Supply Chain Management Review recently ran a story authored by AMR Research -- essentially a repurposed research brief -- that talks about how best to turn data into action. According to AMR, it's critical to not only develop a measurement strategy by identifying what metrics are best to tract and then implementing a measurement program, but also to "turn the data into action." This is step is "the last mile of the journey, and often the most difficult one. It's where many companies flounder and where measurement efforts often die." To prove its point about how data and insight can lead to action, AMR sites the case of detecting and acting on patterns in supplier facing metrics. "Consider the financial connection between supplier performance, days payables outstanding, and direct material costs. One example we often see is poor supplier performance combined with high direct material costs and short days payables outstanding. A company in this situation is receiving poor service from its suppliers, despite the fact that it is paying them a lot and quickly. Clearly, this represents an opportunity to revisit the terms and agreements of those supplier relationships."
To this example I would also add the supply risk correlation between declining supplier performance and overall supplier financial viability. This is an established metric that a number of solutions providers (e.g., Open Ratings (D&B) and SAS) have observed over the years. Indeed, when quality or on-time performance drops, there's often a much more complicated story behind the scenes that could spell disaster for your organization if it goes unaddressed. Above all, as AMR suggests, it's not just about discovering the data -- it's about acting on it. So ask yourself: what are you going to do differently in 2008 when it comes to proactively intervening when it comes not only to Spend Management opportunities but also supply risk management?
- Jason Busch