Strategic Supply Chain Management - Supply Chain Online

186 Strategic Supply Chain Management
of 2002 oblige companies to be thorough about ensuring the validity of
their financial data and diligent about documenting the controls and procedures
used to arrive at those numbers. (Sarbanes-Oxley requires that
officers of U.S. public companies certify the accuracy of their financial
statements and the effectiveness of the associated disclosure controls and
procedures. As such, it requires that companies establish and actively manage
sound internal controls.)
Indeed, many executives laud the Sarbanes-Oxley Act for enforcing
good business practices and providing external validation for company
initiatives. 1 The strict reporting requirements give managers more and better
information that can make business processes more efficient and costeffective.
Some executives even regard the Sarbanes-Oxley Act as a
leverage point in making the case for process improvement.
Yet, while financial metrics can help to gauge the impact of process
changes on a company’s financial health, we think they’re inadequate
when it comes to measuring supply chain performance. Why Since most
financial measures are historical, they don’t provide a forward-looking
perspective and can be very difficult to tie to operational effectiveness.
Nor do they provide insight into strategic nonfinancial performance indicators
such as order-delivery performance and customer service levels.
What exactly is a metric The Merriam-Webster Dictionary defines
a metric as “a basis or standard of comparison.” Note that by this definition,
a stand-alone number or value is not a metric. A number or value
only becomes a useful management tool when compared with another
number or value. This is the premise of an effective performance measurement
program.
WHY MEASURE
Is measuring supply chain performance really that important Absolutely.
For starters, the right set of metrics can tell you how well each plan,
source, make, deliver, and return supply chain process is performing,
highlight where there’s room for improvement, and help you to diagnose
problems and decide where to focus your improvement efforts. Metrics
also can be a powerful management tool by letting people know what is
expected of them and allowing you to track progress—or lack thereof—
over time.
Supply chain metrics can be difficult to define and even more difficult
to measure. At the highest level, supply chain operations are expected
to contribute to a company’s financial performance. Supply chain metrics,