There’s a very interesting article here at Supply Chain Management Review by MIT’s Larry Lapide. The article introduces the concept of a new supply chain performance management metric called “Efficient Orders” – a metric that complements the more standard “Perfect Order” metric. The basic notion here is that efficiency is another key measure that needs to be taken into account, a measure to understand if the order meets the business expectations whereas perfect order focuses on measuring whether or not customer expectations were met.

Larry points out that efficiency is an issue because many supply chain personnel love to play the role of “Everyday Hero,” solving problems on behalf of customers but masking underlying problems that should be addressed. Larry goes on to say that “While supply chain plans are never 100 percent accurate, planning is necessary to reduce the number of exceptions. Do little to no planning and most customer transactions become exceptions. Do a ton of planning and you’ll still get exceptions because of the uncertainties in demand and supply. So there is a limit to how much planning should be done.”

The reality is that exceptions are occuring, and increasingly they are becoming the norm. So, you need to deal with them. The key then becomes how to do so in a way that balances the good of the customer and the business. Arming demand management and supply chain management decision-makers with tools to understand the impact of their actions before they take them is one such approach. Doing so places performance management capabilities where the rubber meets the road and ensures that decisions are made not only quickly, but in alignment with corporate objectives. This is the key to a profitable response to changes that occur daily across the supply chain.

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Posted in Best practices, Response Management
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