Supply Chain Brain - October/November 2011

How Healthy Is Your
Supply Chain? Four Critical
Lenses to Improve
System-Wide Performance

Sue Gillman is partner and
co-owner of Aveus,
www.aveus.com.

BY SUE GILLMAN
t’s no secret who the top supply-chain perform-
ers are: The Gartner Supply Chain Top 25 is an
excellent roundup of companies that are rou-
tinely recognized for applying demand-driven prin-
cipals and achieving great performance results.
While this list includes many organizations we par-
ticularly admire, the big secret is that it’s only part of
the conversation.
Gartner measures ROA, revenue growth and
inventory turns, as well as feedback from the
Gartner AMR survey and a peer opinion panel,
which provide an interesting “end” of the story.
What’s missing from this dialog is the notion of
the interconnected system, of thinking of the sup-
ply chain as part of a larger performance chain.
Missing are the beginning and middle stories. The
supply chain, the way most of us commonly think
about it, is only one thread of a bigger tapestry.
Today’s supply chains are a complex tangle of
data and relationships, which are all part of the
enterprise-wide performance chain—all the tan-
gible and intangible elements that have to move
from the split second you trigger demand to the
time you have cash in the bank.
Whether you’re thinking specifically about
manufacturing, suppliers, invoice processing,
shipping or forecasting, financial metrics are
helpful and clearly objective and unarguable, but
they’re lagging indicators. They’re the score-
board. So where is the system view? How can an
organization see how healthy its performance
chain is without waiting until the end?
Similar to taking a patient’s vitals, looking
through four lenses—speed, predictability, flexi-
bility and leverage—provides a way to measure
the current health of a system-wide performance
chain, as well as help you diagnose where
improvements may be necessary. Let’s take a
closer look at each lens:
• Speed: When we refer to measuring speed in
your performance chain, we’re talking about the
velocity of processes such as turnaround time,
I
closed-lot cycle time, time to market and days cash
outstanding. When evaluating speed in a perform-
ance chain, look for ways to pull time out of the
production cycle, reduce turnaround time and
drive product through the system faster. Start by
mapping your value stream, and focus in on those
areas that are slowing down the speed of the sys-
tem in turning inputs into value for which your cus-
tomers will pay. Then take corrective actions to
break through those constraint areas and reduce
your process times.
• Flexibility: What creates flexibility in your
business? You may need strategic inventory
buffers—or just-in-time fulfillment options so that
you can respond quickly to varying demand.
Staffing on key pieces of equipment may need to
vary from the norm. Using Lean and Six Sigma
tools, you can diagnose and focus on creating flexi-
bility where you need it most. In a factory or ware-
house, cross-training may be far more valuable than
one more piece of equipment that adds capacity
but no extra flexibility. In a service-driven business,
staff flexibility across wage grades may be more
valuable than preserving the capacity of higher-
wage employees while limiting the ability to
respond to dynamic customer needs.
• Predictability: In a plant, warehouse or
processing center, predictability comes from con-
sistent flow across the supply chain—more rou-
tine and quality repeatability, less variability of
external and internal processes. Examples
include variation in time or quality, records accu-
racy, process yield and customer satisfaction. If
you are seeing cycle times with wide deltas in
your operations, or you have significant gaps
between engineered or designed process time
and reality, predictability is out of reach. Wide
swings in your day-to-day output suggest the
standards for performance have not been passed
through the chain successfully. To increase pre-
dictability, measure the difference or gap
between designed process time versus what is