When evaluating an organizationís supply chain acumen, I typically use a framework that is easy for me and executive managers to understand. I call it the PDQ or Performance Dynamics Quotient. An organizationís marketplace performance is heavily dependent upon its internal capabilities to respond to demand using its extended supply chain capabilities. The components of the PDQ are threefold:
a) Ability to focus on its strategic imperative
b) Alignment and synchronization across three dimensions
c) Responsiveness to marketplace dynamics
The Performance Dynamics Quotient
There isnít enough space in this newsletter to fully explain this concept, but here is a brief summary on the PDQ components:
a) An ability to focus on the strategic imperative Ė the entire organization must have a deep understanding of its strategic imperative, its components, relevance and priority. This requires a pre-designed set of agreements and instructions that evaluates the companyís most important customers and most important products based upon contribution to profit. Note that ďall customers may be created equal, but because of each customerís unique needs - not all customers contribute equally to your companyís bottom lineĒ. The same goes for products and the product offering, by market segment or channel. A third dimension to the strategic imperative is service strategy and the capability of an organization to differentiate services by market segment, channel and customer and structuring those services by a) customerís profit contribution, b) size of contribution and c) scope of contribution. Supply chain partnerships must ultimately be financial agreements with mutual and balanced (not necessarily equal) benefits to corresponding parties.
b) Alignment and synchronization are critical to performance. Alignment focuses on supply chain component capabilities to fulfill demand while synchronization focuses on the inter-relationship of those parts to perform in unison. These inter-relationships must be evaluated, a target for performance capabilities must be established and the scope and dependencies measured and monitored. Measurements must be accompanied by accountability and consequences in order to instill performance discipline in the supply chain system.
Responding to market changes in a harmonious manner allows the supply chain to take redundancies out and resulting in cost reductions. Cost will correspondingly increase in direct proportion to any gaps in synchronous performance. Example: demand decrease must be accompanied by corresponding forecast, production, inventory and supply changes (to mentioned only a few). This applies to both the companyís supply chain as well as the extended supply chain.
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