Performance Management: Getting Everybody On the Same Page

Technology, such as RFID and wireless sensor networks (WSNs), has brought voluminous data to the supply chain, allowing you to identify and track your products using radio waves. The received data can be transmitted to your enterprise resource planning (ERP) and supply chain management (SCM) systems, where it can be collected, manipulated and managed by business intelligence, just like any other data.

RFID and WSNs can detect, aggregate, correlate and track events at every level of your operations. These technologies allow you to monitor and control your supply networks at a level of granularity that was previously impossible. The benefits of this are obvious. Should a product recall be necessary, for example, you have a clear record of the source and its current location. Instead of recalling an entire production batch, you can recall just the defective units.

With RFID and WSNs, manually created traceability logs are relics. Instead, quality-control personnel, armed with RFID scanners, read product data at every stage of its lifecycle. Not only can you learn who examined each product, but also when and where.

Many other technological improvements can be suggested for the supply chain. However, you must work with your IT department to ensure proper governance. In a survey of manufacturers, Forrester Research found that only 41% of supply chain improvements generated positive return on investment. This means you must carefully consider IT deployments and align them with corporate strategy.

Metrics That Matter

So, you should focus on metrics that matter. In today's IT-heavy supply chain networks, plenty of data points exist. In any given situation, however, only a few numbers are truly important. Unable to identify the right key performance indicators (KPIs), managers may focus only on improving the measures under their immediate control — an approach that fosters silo thinking and frequently sacrifices overall supply chain network effectiveness. For example, isolated focus on capacity utilization may result in excess inventories.

With the right metrics architecture, an organization can break down functional silos and align stakeholders behind common goals — such as improving cash-to-cash cycle time, reducing total supply chain cost or delivering perfect-order goals. A supply chain performance management application can help you identify and monitor the metrics that really matter.

At the enterprise level, these might be perfect-order fulfillment rate, forecast accuracy or supply chain cost. At the department level, such metrics might include on-time delivery by suppliers, plant utilization or order-cycle time.

A prebuilt metrics architecture within the application should be based on the Supply Chain Operations Reference (SCOR) model and other frameworks yet remain flexible enough to meet your company's specific requirements.

Metrics should be defined, documented and associated with specific individuals within your supply chain network. This fosters accountability — a key premise for strategy-aligned supply chain execution. In the end, the right metrics drive individual behavior, and behavior drives enterprise performance.