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Strategic Supply Chain Management
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metrics used in other core functions. Never develop a performance-management system in a vacuum. Understand and respect your organization s capabilities, and strike a balance on business criticality when introducing new measurement requirements. Products and geographic regions can be brought online progressively. A metrics program does not have to be initiated simultaneously for all regions, channels, and products. Establishing the measurement frequency up front can help to avoid costly reimplementation of data structures. This does not preclude providing reporting on a less frequent basis, a tactic that may be useful if the organization is not ready to exploit more real-time information. Focus on fast clock speed metrics on a daily or weekly basis and report the remainder as part of your balanced scorecard. Also determine the appropriate level of visibility. The goal should be visibility all along the supply chain, including a sufficient amount of drill-down capability to understand performance differences by, for example, originating factory and warehouse. Identify all required data sources, and make the data accessible. For example, if you choose to monitor the percentage of orders delivered on time to the customer s request, you will need the ability to capture the customer request date. Some transactional systems do not have a field for this information, and many systems, while capable of tracking this date, are not programmed to do so. A gap analysis of data elements and data sources is a vital first step to ensure that existing data are accessible to decision makers. If you are like many companies, you may have large amounts of data buried within multiple, disparate systems. An information systems architecture for both applications and infrastructure is needed to pull data from different sources and enable timely decision making. To simplify both data gathering and reporting, design the data-capture and reporting infrastructure using standard data and metric definitions. Take the time to understand the performance-management software market. It is made up of many discrete tools and components, enterprise suites, and packaged applications, including such categories as reporting, business intelligence, advanced planning and scheduling (APS) analytics, supply chain event management, and supply chain performance management. As you evaluate the system tools available, resist the temptation to create an all-encompassing data warehouse to enable slicing and dicing for root-cause analysis and resolution. Integrating extensive sets of lowertier metrics can lead to an overly complex implementation and should not be seen as a prerequisite for an effective metrics program.
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CHAPTER 5 Core Discipline 5: Use Metrics to Drive Business Success
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The remainder of this chapter provides guidance on how to choose the right metrics and build an infrastructure that supports ongoing measurement.
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WHICH METRICS
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When faced with a universe of metrics, companies tend to choose more than they actually need. This is especially true when one or two key metrics are first put in place providing visibility into operational capabilities and results for the first time. For companies used to backward-looking metrics and rear-view-mirror steering, data that can offer insight into cause and effect of key supply chain processes are extremely powerful. The natural inclination is to want such data for all processes. As an example, let s look at order-fulfillment cycle time. The macrolevel metric used by most companies measures the elapsed time between when a customer order is entered and when the associated product is shipped. Orders go through numerous gates an order may be received, verified, entered, priced, credit-checked, released, picked, packed, and shipped and it is possible to measure the elapsed time between each gate and the next. From the customer s perspective, though, the clock starts when he or she issues the order and stops when the product is received; customers are not particularly interested in the interim stops the order may take Since a supply chain along the way. Because of this, it probably doesn t make sense to measure each gate- strategy is based on to-gate cycle. Instead, choose larger process a company s overall sets, such as the time between order receipt and order release. And if the results indicate a strategic direction performance issue, consider adding additional and core granularity at that point. You also should avoid using a prede- competencies, you ll fined set of metrics designated as being right for your business. No predetermined need to choose set of metrics is appropriate for all busi- carefully the metrics nesses. Earlier in this chapter we discussed the need to align metrics with strategic objec- that make sense as tives. Since a supply chain strategy is based signals of on a company s overall strategic direction and core competencies, you ll need to care- performance to your fully choose the metrics that make sense as objectives. signals of performance to your objectives.
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