Assessing the Value in Your Supply Chain: An Interview with Jeffrey Miller
What Do You See As The Key Issues That Companies Face In Addressing Supply Chain Performance Improvements?
There are many challenges that a company faces when seeking to improve supply chain performance. The supply chain is a particularly complex system that offers numerous opportunities for enhanced performance. But, to make the right improvements, appropriate supply chain performance metrics must be chosen. Determining which metrics to collect and then how to interpret them requires a clear connection between the measured process and its contribution to revenue, cost, and capital performance. The difficulty is that there is often a gap between supply chain operational measures and the financial outcomes a company is trying to achieve. To make significant progress, you have to have the supply chain operational side connected to the financial side. For example, if I am an assembler of computers, continuity of supply will likely be one of my most important supply chain performance goals. I must understand my suppliers' capabilities to respond to surges in my demand and connect these capabilities to my financial outcomes. Performance targets are built around these metrics. So the question becomes "How do I determine the contribution each of my core supply chain operations make toward my business and financial goals?" This is a different question, for example, than simply asking, "How can logistics improvement contribute to cost minimization?"How does Accenture assist their clients with this issue?
Traditional methods of measuring supply chain performance through purely functional metrics (which are often financially oriented) are no longer sufficient to meet the business goals of our clients. Our clients need to capture critical quantitative performance data across (and between) functions, as well as qualitative insight into supplier and partner relationships.To address this need, we developed the Supply Chain Value Assessment, or SCVA. SCVA is a framework that connects the operating performance metrics of specific supply chain processes to the desired financial outcomes against which the business measures itself. We built a framework around these performance and financial linkages, supported by a set of Internet-based tools and technologies that enable our client and consulting teams to define and implement the proper metrics. New kinds of metrics which reside at the "seams" between processes are key to helping our clients identify the right areas of their supply chain upon which to focus their improvement efforts.
What is the SCVA framework?
In the SCVA, we use qualitative and quantitative techniques to measure progress toward achievement of desired business outcomes. The SCVA helps build the value proposition for making a change to supply chain structure or operation. It determines the value of changing what we do - the value of closing a performance gap.The SCVA framework finds the weak areas in supply chain operations and connects the value of improvement to revenue lift and cost reduction opportunities.
SCVA applies several tools and methods to collect, analyze, and report data. These three core activities contain embedded Accenture knowledge of leading supply chain practices and business performance equations. The entire SCVA resides as an Internet-based collaborative business application. In this way, geographically dispersed groups may all contribute to the analysis and supply chain value proposition efforts.
Naturally, what makes this framework effective is the supply chain practitioners' knowledge - that of our clients coupled with our own experience and expertise. Cross-functional experience is vital to interpreting the information collected and calculated through SCVA, since it builds the value propositions for directing your actions to the opportunities with greatest potential value.
Can you describe the SCVA process?
To begin, we meet with our client - and depending on the scope of the endeavor, their key business partners - to identify initial data to be collected based on our joint initial assessment of supply chain performance and opportunities. Benchmark reference data are used here. Simultaneously, we conduct a series of interviews with key executives, customers, and suppliers to collect qualitative data. For example, a questionnaire might present the client's planning leader with a statement such as "I share lead times for critical materials with my suppliers on a timeline that supports their ability to meet my needs." The client respondent checks off whether he strongly agrees, agrees, disagrees, etc. Similarly, the client's suppliers are presented with the statement "My customer shares with me the lead times and identifies critical materials to support my ability to meet his need," and again, checks the box which best represents his perception, from strongly disagree to strongly agree.The results are often surprising to clients. With significant frequency, there is a very large disconnect between the perceptions of the client and the perceptions of their supplier. This perception gap regarding the operating performance of the other party must be addressed before a substantive conversation can be had about advancing the capabilities and responsiveness of the supply chain. Often, such business partners believe that they are each contributing the information that the other side needs, when in fact our interviews often reveal the opposite is true. These relationship and perception issues must be closed before attacking the factual performance issues. Following this initial qualitative work, we'll decide on the specific operating data to be collected in support of the analysis and business case. We collect factual performance data to support the calculation of key performance indicators (KPIs). These KPIs often reside in the "white space" between functions of particular interest. In addition, we ask specifically for source metric data. We then use the toolset to calculate the KPIs directly through the framework, rather than requesting the KPI value itself. In this way, we assure that the KPI is calculated the same way each time.
What is the value that a diagnostic of this nature delivers?
Supply Chain Value Assessment is more than a diagnostic, it is a framework for building fact-based value propositions to change supply chain structures and operations. For clients who have institutionalized SCVA, it has become a new, fact-based "currency of conversation" between the client and trading partner on supply chain performance. Fact-based discussions on supply chain performance and the supporting metric data, results and interpretations also help to mitigate the risk of failure since the approaches and data inputs have been agreed to by key process stakeholders. Finally, by conducting SCVA across stakeholder groups, the sustainability of change programs is enhanced. Systems of metrics are tied to financial outcomes, and continuously guide improvement programs across disciplines. Speed to benefit, risk mitigation, and sustainability - these are the three leading goals for any supply chain transformation or performance improvement program, and SCVA is the performance management engine which supports each one.Copyright© 2000 Accenture LLP
