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The Hierarchy of Supply Chain Metrics

Analytics, Business Intelligence, Posts, Supply Chain

Since 2010, Gartner, the world’s leading information technology research and advisory company, has been publishing an annual report entitled ‘Gartner Supply Chain Top 25‘ which ranks organizations that demonstrate leadership in supply chain management.  In each of these reports, the ‘Hierarchy of Supply Chain Metrics’ is positioned as the ideal set of metrics to measure supply chain operational performance.  To emphasize Gartner’s stance, the subtitle reads: ‘The Metrics We Wish We Had’.

The Hierarchy of Supply Chain Metrics was first published in 2004 and was conceived from patterns that emerged from an extensive supply chain study across multiple industries.  Consider it as a basis for a supply chain scorecard as it is a great example of how a set of inter-related metrics can allow you to assess, diagnose, and take corrective actions towards managing your supply chain performance.

The model identifies 3 key performance indicators (KPIs);  demand forecasting, perfect order, and supply chain management cost.  Basically, a highly accurate forecasting model (Demand Forecast) coupled with a healthy balance of customer service (Perfect Order) and cost control (SCM Cost) indicates a healthy supply chain operation. Any issues with these indicators can be further diagnosed by a mid level tier of metrics that focus on your cashflow.  Root cause analysis metrics are located at the ground level, where targeted intervention can be carried out towards improving supply chain effectiveness.

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