If you ask a supply chain leader how they impact their company’s performance, the response is almost muscle memory, ‘reduce cost and inventory while improving service.’ If you ask the same leader how they impact shareholder value, there is often a long pause.
To shed some light on the subject, the APICS Supply Chain Council conducted a live poll during its jointly hosted Best of the Best S&OP Conference in June. Two poll questions were developed to examine attendee perception regarding shareholder value. Almost two-thirds of the respondents reported that they had some form of supply chain scorecard. Conversely, only three-percent reported that they linked supply chain performance to shareholder metrics.
This dialogue with supply chain leaders has sparked a number of research questions, especially in light of the fact that supply chain executives share a seat in the C-suite, including:
1. What are the key shareholder metrics that matter?
For a publicly traded company the ultimate measure is earnings per share or stock price. For privately held companies, the focus tends to be on the attributes that relate to earnings per share: growth, profit, and return.
2. What are the supply chain performance levers that intentionally add to shareholder value?
The Growth attribute is the conundrum that keeps supply chain leaders up at night. Traditionally, the assumption was that great service level, including both lead-time and reliability, didn’t lose sales and potentially helped grow share of customer’s ‘shelf space’ by having predictable availability.
3. How does that affect your supply chain strategy?
The correlation between supply chain excellence and earnings per share certainly is intuitive, but there is data to suggest that even the best supply chain companies still are not maximizing potential shareholder value.
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