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Make It All Meaningful

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Whether your company adopts the SCOR model or chooses a less structured approach to tracking its supply chain, at some point you're going to have to put all that data you've been gathering into context, and that might prove to be even more difficult than setting up the metrics in the first place. “The toughest part of establishing measures is making them meaningful in the right way,” admit consultants Mike Ledyard and Kate Vitasek, faculty members of the University of Tennessee's Vested program. Even if you have an elaborate system of scorecards that measures every group within your company's supply chain, it'll just be an empty show of sound and fury if you can't link the performance measures to actionable plans linked to specific company goals. “Measures must be aligned to strategy,” they note, “but it's important that the measurements be linked to logistics execution. Without that vital link and ample communication, the people performing the logistics tasks in your organization won't see the value or the connection between what they do and the larger corporate or division strategy.”

According to Ledyard and Vitasek, before getting too caught up in measurements and metrics, every supply chain professional needs to answer two key questions:

1 Will you change your behavior, or ask others to change their behavior, based on this measure?

2 Does the potential benefit gained from this information exceed the cost of obtaining it?

Citing advice from the late management guru Peter Drucker, Ledyard and Vitasek observe, “There is surely nothing quite so useless as doing with great efficiency what should not be done at all.” And that, they say, sums up the wasted effort of the measurement trap—merely collecting measures for collection's sake, without a clear plan as to how you plan to meet your company's overall objectives and goals.20

It's better by far to follow a path similar to that trod by high-tech giant IBM. To evaluate the performance of its suppliers, IBM devised a detailed scorecard that tracks how each supplier is performing and how well they deliver to Big Blue's requirements. IBM would routinely review scorecards with suppliers, including transportation providers, to identify where improvements might be needed. If those improvements didn't happen, then IBM would use the scorecard itself as justification for no longer considering that supplier a vendor of choice. Such an approach eliminates any ambiguity as it was quite clear to all parties involved what the expectations were.21

Supply Chain Management Best Practices

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