Executive Briefings

If It's Worth Doing, It's Worth Measuring

Companies large and small are gradually coming to recognize the important of measuring their supply-chain performance. But trust among partners is also a key factor in the effort, says Karl Manrodt, associate professor at Georgia Southern University.

Georgia Southern, in partnership with the University of Tennessee, has completed its 18th annual study on trends and issues in transportation and logistics. Manrodt says the results show how quickly a changing economy can affect companies of all sizes. The gap between them, he says, has narrowed significantly over the years.

Another trend identified by the study is the growing awareness by companies of the need for detailed metrics to track supply-chain performance. "What we're starting to see," says Manrodt, "is senior management ... trying to understand what those metrics are and should be." The desire to monitor one's own performance, so prevalent in school, never really goes away. At the same time, "it's important for us to communicate what's critical ... to customers and suppliers. Let's manage to that."

Much of the interest being shown in metrics today remains at the talking stage. But Manrodt sees the beginnings of action, as companies strive to learn how well-defined performance measures can be deployed throughout their organizations and with supply-chain partners as well.

The mere act of outsourcing logistics won't necessarily achieve a company's goal to become more efficient in its global operations. If logistics providers are compensated solely according to the work they do, they might be tempted to perform services that aren't needed. To counter that tendency, Manrodt suggests a concept he calls "vested outsourcing." It involves customer and third-party logistics provider working closely together toward common goals, in a never-ending search for ways to improve their shared supply chain. A far-seeing 3PL might even agree to tie its profit to the results it obtains on behalf of the customer. For its part, the customer agrees not to dictate the precise steps that the provider must follow as part of the engagement, caring only about results based on specific performance metrics.  In the process, the 3PL could reap even higher rewards down the line.

Such an approach remains rare in practice, of course, requiring an immense amount of trust among all players in the chain. And trust, says Manrodt, "is a scarce commodity today."

To view this video interview in its entirety, Click Here.

Georgia Southern, in partnership with the University of Tennessee, has completed its 18th annual study on trends and issues in transportation and logistics. Manrodt says the results show how quickly a changing economy can affect companies of all sizes. The gap between them, he says, has narrowed significantly over the years.

Another trend identified by the study is the growing awareness by companies of the need for detailed metrics to track supply-chain performance. "What we're starting to see," says Manrodt, "is senior management ... trying to understand what those metrics are and should be." The desire to monitor one's own performance, so prevalent in school, never really goes away. At the same time, "it's important for us to communicate what's critical ... to customers and suppliers. Let's manage to that."

Much of the interest being shown in metrics today remains at the talking stage. But Manrodt sees the beginnings of action, as companies strive to learn how well-defined performance measures can be deployed throughout their organizations and with supply-chain partners as well.

The mere act of outsourcing logistics won't necessarily achieve a company's goal to become more efficient in its global operations. If logistics providers are compensated solely according to the work they do, they might be tempted to perform services that aren't needed. To counter that tendency, Manrodt suggests a concept he calls "vested outsourcing." It involves customer and third-party logistics provider working closely together toward common goals, in a never-ending search for ways to improve their shared supply chain. A far-seeing 3PL might even agree to tie its profit to the results it obtains on behalf of the customer. For its part, the customer agrees not to dictate the precise steps that the provider must follow as part of the engagement, caring only about results based on specific performance metrics.  In the process, the 3PL could reap even higher rewards down the line.

Such an approach remains rare in practice, of course, requiring an immense amount of trust among all players in the chain. And trust, says Manrodt, "is a scarce commodity today."

To view this video interview in its entirety, Click Here.