13 SUPPLY CHAINS TO ADMIRE | 2025
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The Right Stuff Winning is not magic. Leaders drive higher levels of improvement by focusing on cross-functional process development and organizational alignment. Defining metrics to align the organization to a balanced scorecard is essential. Shown in Figure 4 is an example of a metrics hierarchy to drive value. The organization is aligned with a balanced scorecard. To optimize performance on the balanced scorecard, functional metrics are defined to drive reliability. In this journey, Forecast Value Added (FVA) replaces error as a goal, the form and function of inventory analysis replace safety stock analysis, schedule reliability replaces OEE, procurement reliability replaces Purchase Price variance, and no function is rewarded solely for functional costs. These shifts are outlined in Table 4. Here are some guidelines: ‣ The Efficient Supply Chain Does Not Create the Greatest Value. Historically, the focus has been building efficient selling, delivering, making, and sourcing processes. When the organization emphasizes functional efficiency, the supply chain is thrown out of balance, decreasing value.
‣ Economy of Scale Is Elusive. Achieving economies of scale in the supply chain is a challenge. In our analysis, the smaller, regional player consistently outperforms the Global multinational. For example, Monster Beverages outperforms in the beverage sector, and Nathan’s hot dogs drive better performance in the restaurant sector. ‣ It is easier to Drive Improvement in Growth Markets. Supply chains perform better in periods of growth than decline. In the words of one of our clients, “We pedal uphill better together than navigating the downward decline.” ‣ Driving Improvement is Easier than Sustaining Market Leadership. Supply chain leaders quickly find it easier to drive improvement than sustain performance. Progress requires patience and building capabilities to manage the supply chain as a complex nonlinear system based on a multi-year roadmap. Companies can drive improvement and achieve peer group performance through an infusion of leadership, but performance can quickly shift when management teams change.
Figure 4. Alignment of Functional Metrics to a Balanced Scorecard
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