This holiday, consider giving your supply chain a gift. We suggest giving it an asset you probably already own: insight from customer scorecards. It?s the gift that keeps on giving. Consider that companies that are better at demand sensing and new product launches actively use customer scorecards in supply chain initiatives.

AMR Research?s recent survey of more than 300 North American supply chains found that only 22% were actively using supply chain scorecards to define supply chain objectives and metrics. In strategy days with manufacturers and distributors, we see even lower numbers. Of the 25 strategy days completed in the past six months, only one company was using customer scorecards to define supply chain success. In most companies, we see customer scorecards are buried in the sales organization.

Why do customer scorecards matter?
The focus on outside-in measurements is a critical step in the journey to becoming demand driven. This step helps move companies from Stage 2 to Stage 3 in the Demand-Driven Supply Network (DDSN) model (see ?DDSN Diagnostic? to determine the stage in which you reside).

Without this focus on the customer, organizations cannot migrate from functional excellence to embracing key cross-functional DDSN processes, including shared services procurement, new product launch, sales and operations planning, or projects on determining the cost to serve.

How do customer scorecards affect financial performance?
The survey shows a strong correlation between the use of customer scorecards on new product introduction success and decreasing the latency on demand sensing (see Table 1). Note that the level of customer scorecard use matters: When the scorecards have cursory use?that is, only reviewed by account teams and not widely used throughout the organization?there is minimal impact.

Here are three things that can be done now to ensure a happy 2006 for your supply chain:

Use scorecards to break down organizational boundaries.
One vice president that we work with in the AMR Research Supply Chain Top 25 has attempted to get customer scorecards into supply chain processes for more than a year and half. What?s the problem? In this case, the sales organization just does not understand why the supply chain needs it. The sales team thinks that the data only applies to sales. Use the data in this article to make a case for open scorecard sharing.

In 2006, move to outside-in measurement systems.
In setting cross-functional goals, align bonus incentives with customer scorecard improvements. Measure progress monthly and celebrate success.

Monitor program success based on scorecard improvement.
Cross-functional processes accelerate when they are aligned with customer scorecards. Use customer scorecards as the guiding force in determining success in cross-functional processes.

Source: AMR Research

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