Defining Metrics for Success in Supply Chain Design
Mark Armstrong is a Customer Success Strategist at LLamasoft.
Not enough companies are measuring successes (or failures) when it comes to supply chain design. As I engage with more and more through our DECODE methodology I consistently see a gap with teams not having metrics in place to measure their Supply Chain Design organization. Or if they do have something in place it’s simply tracking savings opportunities identified through their projects. While savings is probably one of, if not the most important thing a design team can deliver, on its own it doesn’t help to measure the team’s effectiveness or drive development of the individuals and team. And it’s really the value realized (not just identified) that is the important metric to the larger organization.
Through my discussions, it will often come up that professionals want to track metrics, but they don’t really know how to approach it so it never becomes a priority. From my perspective it should be a major priority and having a scorecard in place is essential for a design organization. Given design is not a required operational function – it’s increasingly more important to have a mechanism to prove your worth. If the larger organization is unaware of what’s being delivered through the design team, some may view it as not being a required function. This creates risk for supply chain design as a sustainable function. Below are some ways to think about developing metrics in supply chain design.
Metrics for Success
Use the term metrics for success when thinking about a scorecard for design. If you are hitting on your targets – you should not only drive significant value to the larger organization but also achieve success as a design organization. I typically break these metrics down into three core categories:
Collectively these paint a pretty good picture of what’s going on within the team and allow for measurement and development.
The value metrics are probably one of the most obvious things to measure as a design organization. Identify what’s important to the larger organization then align the design team’s focus with that of the business. This could cover various areas such as:
- Asset/Capacity Utilization
- Inventory Reduction
- Service Improvement
- Lowering Transportation Costs
- Reducing Taxes and Duties
- Hedging Risk
Additionally, make note of major corporate initiatives where design work helps influence or support the effort. As I mentioned earlier an important aspect to the value metrics is to focus on value realization in addition to value identified. The realization side isn’t as easy because implementing design decisions can be a lengthy process. It requires having processes in place to link the identified value with reality and involves coordination with other groups like Finance and Operations to align on the methodology. In the end though, it’s worth the effort because it provides a true measure of impact to the organization.
The performance metrics allow you to gauge how you are servicing your customer (consumers of design analytics) and how you are progressing and developing your design competency. A starting point to developing performance metrics is to establish a plan or roadmap for what you are looking to achieve in design. This may include targeted design projects/work you plan to deliver, or special projects relating to process development. With special projects think about those that are more important and have an impact on team development. An example of this could be that you have an initiative to streamline your data management processes. If you’ve done design work, you recognize data management can be a major pain point, and streamlining this can provide significant value to any design team. Supply Chain Design maturity progression is an additional aspect to track. If you’ve participated in our DECODE methodology you may have a design maturity target you are striving for. Incorporating this progression into your scorecard helps to keep a pulse on development towards your objectives. Another consideration is to gain direct feedback from your customers. An approach for going after this is to develop a survey to gain insight on how you delivered against objectives from the design consumer’s perspective. This also helps drive continuous improvement definition of ongoing development objectives.
The profile metrics provide characteristics of the design team in general, as well as an understanding of the activities the design team is undertaking. Examples of profile metrics include:
- Number of Active Projects
- Number of Completed Projects
- Project Duration
- Number of Design Resources
- Resource Utilization
- Modeling Team Experience
- Technologies/Solvers being Leveraged
Visibility to this information not only helps to paint the picture of what is going on within the design team but also helps to level set on expectations of a design organization. I’ve worked with multiple customers who struggle with unrealistic expectations in regard to turning around answers (quality answers) in short timeframe when they have no capacity, or providing the answer will require more time to properly address. Tracking some of these measures also helps to establish benchmarks and builds understanding within the design team as you look to develop the overall roadmap or plan discussed with performance metrics by providing direction on what realistically can be accomplished.
Defining your metrics for success will help to drive a better understanding of Supply Chain Design and the impact your team can deliver to the broader organization. But developing your scorecard is step one. Once you have a solid foundation in place you need to establish the communication plan to effectively socialize your accomplishments to the organization. Defining an effective communication plan is an area I’ll save for a future posting.
If you would like to discuss this topic further, please contact your LLamasoft Customer Success Strategist.