Metrics That Speak to the C-Suite

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A Newsletter from Harvard Business School Publishing and The MIT Center for Transportation & Logistics Article Reprint No. P0504C

Metrics That Speak to the C-Suite
by Loren Gary


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Metrics That Speak to the C-Suite
With supply chain management’s growing importance to corporate strategy, supply chain executives must make sure they are following the metrics that will tell company leadership what it needs to know B Y L O R E N G A RY


Four dimensions, three levels of metrics S COMPANIES HAVE SHIFTED from integrated, vertical Which tactical measures are most important to a company business models to horizontal models that rely will vary according to the particular industry and the commuch more heavily on outside vendors and supplipany’s plan for using its supply chain to achieve competiers, making sure that the entire supply chain is strategitive differentiation. cally aligned has become a preeminent concern for “Metrics should be the tools you use to accomplish speexecutives. Getting everyone working in concert is difficific objectives,” says Andrew Pateman, a manager at the cult enough when you’re just trying to do it inside the Balanced Scorecard Collaborative in Lincoln, Mass. That’s four walls of a single organization. But trying to pinpoint why it’s important for supply chain the source of a performance managers to know what the breakdown or making decisions answers to the big strategic quesabout the tradeoffs between, say, tions are before they settle on any inventory levels and customer How do you ensure that specific measures. For example: service are exponentially harder everyone has the same when it’s outside organizations • What are the most critical that are performing critical activipriorities—and is speaking improvements you’re looking to ties that your company used to make in your supply chain? the same language? handle itself. • What one accomplishment over How do you ensure not only the next six to 12 months would that everyone—including interdo the most in terms of helping nal departments and outside you bring about the desired outcome? partners—has the same priorities but, more fundamentally, that they’re speaking the same language? The Once the strategy is set, a company can choose metrics answer lies in large part in the effective and strategic use that best reflect its specific objectives. Regardless of how of performance metrics. Companies that can both pinthey fine-tune their measures, however, all companies point the key supply chain indicators that drive the overshould track supply chain performance along four basic all success of their business and develop effective means dimensions: of tracking those indicators gain a substantial competi1. Service—how completely the chain responds to tive advantage. every aspect of a customer’s request. The work starts with ensuring that all the critical indicators are included in the metrics portfolio your com2. Assets—how well the chain utilizes its inventory pany chooses to monitor. But the hallmark of a truly and cash. effective measurement system is that it speaks to the 3. Efficiency—the chain’s ability to keep costs down. needs of both senior corporate executives and managers up and down the supply chain. The key, in other words, is 4. Speed—how fast the chain executes a customer order. to understand which aspects of supply chain performIn addition to these four dimensions of supply chain ance are most important to the C-suite and to translate performance, the metrics you choose should also take them...
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