Supply Chain Performance Metrics

Copyright (c) 2010 Randall Mauldinmetrics and held accountable for performance. The
Supply chains are effective when based on long-termmodern business should note that leading companies
strategy, measures of effectiveness, talentedemploy supply chain management best practices as a
managers, and comprehension of the differencesway to reduce expenses and increase efficiency.
between nodes in the supply chain. With analytics,To accomplish effective management, metrics need
managers are able to replace intuitive decisions withto be aligned across multiple organizations and
quantifiable analysis. By linking operations tofocused on critical areas that contribute to success.
customers through points of measure, theMetric misalignment and inappropriate measures of
organization enables proactive decisions that improveperformance result in inefficient procurement
customer satisfaction.processes, missed opportunities, or conflict between
Supply chains synchronize nodes to achieve maximumnodes in the supply chain. Managers focus on
efficiency. Process-based performance measurementevaluating internal performance with financial metrics,
systems provide opportunities to recognize problemssuch as inventory turns and carrying costs, that do
and proactively implement solutions, link operations tonot reflect supply chain efficiency. Performance
critical factors, enable appropriate allocation ofmetrics lean toward internal performance and do not
resources, and improve trust and understandingconsider performance across interrelated nodes;
across the supply chain. When sales are flat,supply chains require alternative metrics to monitor
executives should consider procurement performanceperformance. The complexity of this task involves
as a way to improve profitability.aligning independent operations and assigns a
Procurement efficiency is not considered a strategicmanager to account for the performance of the
part of an organization because supply chains are notentire supply chain, not necessarily the performance
optimized, incentives are not tied to procurementof one part of the chain. The ultimate goal is to
performance, and technology is considered a quick fixcreate a cooperative effort across functional areas
to fundamental errors within the supply chain.and across companies to enable a seamless effort to
Managers need the responsibility of monitoring keysupport business objectives.