Total DSC Technology Spending

Add up the annual capital and expense for IT (Enterprise Software, Blockchain) and special technologies (e.g., 3D or driverless vehicles or sensors). Some judgment will be required to determine what spend is DSC spend. Building that spend baseline is important.

Why

Technology spending will go up because of the increasing amount of data, new methods of manufacturing and production, IoT, sensors, etc. Measuring and managing this spending is important. We must spend more but we must get more for what we spend.

How

Capture all the spend on technology. Include phantom servers run by the engineering department, include cloud spend that is sometimes called by the name of the internal customer. Make sure that return expectations are clear and audited.

Percentage of Sales through Direct Channels

Measure the percentage of business that goes directly to the customer. Not through a channel partner or reseller. This applies to B2B as well as B2C. Decide if revenue or bookings will be measured.

Why

Direct channels will deliver higher margins and more customer intimacy. This will lead to market share growth, more revenue, and higher earnings.

How

Set up a web presence that lets your customers purchase directly from you. Maintain current channels but build your own.

Technology - Process Metrics

Percentage of Revenue Facilitated by Advanced Digital Technologies

What

Measure the exact percentage of business revenue that is, or has at least some part, produced with advanced digital technologies like AI, 3D, Blockchain, IoT, etc. Measure the percentage of business revenue that is delivered by driverless cars/drones. Measure other sources of revenue that have been enabled by DSC technology.

Why

We know that 3D, driverless, and other technologies can transform the DSC. Importance of measuring, managing, and incentivizing development.

How

Collect data from factories, delivery systems, and sales or bookings. Consolidate incremental revenue and calculate percentage of total revenue.

Percentage of Time on Manual Tasks

Calculate the total amount of time within a certain segment of the supply chain (e.g., order to cash). Calculate the percentage of that time that requires people work as opposed to machine work.

Why

Automation is the key to reducing costs, speeding delivery of value, and improving quality. DSC automation is important.

How

Form a work team to map out existing and to-be processes. This team can also do the calculations. Be sure to employ baseline and improvement metrics so that the percentage reduction in manual work can be calculated.

Percentage of Manufacturing and Delivery Handled by Technology

What

Measure the percentage of your factory and delivery work that is automated and is not touched by human hands.

Why

The DSC will harness the power of software and machines to drive higher levels of customer satisfaction and efficiency.

How

Calculate the total number of delivery transactions made per week. Determine the percentage of those that are delivered by driverless vehicles. Determine the percent of manufacturing steps that are performed by software/machines.

Risk - Output Metrics

Percentage Change in Value of Counterfeit Goods in the Legitimate Supply Chain

What

Measure the number of counterfeits in your legitimate supply chain (legitimate defined as authorized suppliers, distributors, and retailers).

Why

Counterfeit goods are commonly found in authorized supply chains. It could be from overproduction by an authorized factory or an authorized distributor that purchases counterfeits knowingly or unknowingly.

How

Monitor the total production emerging from an authorized factory by studying raw material/ component purchases, working hours, and shipments of finished goods. Establish a mechanism for auditing distributors and retailers to establish if they have controls in place to verify that all incoming product is authentic. Sample, test, measure, and control.

Loss from Supply Chain Disruption as a percentage of Gross Revenue

What

Calculate the dollar amount of negative supply chain events as a percentage of gross revenue and track reduction against this baseline. Negative events will be defined in the DSC strategy.

Why

Business performance and compliance risks impact revenue and expenses through supply chain disruptions and losses. Measuring the reduction of risk will focus managers on reducing these problems.

How

Baseline revenue lost or expenses incurred due to negative events in the supply chain whether caused by business performance or compliance issues. Measure tangible losses such as lost sales due to supply chain disruptions.

Incremental Revenue Generated from Addressing Risk

Companies that excel at reducing a specific risk area can turn it into a competitive advantage to generate value for the company through increased sales, higher margins, higher valuations, increased ability to raise capital, longer-term contracts, etc.

Why

Reducing risk and converting this into more sales creates financial value. Measuring this value is essential.

How

Identify a risk area that is central to the customer. Establish a value baseline financial measurement. Track changes to this baseline.

Risk - Process Metrics

Time Lag between Capture of Critical Risk-related Data and its Inclusion in Decision Making

What

Count days between risk discovery and inclusion. Some judgment is required to determine when things are discovered and when things are decided. At the end of the performance period you should be able to calculate the average time between discovery and decision.

Why

Speed is all-important. Taking action on data that is as close to real-time as possible is essential. This risk metric will help focus people on speed of execution.

How

Identify current supply chain data sources and determine the time span between when the data first existed and when it is integrated into your risk assessment. Allocate resources to reduce the time span as needed. Measure the change reduction in days from discovery and inclusion.

Percentage of Cyber-Assessed "Connected" Suppliers

Calculate the total number of suppliers as a denominator. Calculate the total number that has undergone a thorough assessment of cybersecurity controls and confidential information protection programs. Divide the denominator by the number of assessments. It is important to decide what an acceptable cybersecurity assessment is and what an acceptable level of risk is.

Why

Cybersecurity and the protection of confidential information, including trade secrets, is a growing risk in the DSC. Your supplier assessment program and ongoing monitoring must cover these escalating issues. Measuring the percentage of suppliers that have been assessed is important.

How

Start by mapping all of your suppliers that are connected to any of your networks or those that receive confidential information or trade secrets from your company. Conduct assessments. As a program matures, consider weighing the percentage based on the dollar value of the supplier.

Percentage of Suppliers Classified in a Comprehensive Overall Risk Assessment

What

This examines the existence and utilization of a comprehensive risk assessment program that includes a tiered - low, medium, and high - risk rating system. Beyond that, it studies the percentage of suppliers at each risk level. Companies have traditionally done this. The DSC approach is to incorporate new sources of data, prescriptive analytics, unstructured and structured data.

Why

There is a trend in many industries towards supplier consolidation with a focus on having a smaller base of “strategic suppliers.” One factor driving consolidation is that it provides more leverage and control over the supplier, thus reducing risk. Coupled with this, is the trend towards companies doing a more comprehensive and “holistic” supplier assessment of the broad range of business performance and compliance issues they face. Continuing increases in regulations will accelerate the need for comprehensive risk assessments to be conducted, with results being analyzed and implemented.

How

Establish your risk tolerance in the relevant business performance and compliance risk areas. Develop a tiered risk rating assessment and classification system of at least three levels in each of the risk areas. You may wish to aggregate this into an overall risk score. Many companies will have existing programs that can be utilized and modified as necessary to cover the enhanced risks of the DSC. Initiate the comprehensive assessment program with strategic suppliers or with those in known high-risk areas.

Appendix A. Reference

Digital Supply Chain Institute (DSCI). (2017). Digital Supply Chain Transformation Guide: Essential Metrics [White paper]. Center for Global Enterprise, https:// www.dscinstitute.org/assets/documents/Digital-Supply-Chain-Transformation- Guide-Essential-Metrics_DSCI_0ct2.pdf.

 
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