Metrics Matter: How to Get Clear Operational Insights for your Service Supply Chain
In the field service industry, everything goes smoothly if we start with a solid plan. Just kidding. The last two years have shown us sometimes the plan goes out the window! Global supply chain disruptions happen, and our First-Time Fix Rate (FTFR) falls short of projections. However, metrics are still important to track, even if they seem “unfair” given the circumstances. This article explores how to manage metrics in a world where ships get stuck sideways in canals and pandemics rearrange workforces.
On-Time Delivery & Hit Rate
Two of the most useful metrics for field service companies to track are On-Time Delivery (OTD) and Hit Rates. The importance of On-Time Delivery is evident: In the field service industry, you must prioritize service. It means complying with the Service Level Agreement (SLA) you set with your customers. Fulfilling these agreements is a baseline for staying alive as a company. When you overpromise and underdeliver, you not only compromise your contract with the customer at hand, but you damage your potential to enlist new business. That said, On-Time Delivery could easily consume your attention.
You also need to remain profitable, which means getting strategic about how you comply with SLAs. If you constantly splurge on expedited shipping to meet them, especially with today’s fuel prices creating shipping surcharges, it’s time to reevaluate your approach. This is where “Hit Rate” comes in.
Baxter coined the term “Hit Rate” to represent a specific functionality of Prophet, our Service Parts Management software. Hit Rate goes a step further than On-Time Delivery to measure part availability. The phrase “the right part in the right place at the right time” may be overused, but that’s exactly what Hit Rate measures. If you meet your SLA in the most efficient way possible, it’s considered a “hit.” Prophet would mark the part requirement as a “miss” if you got your materials from an inconvenient location or unexpectedly had to expedite shipping, even if you complied with the SLA. This more granular metric helps your business ensure you’re actually meeting your goals of delivery, efficiency, and cost-effectiveness. It can also help you determine the root cause of any misses.
Based on the data we’ve seen from Prophet customers, the root cause of misses roughly falls into these three categories:
- Data issue: Data is insufficient or inaccurate.
- Configuration issue: Planning parameters don’t align with business processes.
- Execution issue: Execution of service delivery doesn’t align with business processes, as in the case where a planned stocking target goes unfilled due to a late part delivery.
The more “misses” you analyze and categorize, the easier it’ll be for you to see which issue you should prioritize. Some miss root causes can be fixed, so you can avoid another miss the next time, creating a cycle of continuous improvement. For example, identifying and correcting an issue with master data like installed base or bills of materials may change your inventory plan, so the issue won’t happen again.
Measuring Spare Part Availability
Stellar On-Time Delivery and Hit Rates rely on parts availability, which is why it’s critical to measure Hit Rate independently of OTD. How often can you get the parts you need? How do you predict which parts will be accessible when you need them? Should you get them elsewhere if you determine they won’t be available from your usual supplier?
Here’s where you acknowledge that things might not go smoothly and account for this turbulence in your metrics. You’ll miss out on the complete picture if you use On-Time Delivery as a proxy for measuring part availability. A more effective way to measure part availability is to determine whether the part came from the ideal location or if obtaining it incurred unnecessary costs.
Another way to look at this concept is to consider both process and results metrics. In the field service world, the ends don’t always justify the means. That’s why it’s essential to look at both kinds of metrics. Results metrics are clearly important in that they measure if you’re delivering on your goals or not. But process metrics, or data about how your operations are performing at critical benchmarks, can give you even more insight on how to improve your operations.
Is It Ok to Fudge Metrics?
No, giving your metrics a makeover isn’t in your best interest, even if unfortunate circumstances threw you off. You missed your metrics for a reason, so you’ll have to face why at some point. While it may feel unfair to get penalized for something out of your control, such as global supply chain issues, the metrics are just neutral information. You can use this data to uncover patterns that may lead to process improvements.
I recommend you consider all your metrics and group the failures into root causes. Even “out of your control” misses should be tracked so you understand the full scope of the issues and know whether they’re getting better or worse.
By embracing your unfavorable metrics, you might realize you have more control over the situation than you initially thought. Are you consistently missing OTD due to part availability issues in a specific region when you try to get parts from a particular supplier? Have you looked at the delay from every angle? Maybe a lack of automation or fuzzy communication is to blame.
At a recent Field Service conference, one of my co-speakers in a panel on OTD shared a story about a customer where certain employees had gotten into the habit of ignoring planning system requests. This negligence happened due to a lack of automation. When this customer took on a high-profile miss on a critical customer, they researched to find that the planner had been ignoring the part movement request because the “ship from” location didn’t have the part. Instead of fixing the inventory discrepancy or trying to recreate the order from another site, they turned a blind eye to the issue. More anecdotes like this may come up for you than you realize when you diligently measure orders and have a process to track them down to their root causes.
When It’s Time for a Workaround
As I mentioned at the beginning of this article, you want to meet your SLAs in the most cost-effective way possible. However, there’s an exception to every rule. Sometimes it makes sense to invest in costly workarounds: another key benefit of looking at data trends and analyzing root causes.
When you have a clear idea of what’s going on at each stage of your process, and you know what’s in your power to change, it becomes clear which instances warrant the expense of expediting to make OTD when you experience a Hit Rate, or part availability, failure.
Some part availability failures are inevitable because you will never achieve 100%-part availability. It’s not practical and the expense in inventory to do so is just too high. However, understanding that not all misses are equal, instead of reactively investing in expedited shipping each time you run into a potential SLA miss, you can proactively allocate resources to this circumstance for when it truly makes sense. For example, misses at certain clients will harm your business more than misses at others. Sometimes misses don’t impact the customer if they have redundant equipment and may be acceptable to take. Have this information at your fingertips so you can be strategic about workarounds.
The Importance of Aggregation & Automation
At a surface level, delivery and part availability metrics tell a one-dimensional narrative: You’re more likely to deliver on time when parts are available. But when you run into the issue of part unavailability, for example, it’s time to illuminate a more nuanced story. The number of variables that impact your end-to-end operation is vast. That said, you can’t feasibly get effective data insights by using a spreadsheet; you need software that can aggregate data from multiple sources and generate metrics that speak to the big picture. Baxter Planning also launched a new product LynX in 2022 to help solve this problem proactively and close to real time.
Automation is also essential. There’s simply too much data available today to think about collecting, collating, and aggregating it manually, and then layering on a repeatable metrics calculation. From what I’ve seen over my years in the Service Supply Chain, businesses make the most of their data when they can traverse the continuum from complexity to simplicity. Start with as much data as possible, then distill it into digestible dashboards and actionable, easy-to-prioritize insights.
Director of Product Strategy
Mike Ross is one of our primary subject matter experts. He has been on the Baxter Planning team since 2000, currently as Director of Product Strategy. Mike works on new feature conceptualization, requirements, and product design.
For more than 20 years Mike Ross has designed, developed, implemented, and supported off-the-shelf solutions for service parts planning that have been used at over 100 companies in a broad range of industries, including telecommunications, medical equipment, energy, imaging, printing, and aerospace. Mike has led many service-parts implementation and consulting projects and maintains solid client relationships focused on continuing education and process improvement. And in 2014, he was named as a Supply Chain “Pro to Know” by Supply and Demand Chain Executive magazine.
Mike lives in the Rochester, NY area with his wife and three amazing kids, as well as a dog, three fish, a leopard gecko, and a hedgehog. Mike and his wife enjoy running 5Ks (slowly) in their spare time.