A typical supply chain report has forty indicators: fill rates by warehouse, trucks loaded per shift, forecast error by SKU, days of cover by category. Each one matters to someone. Almost none of them reaches the executive committee in a form it can act on, because the committee does not think in fill rates; it thinks in revenue, margin, cash and risk.
The fix is not fewer indicators but a different top layer: a handful of measures that describe the supply chain the way a CFO describes the business, each one with a known price. Then a point of service level or a day of inventory stops being an operational statistic and becomes a line in the value creation plan.
Five dimensions, one or two numbers each
The SCOR model, the reference framework maintained by the supply chain association ASCM, groups its top-level metrics into five attributes. They work well as an executive scorecard because they cover both sides of the trade-off: what the customer receives and what it costs the company to deliver it.
| Attribute | Executive metric | Moves |
|---|---|---|
| Reliability | Perfect order rate: complete, on time, undamaged, correctly invoiced | Revenue, credits, customer churn |
| Responsiveness | Order fulfilment cycle time | Win rate, price premium |
| Agility | Upside flexibility: how fast volume can rise 20% | Captured demand peaks, risk |
| Cost | Total supply chain cost as % of revenue | Gross and EBIT margin |
| Assets | Cash-to-cash cycle time, return on supply chain fixed assets | Working capital, ROCE |
The discipline is to show the five together. A supply chain that improves cost by cutting inventory will usually lose reliability; one that buys reliability with inventory will lose on assets. Seen one at a time, each looks like progress. Seen together, the committee can tell whether the frontier moved or the company just slid along it.
Put a price on each point
Consider a manufacturer with 800 million of revenue, 560 million of cost of goods sold and 120 million of inventory. Translating a realistic step in each measure into EBIT and cash shows where management attention pays most.
Two different currencies appear. Cost and reliability improvements raise EBIT every year; inventory, receivable and payable days release cash once. Ten fewer days of inventory free 15 million, but they also cut carrying costs by about 1.5 million a year. A board that only reads the P&L will undervalue working capital, and one that only reads cash will undervalue service. The executive scorecard needs both, side by side.
Rules for the top layer
- Measure as the customer does. Perfect order is counted at the customer's dock against the date the customer asked for, not the date the plant promised.
- Express cost as one number. Freight, warehousing, inventory carrying cost, planning and procurement overheads together, as a percentage of revenue, so that savings in one bucket are not paid for in another.
- Report cash-to-cash, not just inventory. Inventory days plus receivable days minus payable days is the time the company finances its own operations.
- Show the price of a point. Next to each metric, what one unit of improvement is worth in EBIT or cash. It is the bridge between the operations review and the budget.
- Keep the forty indicators, one level down. They are the diagnostic tree under each executive number, used to explain movements, not to fill the board pack.
Bartor S.
Founder
