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06/15/2010
Supply Chain Performance Management: Small steps, big impact
Key performance indicators (KPIs) applied on a company-wide basis provide a foundation for effective supply chain intervention. Though this sounds convincing in theory, it can be problematic when put into practice. The challenges faced can include inadequate data availability, a lack of clearly defined goals and the incompatibility of parallel KPI systems. Supply Chain Performance Management makes it possible to achieve goals on a step-by-step basis.

Companies have been using financial controlling mechanisms for a number of years now. KPI-based methods of supply chain control, on the other hand, are still at an early stage of development. This is despite the benefits that Supply Chain Performance Management brings by bridging the gap between operational performance systems and management systems. To tap into those benefits, companies first need to operationalize their strategic corporate goals. This necessitates the translation of targets which have only been formulated verbally up to that point into KPIs. The statement “We want to break into the top 3 on the market”, for example, can be turned into a set of measurable KPI-based targets. These targets can focus on indicators such as customer numbers, region-by-region sales or specific levels of service.

Many companies have already introduced KPI systems, but there is a hidden catch: department-based weighting and internal system incompatibility brought about by mergers often hamper the evaluation process and make it difficult to focus on strategically relevant KPIs. Precise analysis of existing systems is therefore indispensable. The “J&M Supply Chain Performance” programme sees J&M consultants work in partnership with the client to identify those parameters, interdependencies and drivers which are of relevance to the specific operational situation.

As early as the planning phase, companies should give consideration to the technical practicability of the project. Is it possible to gather the data required? Which interfaces are involved? Project experience and knowledge of available technologies are of key importance if the realistic assessment of potential weaknesses and required investment is to be ensured.

The analysis of KPIs and the relationships between the various data sets gathered is carried out in the SC Performance Cockpit, the “control centre” for all participants. Depending on their role in the company, each participant can use the Cockpit to call up all data to the degree of detail they require. A logistics manager, for example, may require KPIs which are more aggregated or value-oriented than those required by a logistics assistant. To this end, J&M offers a useful visualization: the “Performance Management Lab” not only gives companies an idea of the form a solution based on SAP Business Intelligence tools could take, but also serves as a feasibility study which reflects the respective practical situation.

Once an operational foundation has been arrived at, there are still various specialist questions to be answered: How are the desired results to be achieved? Which tools can be used to facilitate system implementation? Measuring methods need to be selected and refined, and responsibility for the various KPIs is to be delegated. The results of these deliberations are collated in a roadmap which outlines the individual steps to be taken in the future. The roadmap also includes recommendations on system landscapes and IT architecture, and defines the path towards effective Supply Chain Performance Management.

Further information is available from: Dr. Boris Reuter, Practice Leader Performance Management, J&M Management Consulting, telephone +49 (0) 621 12 47 69 - 0 or via e-mail b.reuterjnm.com.