Visibility on Visibility

The ROI Question

Probably the most asked question about supply chin visibility is how it is defined, but then very quickly people want to know what is the visibility Return on Investment, or ROI.  My response would be that excellence in visibility should result in direct financial impacts (hopefully with a payback due to increased revenue, reduced expenses, or reduced assets) and that visibility strengthens the critical service capabilities within a supply chain. Specifically, visibility should make supply chains more agile, resilient, reliable, and responsive. All these benefits should be measurable, some to a fairly high degree of precision. That is to say, excellence in supply chain visibility should result in measurable improvement to service capabilities and usually to financial results. For a more complete discussion on this, see my article on the visibility framework.

Measuring the ROI

Aside from the strategic question of selecting metrics and assigning responsibilities for ensuring metrics are well reported, there is a question of “what” reports on visibility performance. Business intelligence applications, executive dashboards, distributed reports, etc. are all good tools to monitor and publish visibility impact metrics.

Can the visibility practice be self-aware?

It is a good idea for visibility practices to measure their internal bias, accuracy, timeliness etc. This is about strengthening the quality of the intelligence derived from visibility, and its integration into decision making (see the post on Visibility Effectiveness Framework).  But these kinds of metrics are internal to the visibility practice; they don’t measure the practice as a whole. So someone is always going to eventually ask, “should the visibility practice be responsible for reporting on the performance of the visibility practice?”. In other words, should distributing the top-line results of the visibility practice be part of the visibility practice’s mission. There are definitely a few catch-22s built into the question:

  1. Can trust be established when you have a process, team, or application monitor itself? Trust is important for many reasons, but to stay directly on-topic I’d refer to the Visibility Effectiveness Framework, and specifically to the Decision Interruption component of effective visibility. Will business decision makers allow their decisions to be altered by a process, team, or application that is not independently assessed for its performance? Probably not…
  2. Because the process is circular, there will be some amount of visibility practice which is not being scorecarded. For example, if the visibility practice is judged by how well it delivers scorecards, then its current scorecard has to at least have a time-delay embedded. More likely, the entire reporting function is, itself, not being reported on.

Monday Morning Suggestions…

As always, I try to end posts by going back to the ways supply chain leaders can use this information on Monday-morning in the office. Here would be my suggested points to incorporate into your management of supply chain visibility…

  • Visibility practices can and should be measured for their impact on the supply chain’s effectiveness. That includes financial and service capabilities.
  • A number of methods and applications can be used to do pre-and-post, or ongoing visibility initiative impact reporting. These range from periodic analysis with ad-hoc tools to full business intelligence coverage.
  • Putting metrics of bias, timeliness, accuracy, etc. into visibility is an excellent idea. But these metrics are focused on visibility data and intelligence, not on the top-line impacts from visibility for the supply chain as a whole.
  • Using the visibility solution to distribute metrics on top-line visibility performance is okay, so long as:
    • The scorecarding is done by an outside process, team, or application with independence from the visibility process
    • The act of distributing the scorecarding is cut-out from how the visibility solution is being measured, probably by being returned to the process, team, or application which creates the scorecarding.
    • There is sufficient sensitivity among supply chain leaders to potential erosions of trust in the results, based on perceptions of collusion or lack of independent oversight.

 

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