Effective supply chain management.

Author:Slota, Joseph
Position:Special Section: Supply Chain

Supply chain management (SCM) is undergoing a paradigm change in aligning its activities, measures and customer focus. No longer does supply chain management operate as mutually exclusive teams with separate sets of metrics in managing their activities. Today's successful companies use a master strategy or balanced scorecard approach to managing the organization as a connected enterprise.

Scorecards at the enterprise level now include strong metrics for measuring performance throughout an organization. In essence, scorecards include the "vital three" elements -- people, process and enabling technology -- in addressing future growth, enterprise transformation and enterprise resource planning (ERP)-enabling initiatives. The scorecard uses leading and lagging indicators as one overall enterprise blend.

This enterprise blend incorporates the activities of sales and marketing, SCM, the enabling functions of finance, human resources and others, and actually goes one step further. It incorporates external activities and enablers such as bankers, suppliers of goods and services and the customer's customer into the equation, which is imperative. Today's enterprise operates in an environment of end-to-end management, collaboration, vision and working for the good of the customer, stockholders and society, and emphasizes long-term cooperative growth.

Companies are recognizing a need to stretch traditional boundaries. No longer can they count on time-honored factors to spur business growth, such as:

* Improved performance through price increases.

* Decrease manufacturing costs year over year -- for example, a 6 percent per year over three years cost-reduction initiative.

* Line extensions, new products and acquisitions.

Some speak of the supply chain as "the final frontier" -- underscoring the importance of attacking the cost of process inefficiencies resulting from disjointed enterprise activities, and going beyond the "traditional" approaches shown above. Scorecards of forward-looking companies now include supply chain metrics such as shipping accuracy through perfect order metrics, cycle time reduction and others.

The Vital Three -- A New Paradigm

Effective SCM plays a role within organizations that are willing to break down functional silos and eliminate time through speed and process innovation. This is a very basic approach, but hinges on analysis surrounding the vital three factors of people, process and the enabling technology. Wrapping the...

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