Supply Chain Shaman

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My Take: Supply Chain Metrics That Matter

Supply Chain Metrics That MatterLast week, I held my new book in my hand. It is exciting to have two years of research, nine months of writing, and four months of editing become crisp, fresh pages. The smell of ink is intoxicating. I am now an author of my third book.
I also love getting feedback. Over the course of the last week, I had a Linkedin comment from Dubai, questions from a team from the Philippines, and an inquiry from Switzerland. Dialogue with global supply chain teams energizes me.  Tomorrow, I have a call with a manufacturing company to answer the question, “What is the most important concept in the book?”  I love the challenge.
I have three. Here is my response.
1) Get Clear on the Definition of Supply Chain Excellence. The book is a story of a fictional client by the name of Joe. The story is a composite of personal experiences with clients. In the book, Joe does not want to perform like an average Joe. He has a passion to do supply chain right, but he is uncertain on where and how to get started.
He is in a quagmire. Joe works for Filipe, and his boss believes that supply chain excellence can best be typified by lean processes. Filipe wants Joe to adhere to all of the principles of the book Toyota Way. However, in his organization, this is not a commonly held belief. There is no consensus. In contrast, Frank, his sales vice president, wants volume. For Frank, excellence is all about growth. Frank believes that supply chain excellence is best defined by his experiences at Procter & Gamble.
While Joe is trying to balance the feedback from Filipe and Frank, he is often asked to change metric targets by his CFO named Lou. Lou is singularly focused on inventory. Joe and Lou have long discussions about Lou’s definition of supply chain excellence. Lou’s definition is based on his experience at General Electric. Joe struggles with the fact that he has a leadership team of three strong leaders: each with a very different paradigm of supply chain excellence. Joe struggles how to align these three commonly held visions. Without alignment, the organization constantly gets pulled in different directions.
Since each of Joe’s leadership team members have a fixed paradigm on the definition of supply chain best practices, it limits the potential of Joe’s organization to redefine supply chain excellence. Joe is struggling to open-up the discussion with closed-minded leaders. It takes a different mindset. The book outlines the steps to drive a guiding coalition.
2) What Is Balance? After two years of research, I think that we throw the supply chain out of balance and limit its potential through the use of traditional and functional metrics. It is for this reason, that I believe that the traditional SCOR Model metrics are problematic.
To maximize performance, I believe that companies must align all functions within the organization to a common set of metrics based on the operating strategy. Joe’s team selects the metrics of Revenue Growth, Operating Margin, Inventory Turns, On-time Customer Orders, Safety and Return on Invested Capital (ROIC). TO drive success, they then focus the individual functions–sales, marketing, manufacturing, procurement, distribution, finance–around metrics that focus on reliability. To illustrate the point, I share a figure from the book in Figure 1.

Achieving Balance in Metrics
Achieving Balance in Metrics

3) Outside in. I have written about demand-driven and market-driven concepts for over a decade. I fundamentally don’t think that most people understand the impact of decreasing demand latency and improving the speed of demand translation on the balance sheet. This happens through the building of outside-in processes. It requires the use of channel data and the building of many-to-many networks. This is a stark contrast to traditional supply chain processes that are inside-out. As I have written the book, and written the research supporting the book, I am becoming more and more of a zealot about outside-in processes. This end-to-end focus is a step change from what we have in most organizations. Making this pivot makes Joe successful….  I also believe that it can also make you more successful.
So, let me know your thoughts. The book has been selling briskly on Amazon. Every morning after I fill my coffee cup, I go to the Amazon site and check sales. I smile when I see that it has been selling within the top 100 books within business and economics and commerce for the last six weeks. This puts a spring in my step…. I love to see it sell, but I love even more to hear from my readers. Please let me know your thoughts.
I am planning a book tour in Europe in March and one for North America in April. I will be placing updates on my site on these tours. I look forward to signing your copy in person. When I do, let me know if you agree with these three central points.

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