There are several lessons on the importance of measuring supply chain performance
to be learned from this story:
Measurements are important to directly controlling behavior and indirectly
to performance – the speedometer reading impacts how hard or soft Tom pushes
on the gas pedal.
A few key measurements will go a long way toward keeping a company on track
towards achieving its supply chain improvement objectives – like those on
a speedometer and a gas gauge.
Seemingly relevant, but cumbersome, measurements are of little use, and
are possibly a hindrance, in helping to improve supply chain performance –
like the odometer in the car.
Picking the wrong measures and leaving out important ones could lead to
supply chain performance degradation – like running out of gas.
Driving a supply chain based only on after-the-fact measures, like losing
an important customer or having poor financial performance is not very effective
– the way getting speeding tickets and running out of gas is an expensive
way to drive a car. Every CEO must always be concerned with the competition. In today’s economy the battlefield is shifting from individual company performance to what we call Supply Chain Performance. Supply Chain Performance refers to the extended supply chain’s activities in meeting end-customer requirements, including product availability, on-time delivery, and all the necessary inventory and capacity in the supply chain to deliver that performance in a responsive manner. Supply Chain Performance crosses company boundaries since it includes basic materials, components, subassemblies and finished products, and distribution through various channels to the end customer. It also crosses traditional functional organization lines such as procurement, manufacturing, distribution, marketing & sales, and research & development. To win in the new environment, supply chains need continuous improvement. To achieve this we need performance measures, or “metrics,”...