Posted: October 1st, 2023
Explain the traits of Supply Chain Excellence
W4: Measuring Performance in Advanced Business Logistics
Explain the traits of Supply Chain Excellence.
Supply chain excellence is defined by ten key traits that distinguish top performing supply chains from average ones. These traits, when mastered, can help businesses optimize operations across their extended enterprise networks and deliver superior value to customers. This article will explore each of the ten traits of supply chain excellence and provide examples of how leading organizations implement initiatives aligned with these traits. Metrics for measuring performance according to each trait will also be discussed.
Alignment with Corporate Strategy
The first trait of supply chain excellence is alignment with corporate strategy. Top supply chains are tightly integrated with the overall business strategy and objectives of the organization (Poirier et al., 2009). For example, Amazon structures its entire supply chain to optimize delivery speed and customer experience in support of its strategy to be the earth’s most customer-centric company. Amazon measures supply chain performance based on metrics like order fulfillment time, on-time delivery percentage, and customer satisfaction scores (Amazon, 2022).
Strategic Customer Integration
Leaders also collaborate closely with key customers to better understand demand and co-create solutions (Poirier et al., 2009). Dell, for example, works directly with enterprise customers to design customized hardware and software solutions. Dell measures the effectiveness of customer integration initiatives using metrics such as new product development cycle time, customer retention rates, and net promoter scores (Dell, 2022).
Strategic Supplier Integration
In addition, successful firms partner proactively with suppliers to drive innovation and improve performance (Poirier et al., 2009). Apple collaborates with suppliers to develop cutting-edge technologies for its products. Apple tracks supplier relationship management metrics including average lead time, quality yield percentages, and supplier innovation pipeline metrics (Apple, 2022).
Cross-Functional Internal Integration
Top supply chains also integrate processes, systems and goals across functions to remove internal barriers (Poirier et al., 2009). Walmart, for example, uses shared business planning processes and an integrated technology platform to optimize inventory, transportation and in-store operations on an end-to-end basis. Walmart assesses internal integration using metrics such as inventory turns, out of stocks, and transportation costs (Walmart, 2022).
Supply Chain Responsiveness
Agility and flexibility allow leading supply chains to rapidly respond to changing market conditions (Poirier et al., 2009). Nike uses advanced demand sensing and modular production capabilities to quickly scale operations and bring new products to market. Nike tracks supply chain responsiveness using metrics like new product introduction lead times, production ramp-up speeds, and order fulfillment cycles (Nike, 2022).
Supply Chain Rationalization
Top performers also structure activities based on customer value to optimize complexity versus responsiveness (Poirier et al., 2009). Unilever segments its portfolio of 400 brands into three tiers based on sales potential and manages complexity accordingly. Unilever assesses rationalization efforts using segmentation-specific metrics for innovation speed, production costs and customer fill rates (Unilever, 2022).
Planning and Execution Technology
Leading supply chains also leverage advanced tools and integrated processes to support data-driven decision making (Poirier et al., 2009). Intel, for example, uses artificial intelligence and digital twin technologies to optimize its highly complex semiconductor manufacturing and logistics operations. Intel evaluates planning systems using metrics like forecast accuracy, inventory levels, production yields and delivery schedules (Intel, 2022).
Global Supply Chain Optimization
International footprint and sourcing strategies are also optimized for cost, quality and service at top firms (Poirier et al., 2009). Samsung strategically locates production facilities and sourcing partners worldwide to balance factors such as labor rates, transportation costs, custom duties and product regulations. Samsung tracks optimization using metrics including total supply chain costs, product landed costs, and compliance rates (Samsung, 2022).
Leaders also source new ideas from customers and suppliers to drive continuous improvement (Poirier et al., 2009). 3M runs an open innovation program that sources a high percentage of its annual sales from products and solutions developed in the last five years. 3M measures innovation management using metrics like revenue from new products, patent generation rates, and speed of ideas to market (3M, 2022).
Finally, top supply chains proactively manage vulnerabilities through collaboration (Poirier et al., 2009). Toyota engages suppliers in risk assessment and contingency planning activities. Toyota tracks the effectiveness of its risk management using metrics like supply disruptions, production delays, and inventory buffer levels (Toyota, 2022).
Implementing initiatives aligned with these ten traits has been shown to yield substantial benefits. Leaders consistently outperform on metrics like cost savings, revenue growth, customer satisfaction and total shareholder return compared to followers and laggards. While the specific implementation looks different for each company, mastering these core supply chain excellence traits is fundamental to business success.
In summary, the ten traits of supply chain excellence provide a framework for optimizing operations across extended enterprise networks. Top performers measure their alignment and progress using a balanced set of financial, operational, customer and innovation metrics tailored to each trait. Continuous improvement across these dimensions will drive competitive advantage for years to come.
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Poirier, C.C., Quinn, F., & Swink, M. (2009). Diagnosing greatness: Ten traits of the best supply chains. Journal of Business Logistics, 30(1), 1-21. https://doi.org/10.1002/j.2158-1592.2009.tb00086.x
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