Inside Logistics

BOOK REVIEW: Supply Chain and Strategy and Financial Metrics

Supply Chain and Strategy and Financial Metrics, By Bram DeSmet, published by KoganPage Limited, 2018. Approx. $45 + shipping


September 12, 2018
by Linda Craig

This is a resource book for those who are interested in improving the financial wellness of their organization as it relates to supply influences. It highlights that within an organization each functional area has its own goals, thus making it difficult to make joint choices.

The book hypothesizes that the 1990s-style two-dimensional review is not sufficient to determine what areas would move the organization forward. Thus, a multi dimensional review is suggested.

The author details three different measurement methodologies to help determine effectiveness and to fine tune company strategy. The first is a review of Supply Chain Triangle. This includes the factors influencing service, cost and cash. Measuring Service includes such items as target service levels, product portfolio scope, and order flexibility. Measuring Cost includes such influencers as logistics, warehousing, manufacturing and purchasing. Cash includes all contributions to working capital. Especially when times are bad, alignment of these three components is key.

The second model reviewed is Treacy and Wiersema’s three strategic options. It details what defines product leadership and customer intimacy, and to that end, the Supply Chain Triangle of service, cost and inventory. The triangle requires choices to be made to achieve that goal. For those that excel in cost, service and inventory basis, they have the status of operational excellence. This then relates to the ROCE (Return on Capital Employed), EBIT, and Fix Asset & Inventory Returns.

The third model follows Crawford and Mathews. In this model, there are five primary value drivers or attributes including price, product, access, service and experience. As such, they propose that you can dominate on one attribute, and differentiate on a second, and at best be on par for the the other three. Companies that try to dominate in more than one area run the risk of not achieving their organizational goals and not optimizing their financial outcome.

These methodologies are then related to the SCOR model. There is further review of how you can integrate the three methodologies to optimize that components based on your organization.

Beyond the methodologies, the author provides information on how to define metrics for the costs and capital employed, how to build the strategy-driven KPI dashboard and subsequently how to understand the impact of the dashboard.

For each of the three measurement methodologies, the book includes cases to demonstrate their application. The scope of cases includes international organizations, organizations with a variety of levels of maturity, product leading organizations, operational leading organizations and those organizations that value customer intimacy, including Barco, Casio, Food retail companies, Owens Corning, Henkel, Bekaert, and Johnson Controls. The author points out that although it is good to benchmark against one’s competitors, the comparison must begin with understanding the strategy the organization is employing.

The target audience for this book is Supply Chain Financial Managers and/or those who are responsible for implementing KPI reporting tools. I would recommend this book for those within those areas who have a good understanding of accounting basics and principles.

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Linda Craig CSCMP, CAE, MBA, is the managing partner of RSVP (Retention Strategy Value Partners) a strategic supply change innovation organization. Email Linda.