SMART Metrics and Your Edge Perception
Translating the vast amounts of available business information to an intelligent dashboard upon which to base decisions and align organizations is a critical, if not central, goal of supply chain management today. However, as Lora Cecere noted in her now iconic 2015 book: Supply Chain Metrics that Matter, “Over the past decade, good business practices did not become great. Scorecards were difficult to balance, and leadership teams struggled to evolve. Today, executive boards are disappointed.”
Simply put, in our recent experience helping manufacturers and service sector businesses alike to not only balance scorecards but allow for improved supply chain management, the eyesight of many businesses is far worse than C-Level expectations of 20/20 equivalent vision. We call this Edge Perception because of the vast amount of IOT information available to businesses today that could otherwise be used to power intelligent dashboards. However, even with heavy investment in technologies, virtually all businesses are stuck in second gear in developing the business insights they need to power decision-making. With the notable exception of a few tech giants and a handful of Gartner Top 25 companies, business capabilities today in this space are little better than where we stood at the turn of the century.
In a recent article (SCMNOW Q1, 2019) on this subject, Richard Crandall, professor emeritus at Appalachian State University noted that cost appears to be the biggest hurdle, but not the only important one. Change management headwinds are often significant, with data privacy and intellectual property rights also blamed for dragging down progress.
Sound familiar? How then, to make enough progress in this arena to bring tangible financial benefit to your business? We recommend first assessing your enterprise against the following simple criteria:
1. Do you see a lot of metrics that are ‘boilerplate’ and lack context to customer value?
2. Are custom metrics being derived from spreadsheet analysis and not present in any standard system report?
3. Does your S&OP dashboard fail to connect overall financials to specific activities and strategy initiatives?
4. Is your business failing to put any ‘threat-casting’ data into a control tower or some other digitized dashboard?
5. Finally, do your metrics lack SMART-ness (Specific, Measurable, Assignable, Relevant, Time-based)?
Each question drills into the following common desired supply chain outcomes:
1. Converting output metrics to preferred outcome-based measurements
2. Systematizing knowledge and processes to buffer against staff turnover and release organizational bandwidth.
3. Modernizing old S&OP dashboard techniques to control towers with automation, AI-assisted analytics, and relevant metrics to fast-moving initiatives.
4. Analyzing and visualizing external changes in real time as inputs into a formal disruption management process.
5. All enterprises, but particularly those in fast changing markets such as consumer electronics, should automate a SMART test to their dashboards on a quarterly basis to maintain good edge perception on changes both external and internal.
Finally, any intelligent dashboard should contain three distinct types of metrics designed to provide everything an enterprise needs to run, grow, and transform in a competitive environment of continuous and unpredictable change:
1. Traditional top-line metrics, such as Revenue, EBIT, gross margin, etc.
2. Functional metrics that specifically connect the value of enterprise activities and initiatives to corporate financials. These metrics are outcome-based and specifically crafted to measure progress towards desirable end-points envisioned by the business strategy.
3. Causal or diagnostic metrics to the functional metrics, which provide leading indicator insights to future changes and abnormal situations, as well as root-cause flags to alert management to potential problems down the road.
Each metric is refreshed on its own renewal cycle, whether it be quarterly, monthly, or even hourly. To perform its agile mission, the aim is to make the dashboard a real-time sensing mechanism – the ultimate goal in this space – and the better an enterprise gets at this activity the more capable it will be in warding off disruptions.
Please explore our website to find out more about how to build an intelligent dashboard and enhance your edge perception. One very helpful page can be found at: https://www.octagonvaluechain.com/dashboard