Leverage a Disciplined, Standard Approach to Achieve “One-Source” Truth

Today’s best-run companies can identify and repair problems and replicate best practices throughout the organization very quickly. Most of the time, these organizations measure and manage their supply chains with exceptional skill and vigilance.

By Mark Holmes, National Operational Consulting Practice Director, and John Williams, Senior Vice President, National Practice Director, Collaborative Consulting

Excellence in supply chain management means achieving superior levels of visibility into systems and processes, while optimizing the effectiveness of key performance indicators (KPIs). Companies can improve their visibility into systems and process execution by ensuring that their KPIs are well defined and based on accurate, timely data. When organizations accomplish these levels of introspection, they can create effective plans and quickly implement changes that make a real difference.

Here’s the catch: KPIs rely on multiple, usually disparate sources of data. These feature a wide range of quality and accuracy, making it difficult to draw precise conclusions about their intended measurements. In fact, defining the proper KPI and gathering its associated data is usually incredibly complex and challenging. And the more functions and divisions an organization has, the more complicated the task.

Consider a particular data value. An organization’s enterprise resource planning system, its third-party logistics system, and its general ledger may all provide this value. However, each could come by that value differently, which invites inconsistency. Figuring out how to rein in all that information, determine what it means, and represent it in an accurate and timely fashion is indeed a tall order. How can a company achieve “one-source” truth?

The best way is to adhere to a common, disciplined approach to KPI development. Proper KPIs are the result of a mathematical equation used and integrated throughout the enterprise, and adopted by trading partners. This level of standardization helps KPIs link with an effective data architecture that enables timely, accurate visibility. When that occurs, underperforming processes are highlighted very quickly, as are those that ought to be implemented throughout the enterprise.

In addition, to optimize the effectiveness of its KPIs, a company must identify those that are most critical, i.e., the ones that drive the business. Usually, this is a relatively small but highly important group.

Because most companies have only a few critical KPIs, it makes sense to begin KPI enhancement initiatives with them. Doing so, however, is complex; a company must uncover, organize, and expose the data that creates visibility into KPIs.

Other important elements of KPI visibility include:

• Data source. KPIs are most effective when all functions and divisions within an organization “pull” a particular value from a standardized source, such as an ERP system. When the same value is extracted from different sources, inconsistencies and inaccuracies creep in.
• Data users. If only a small group of executives needs to review KPI data, a relatively simple application can be developed to share that information. If, however, several manufacturing plants are also heavy KPI data users, and a global executive team requires the information, a portal may be more appropriate.
• KPI value. KPIs must align with business objectives. In addition, senior executives must ensure their adoption throughout the enterprise.
• Measurement time frames. By determining how often to measure KPIs, a company can figure out which data sources it must access easily. Of course, measurement times vary greatly from company to company. An e-fulfillment organization will want its “out-of-stock” KPI measured daily; another enterprise may need that metric only weekly or monthly.

KPIs require a sound definition, disciplined data gathering, and continuous alignment of that data with business objectives. By adhering to a rigorous plan and maintaining data discipline, companies can create extremely robust KPIs, and access powerful, accurate, optimized assessments of their performance.