Strategic Supply Chain Management - Supply Chain Online

CHAPTER 5 Core Discipline 5: Use Metrics to Drive Business Success 207
business. Buying in volume caused inventory levels to increase. And manufacturing
yields were dropping—a problem traced back to lower-quality
materials purchased from the low-cost suppliers.
The moral of this story is clear: Exclusive use of functional metrics
can drive unwanted behaviors and interfere with overall strategy execution.
Functional metrics aren’t bad in and of themselves, but they can hurt
overall performance if not combined with cross-functional measurements
that enhance the end-to-end supply chain.
Choose Metrics That Support Your Strategy
In Chapter 2, we discussed the importance of organizing around crossfunctional
processes and breaking down functional silos to support the
end-to-end supply chain. Your metrics program must do the same—break
down the barriers and handoffs between functions by using cross-functional
and process-based performance measures to supplement functional
metrics. Functional metrics then become useful tools for diagnosing the
causes of performance problems.
The first step in choosing the right metrics is to assess your company’s
supply chain maturity. The next step is to review your overall
strategic objectives and any plans you have to move to the next stage of
maturity—cross-process excellence, for instance, or cross-company
excellence. Then you can begin to structure a balanced set of supporting
metrics, including top-level metrics that evaluate whether or not your supply
chain is supporting your company’s overall strategy.
Our design of the SCOR model was influenced heavily by our work
with hundreds of companies in establishing appropriate approaches to
supply chain performance management as part of operations strategy and
performance-improvement programs. This work allowed us to establish
one of the world’s most comprehensive databases of supply chain metrics
and associated best practices, which, in turn, became the foundation for
PMG’s supply chain management database. These metrics and practices
are embedded in the SCOR model and are leveraged widely by all industries
today.
PMG’s Supply Chain Management Benchmarking Study, an ongoing
survey of supply chain practices and performance, is based on the same
work that led to creation of the SCOR model and uses the same hierarchical
construct. At the highest level, the SCOR model provides quantitative
measures of performance under 5 key attributes and 13 specific measures. 5
SCOR level 1 metrics typically are associated with executive-level concern
(see Figure 5-6).