Appendix A: Example Digital Supply Chain Metrics
Selecting appropriate metrics is crucially important as they drive the behavior that you get. Failure to identify incorrect metrics could send your organization and people into a tailspin. Here we present a recommended process for identifying a short list of Digital Supply Chain (DSC) Metrics (Digital Supply Chain Institute DSCI, 2017).
We recommend every company select at least one metric from each of these four critical areas to drive a successful DSC. Demand is so crucial and so novel to most supply chain organizations that we recommend at least two metrics. Developing a Talent Resources Strategy is also essential as it is clear that people require a variety of skills to attain DSC results. You must find people capable of capturing and analyzing data to drive better decisions. You will need more people with backgrounds in Sales and Marketing and Customer Service to drive more customer-focused growth solutions. Your metrics will shape management decisions across these areas.
Choosing new metrics, holding people accountable, and paying them for results is difficult. In particular, DSC people may sense that they cannot drive revenue. The sales team or engineers may believe that DSC people are purely operational and underestimate their efforts. If this occurs, it is a sign that you are on the right track! Navigating through this challenging process of setting new metrics and determining how to collect and use data is an integral part of the DSC as will be shown later in this document.
The DSC metrics have been divided into four areas which are critical when transforming a traditional supply chain into a digital one. Measuring for Demand, Talent, Technology, and Risk ensures that all sections of the company are fulfilling the required changes to become more demand driven, customer focused, technology savvy, and risk compliant.
Revenue Change from DSC Actions
Calculate the total dollar value of DSC actions that have increased revenue. These actions can include using big data to match customer demand better, stimulate sales through a “sticky” supply chain that creates advantage, better-informed product design based on DSC knowledge and local 3D manufacturing, etc. This metric will be shared (double counted) with Sales and Marketing.
The DSC must shift to face the customer in a way that grows revenue. Measuring DSC-generated revenue growth is essential to focus on and will support this effort. The DSC strategy was jointly developed with Sales and Marketing.
Each year DSC leadership must meet with Sales and Marketing to establish the categories of actions that the DSC can take to grow revenue. Each action must be built into the budget and measured.
Revenue Increase from Platform Utilization
Every supply chain should grow revenue from platform partners. This revenue should be planned and measured in revenue dollars. These platform partners may be current or new suppliers or even customers.
A DSC platform that connects to customers is an asset. Other companies will welcome the opportunities to access the DSC, its manufacturing, shipping, logistics, quality, and customer intimacy. Technology-enabled collaboration makes all of this possible.
Select a specific supply chain process that offers benefits to other vendors. Develop a revenue-sharing model that enables your company to keep a percentage of the value. Value could come from cost savings or from increased sales.
Percentage Growth in Demand due to DSC Actions
Calculate a target percentage increase in demand that comes from specific DSC actions. These actions could include increasing delivery speed, improving availability, offering goods and services through online channels, anticipating customer requirements, etc.
This metric is similar to the Revenue Increase metric but is expressed as a percentage that enables more comfortable comparisons with other companies and previous years.
Percentage growth should total at least 10% of current company revenue by year three.
Demand - Process Metrics
Percentage of Perfect Orders from Automation
Measure the total number of perfect orders achieved through automation. Compare to total orders and to total perfect orders.
Automation, done correctly, will create more perfect orders. Perfect orders create customer satisfaction. This creates more orders and revenue.
Count total orders, total perfect orders, and total perfect orders through automation. Integrate customer knowledge into automated systems.