Measuring the right things and measuring it right

1. Link (Non)Financial to Supply Chain Performance Metrics Measuring the right things and measuring it right Anand Subramaniam

4. Metrics - Overview

5. Enterprise-Wide Supply Chain Management Planning Evaluating Selecting Purchasing/ Contracting Revenue Management Using Disposing Distributing Processing Storing Warehousing Managing Inventory Receiving/Accounts Payable Supply Chain & (Non)Financial metrics

7. Example: Measuring Inventory Turns Inventory Turns The problem is that not all inventory turns are equal Inventory is usually cheaper further back in the supply chain Many companies use inventory turns as a measure of its efficiency !! Caveat: this might not be the case if the cost of money varies between firms in the supply chain Inventory turns also doesn’t consider risk and the value of post-ponement Typically, an improvement in inventory turns close to the retailer is more valuable than one further back

8. Metrics - Supply Chain & (Non)Finance Why? To allocate benefits and burdens between functions and between firms To align activities and share performance goals To extend the “line of sight” in the supply chain To determine the relationship between corporate and supply chain performance To differentiate the supply chain & to obtain a competitive advantage Is a prerequisite to successfully implement a supply chain strategy To encourage cooperative behavior both between functions and between firms

9. Steps - Develop SC & (Non)Finance Metrics 1. Map the supply chain 3. Develop customer & supplier P&L statements 4. Realign processes & activities to achieve the objectives 5. Establish (non)financial measures / metrics 6. Compare shareholder value & market capitalisation across firms 2. Analyse each link & determine where value can be created

10. Metrics – Supply Chain & (Non)Financial