There has been quite a bit of social media discourse of late regarding supply chain metrics and whether supply chain organizations have been identifying and measuring the right metrics and driving the right behavior for their organizations. Pundits, industry analysts and even vendors all weigh-in on this topic.
Earlier this week, Chris Jones, Executive Vice President of Marketing and Services at Descartes Systems, penned what we believe was an outstanding commentary on the DC Velocity Blog, The Curse of Metrics. I have known Chris since his days as an industry analyst at Gartner, and he can often bring rather pragmatic observations regarding the state of supply chains.
Chris observes that metrics can be misleading, can equally be divisive, and often conflict with one another. He notes that there is a lot of “urban legend” in supply chain organizations regarding measuring both performance and contribution to the business. Too often, supply chains are measured on operational cost or service level as opposed to driving revenue for the business. He observes that we often find very little holistic thought to supply chain metrics, rather singular, and we might add, more functionally-driven metrics that often do not align with a desired business outcome.
Chris has identified five design goals for organizations to consider in a metrics framework. We recommend that our readers review these goals along with the outlined steps. Pay particular attention to what Chris as defined as building a supply chain metrics tree and slaughtering the scared cows. Both of these are crucially important. Consider tools such as the existing SCOR Framework or new evolving M4SC Framework methodology available from the Supply Chain Council.
Supply Chain Matters believes the design principles outlined by Chris Jones are insightful and could serve as a practical guide for measuring the right supply chain metrics. We applaud Chris for adding a pragmatic and insightful guidepost to this topic.
We also encourage our readers to share with others in the Comments section related to this posting, what supply chain metric approached that have worked well in your organization.
This is a great topic, and Chris Jones did a good job addressing the flaws in traditional supply chain metrics. I believe that the core issue (and this goes beyond just metrics) is that supply chain, as it has grown out of warehousing and logistics, is still seen as a cost center in the organization. The metrics we use reinforce this perception–inventory turns, total delivered cost, capacity utilization. Because of this, senior management only discusses cost savings and efficiency with supply chain managers and rarely ask how the supply chain can deliver value to the organization.
Using better metrics can help align the supply chain toward delivering value and better integration with the organization, as you and Chris both mention. More importantly, in my opinion, value-driven metrics can change the way the entire company views the supply chain leading to new ideas on how the supply chain contributed to the enterprise.
I have had success building supply chain metrics using a combination of the Balanced Scorecard method and the SCOR framework. SCOR brings in traditional supply chain metrics linked to a strategic framework and the Balanced Scorecard brings a focus on customer value, organizational growth, financial value, and efficiency. While not perfect, it has proven to help break out of the traditional supply chain metric mold.
You have identified some insightful observations.
Thanks for sharing.