Part - I

Supply chain management (SCM) is undergoing a paradigm change in aligning its activities, measures and customer focus. No longer does supply chain management operate as mutually exclusive teams with separate sets of metrics in managing their activities. Today's successful companies use a master strategy or balanced scorecard approach to managing the organization as a connected enterprise.

Scorecards at the enterprise level now include strong metrics for measuring performance throughout an organization. In essence, scorecards include the "vital three" elements - people, process and enabling technology - in addressing future growth, enterprise transformation and enterprise resource planning (ERP)-enabling initiatives. The scorecard uses leading and lagging indicators as one overall enterprise blend.

This enterprise blend incorporates the activities of sales and marketing, SCM, the enabling functions of finance, human resources and others, and actually goes one step further. It incorporates external activities and enablers such as bankers, suppliers of goods and services and the customer's customer into the equation, which is imperative. Today's enterprise operates in an environment of end-to-end management, collaboration, vision and working for the good of the customer, stockholders and society, and emphasizes long-term cooperative growth.

Companies are recognizing a need to stretch traditional boundaries. No longer can they count on time-honored factors to spur business growth, such as:

• Improved performance through price increases.

• Decrease manufacturing costs year over year - for example, a 6 percent per year over three years cost-reduction initiative.

• Line extensions, new products and acquisitions.

Some speak of the supply chain as "the final frontier" - underscoring the importance of attacking the cost of process inefficiencies resulting from disjointed enterprise activities, and going beyond the "traditional" approaches shown above. Scorecards of forward-looking companies now include supply chain metrics such as shipping accuracy through perfect order metrics, cycle time reduction and others.

The Vital Three - A New Paradigm

Effective SCM plays a role within organizations that are willing to break down functional silos and eliminate time through speed and process innovation. This is a very basic approach, but hinges on analysis surrounding the vital three factors of people, process and the enabling technology. Wrapping the technology around a well-skilled team and simplified processes will yield the greatest technological advantages and best results, and employing ERP solutions can have long-term benefits.

SCM technology enables operations to perform with greater efficiency, as well as at unprecedented levels of interactivity. However, without incorporating the vital three factors into the solution through enterprise-wide people and process simplification, the organization won't get the desired results.

Management must understand market segmentation and what the customer is looking for. To achieve top performance results, customer expectations must be understood and met.

In the case cited in the accompanying table, the basics of people and process were redesigned prior to installing a technological change. An improvement in line item fill-rate percentages was achieved within a six-month period, among many other things. The client's customers could not understand the internal structure of the organization, nor did they care. However, people and process changes quickly yielded favorable results.

Customer losses - or non-renewal of contracts at expiration - serve as a reminder that every order must stimulate an organizational rallying, resulting in perfect execution. Orders must be received, fulfilled, delivered and closed as well as the marketplace expects in order for the organization to have long-term viability.

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* Joseph Slota is a supply chain professional with Deloitte & Touche LLP. He is a former vice president for supply chain management with Philips Electronics NV and held positions in finance, marketing and operations management with Johnson & Johnson, Mobil Oil, Reckitt & Coleman and American Cyanamid.