDeliveries

Expediting+

+

-

R

Skilled Labor

Employee Wagesand Benefits

+

-

B

Labor Cost R

First-TimeQuality

-

Revenue+

Access toCapital

Tendency toExpand

+

+

+

TraineesLayoff/Quit

LaborCost+

+

B

Expediting

R

Growth

RejectionRate

+

+

Quality-

-

Executives

Executive HiringRate

ExecutiveFiring/Quit Rate

++

Tendency toIntroduceChange

EmployeeStress Level

+

+

+

+

R

ManagementChange