Strategic Supply Chain Management - Supply Chain Online

206 Strategic Supply Chain Management
The metrics you use will evolve as your supply chain processes
mature and will vary based on how functionally focused your supply chain
is. Clearly, it’s futile to establish aggressive targets for cross-enterprise
collaboration if your company is still struggling to move beyond a functional
focus (see Figure 5-5).
Even if your company focuses only on functional processes, metrics
based solely on functional performance are inappropriate. Besides encouraging
functional silos, measuring functional performance alone can
promote functional excellence at the expense of overall supply chain
excellence. For example, the customers of a large telecom company were
demanding lower prices. In response, the company pressured its procurement
group to lower the cost of materials by negotiating better prices with
suppliers. The buyers negotiated substantial discounts by committing to
higher-volume purchases for some materials and finding lower-cost suppliers
for others. On a monthly basis, the purchasing group posted the
results of its efforts—a declining cost per unit of materials.
After a few months, however, it became clear that the focus on
reducing materials costs was having a negative effect elsewhere in the
FIGURE 5–5
Focus of metrics to solve performance problems.
Supply Chain Characteristics
Functional Focus
Lack of functional policies/processes and
basic operations management leads to
unpredictable product quality and supply.
Process Focus
Although processes, systems, and disciplines
are in place to optimize functional quality,
cost, and cycle times, cross-enterprise
performance may be suboptimized.
Enterprise Focus
Supply chain processes are integrated,
aligned across all subprocesses and levels
of management, and display world-class
performance and continuous improvement.
Cross-Enterprise Focus
Integration of both internal and external
processes allows enterprise partners to focus
on their customers, supply chain partners,
core competencies, and on creating value.
Focus of Metrics
Performance of
specific functions
or departments
Performance of
specific processes
within or beyond a
functional area
Performance of crossfunctional
processes
Performance of crossenterprise
processes
and designated
external processes