“If you don't know where you are
going, you'll end up someplace else.”
– Yogi Berra
There is no shortage of
metrics for organizations today:
financial metrics, supply chain metrics.
personal objectives, business intelligence, dashboards, analytics. For many companies, the challenge is not data
but making the data usable to enable timely decisions. One version of the truth would be nice, too,
as represented in a single set of numbers.
In a recent conversation, an executive threw down a folder full of
dozens of pieces of paper on the desk in front of me and commented with
exasperation, “This is my dashboard!” There
is a challenge in aligning operational metrics with financial performance to
enable sensible and timely decision making toward financial goals, shareholder
return, and—oh yeah—customer service and satisfaction.
What is the goal?
Taking a breath and
looking at the fundamentals, a good place to begin is the end. What is your business goal?
- Increase revenue?
- Reduce costs?
- Increase profitability?
- Increase margin?
- Increase market share?
- Shareholder value?
This may seem
simplistic, but there is a debilitating disconnect for many organizations
between what companies are trying to achieve and how they are actually operating. What gets measured gets done, and the
measures or their targets do not align with the strategic goal of the
organization.
What is the measure?
Individual operational
metrics may be very meaningful to a particular person or department. However, these individual metrics are
meaningless in isolation until there is a direct link to business goals through
an integrated financial and operational business metrics system. Bob in the warehouse and Sally in procurement
need the right rules to play nicely together and stop being at odds with one
another with competing metrics and targets.
An intentional orchestration of operational metrics cascading in rank-and-file
alignment to the company objectives is required.
What is the point?
Supply chain is the
most strategic asset and potentially the most significant competitive
differentiator available to the C-suite in achievement of corporate
objectives. According to Joseph Francis
of the Supply Chain Council 1, supply chain generally accounts for between 60
percent and 90 percent of all company costs.
The challenge is alignment. The trouble
with alignment is language. An
integration of operational metrics to financial performance is possible through
the linking of tools like SCOR, DuPont Model, and EVA in defining the ability
for supply chain to be the strategic enabler of financial performance. When the team hears ROIC or Perfect Order,
the same definition and meaning should run through everyone’s heads. As Enrico Camerinelli 2 states, the entire team
needs a common language—a supply chain finance lingua franca. In the next installment I will share what
I‘ve coined, “The Four Languages of Supply Chain.”
(1) “Measuring Supply Chain Performance” Francis
(2) “Measuring the Value of Supply Chain” Camerinelli
