Continuous improvement may no longer rank as the sexiest buzzword in business circles but, nonetheless, I feel it's the phrase that best captures what should be the mandate of every supply chain manager. Of course, a crucial element of any attempt to continually improve quality is a way to measure and benchmark performance.Regular readers to this column will know my concerns that Canadian supply chain professionals are hampered in their efforts by the general lack of such data. South of the border such information seems to be available in abundance. Supply chain programs at major U.S. universities, consultancies, government and logistics service providers and associations all seem to regularly churn out studies and reports that probe every aspect of the supply chain. This side of the 49th, with the notable exception of the few supply chain programs at major educational institutions and the efforts of a few associations, we seem to shy away from the necessary number crunching.
Rather than simply bemoan the lack of statistical and benchmarking data, we at Canadian Transportation & Logistics have chosen to roll up our sleeves and seek to be leaders in this field. Three years ago we made the considerable investment necessary to publish a scientific and statistically valid annual report on compensation and career trends for the Canadian supply chain professional. With this issue, I am proud to introduce our initial foray into the performance measurement and benchmarking arena.
Transportation service providers constitute a critical link to the supply chain and their ability to meet shipper demands for constant improvement is crucial to supply chain effectiveness. We believe the time has come for easily accessible, scientifically based and nationally relevant benchmarking for the quality of service provided by transportation providers. Earlier this summer we embarked on a major project to provide just that and you can see the end result in our first annual Shipper's Choice survey (see page 23). With the survey we offered Canadian shippers an opportunity to set benchmarks for expected carrier performance on seven key areas and to rate their carriers against those benchmarks. Aside from identifying the carriers in every mode which our readers singled out for providing the best service, it is our intent that the survey results provide shippers and carriers alike with a common set of annually updated benchmarks by which to continually improve performance.
The importance of continually improving supply chain performance is punctuated by another study in this issue. Our cover story (see page 18) provides a "bite of reality" on stock market reaction to supply chain glitches. Over the past three years, two researchers - Kevin Hendricks, Associate Professor of Operations Management at the Richard Ivey School of Business, University of Western Ontario, and Vinod Singhal, Professor of Operations Management at DuPree College of Management, Georgia Institute - have been tracking announcements of supply chain glitches and analyzing the impact on stock price. Their innovative and detailed work in an area which previously suffered from having only anecdotal evidence is an eye opener and a must read for every CEO who wants to understand the true value of the supply chain. In their study Hendricks and Singhal found that supply chain glitches cause economically significant destruction in shareholder value and profitability.
The numbers speak for themselves: On average, Hendricks and Singhal found that the stock market penalized public companies announcing supply chain glitches (defined as the occurrence of production and/or shipment delays for one or more reasons) with nearly a 9% drop in stock price. When they looked at the stock market's reaction over a period covering 60 trading days before and 60 trading days after the announcement, Hendricks and Singhal found that companies with supply chain glitches suffered a 20% deterioration in shareholder value.
Although admittedly circuitous, credible data showing the negative impact of a glitch on share price is also an indication of the value brought to a company by an efficiently run supply chain.