Supply Chain Metrics that Measure Up

Building and leveraging a metrics framework to drive supply chain performance


3. Review the supply chain scorecard in the sales and operations planning (S&OP) process
While metrics reflect the overall health of the supply chain and various functions, they need to be supported with process mechanisms. These mechanisms enable a joint review and formalization of corrective plans from a cross-functional perspective. Among the best practices for implementing effective sales and operations planning (S&OP) processes is establishing pre-scheduled meetings — with a well-defined agenda — with critical players in the supply chain, along with their cross-functional teams.

Another key requirement to enable an effective S&OP is to have the IT capability to aggregate and structure enormous supply chain information and data originating from disparate IT systems. This facilitates a clear and comprehensive view of the supply chain. And finally, it is vital to benchmark supply chain performance with best-in-class companies in your own industry, as well as across industries.

Benefits of the Metrics Framework

The supply chain performance management framework is a powerful tool for enterprises to build efficient, responsive and agile supply chains that are managed and led by committed and well-informed managers and executives within the enterprise as well as partners. When executed effectively, the metrics framework can lead to significant benefits for a company.

1. Alignment of supply chain metrics to overall corporate metrics and strategic objectives
There are instances of supply chain performance being driven by KPIs that do not accurately reflect what it would take for a CPG company to win in the marketplace. For example, if the primary KPI of a supply chain is to optimize on inventory turns, it could become overly focused on reducing inventory levels at all nodes of the supply chain. The result could be that either service levels or lead times could get compromised, resulting in a much more significant impact on corporate performance in the long run. The top-down approach recommended in this article helps derive and align supply chain KPIs to key corporate objectives like customer satisfaction, financial performance or operational excellence.

2. Enhanced collaboration internally as well as with external business partners
A supply chain metrics framework that is meaningfully aligned to corporate goals and is suitably supported by cause-and-effect guided analysis enables internal business functions like sales, marketing, manufacturing, etc., as well as business partners like suppliers, third-party logistics providers, etc., to clearly understand their role in shaping the success of the CPG supply chain. This in turn improves the performance of both the company and its extended enterprise. Such an understanding also helps eliminate functional silos, creating a results-oriented, multi-functional, multi-partner team that is able to visualize and work towards a larger objective instead of focusing on individual or functional delivery.

3. Increase in employee productivity at all levels
Automated and timely customized scorecards consisting of metrics relevant for each role/function/process within the supply chain significantly reduce time spent on data collection and collation. This "reclaimed" time can now be fruitfully spent on root cause analysis and making and executing well-timed decisions supported by reliable and accurate data.

4. Greater commitment and ownership of metrics and targets
Many organizations establish supply chain metrics and their targets without ensuring an adequate feedback mechanism prior to finalization of metrics and targets from the owners of these metrics. This fails to create adequate ownership and a common shared objective. On the other hand, an S&OP-driven process that ensures collaboration and consensus on metrics and target-setting helps create greater commitment and objectivity in performance. To maximize the benefits of SCPM, such a framework needs to be supported by adequate review processes and an organizational climate that fosters collaboration and teamwork.

According to AMR Research, supply chain organizations of large enterprises have on average more than 300 employees across business divisions and geographies. Building and leveraging the supply chain performance management framework to improve their productivity, ensuring greater collaboration internally and externally, and being able to provide visibility of their performance in the context of the overall corporate performance can create significant competitive advantage. With increasing focus on creating supply chain excellence, the supply chain performance management framework is an investment that can provide healthy returns in the long run.

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