HOW TO MEASURE SUPPLY CHAIN PERFORMANCE

32 | R i g h t S c o r e s ™ An annual volume resource requirements driver is chosen for each RightChain™ performance indicator. The driver is multiplied by the current performance to give the current resource requirements associated with the indicator. The next line is the RightChain™ performance target for that indicator. That is multiplied by the annual volume to give the RightChain™ resource requirement. The difference between the current resource requirement and the RightChain™ resource requirement is the resource savings. Those savings are multiplied by an annualization rate to give the annual savings associated with the gap closure. Those annual savings are summed for all indicators to provide an estimate of the annual financial benefit of the RightChain™ initiative. In addition, each annual savings figure is multiplied by a required payback period to provide an estimate of the justifiable investment in gap closures in that area. Those justifiable investments are summed across all indicators to provide an estimate of the justifiable investment available for the project. Supply Chain Development Planning In supply chain development planning we tie the justifiable investment to a schedule of strategic initiatives typically playing out over a period of six to twenty-four months. An example supply chain development plan completed for a large aerospace company is illustrated in Figure 2.x below.