Part V: How to climb up the Flow Metrics maturity ladder
How to implement Flow Metrics? Flow Metrics must be developed taking all relevant levels and interdependencies into account. CAMELOT identified five maturity levels of supply chain performance management: From basic cost-centric to flow-centric metrics within a Demand-Driven environment (Fig. 1).
Figure 1: Flow Metrics Maturity Model
Depending on the current maturity of supply chain performance management, several development steps towards “Demand-Driven Flow Metrics Excellence” are recommended.
Step 1 covers the introduction of Flow Metrics (incl. required mind change) coming from a traditional (cost-centric) supply chain performance management. This means a real paradigm change and therefore comprises significant training and enablement efforts besides the definition of the Flow Metrics system.
In step 2, the objective is the development of Flow Metrics within a Demand-Driven setup, as actual demand is the most relevant information in the short time range avoiding planning mistakes due to forecast errors. The basic “thoughtware” should already be available in the organization, the focus is on the introduction of real Demand-Driven KPIs and dedicated change management. It begins with operational Flow Metrics followed by tactical ones to gather relevant information that is needed to control the supply chain processes.
Step 3 is about going the last steps towards Demand-Driven Flow Metrics excellence with a strong focus on improvements besides further developing the tactical and strategic perspective of Demand-Driven Flow Metrics. There is a need to reconcile the information of the different ranges in a constant bi‐directional and iterative fashion in order to drive adaptation and improvement.
To reach step 1, the definition and introduction of a Flow Metrics framework, a five-phases project approach, is recommended. Figure 2 describes the main approaches of these phases.
Figure 2: Introducing Flow Metrics – key phases
Phase 1 “Establish Flow-centric view”: As a basis for the development of company-specific Flow Metrics, the strategy has to be broken down into non-conflicting objectives. Flow Metrics that drive those objectives and target values are defined with the help of the Flow Metrics catalog developed by CAMELOT. The influence of existing and possible new decoupling points are simulated and evaluated using the defined Flow Metrics until an optimal setup of stock, time, capacity buffers and control points has been created.
Phase 2 “Framework implementation”: To implement a Flow Metrics framework, either a greenfield or a brownfield approach can be used. Performance indicators must cover multiple strategic dimensions, enable the desired behavior and culture and be selected in accordance to defined criteria. A detailed presentation of the Flow Metrics building blocks can be found in my article “Implementing Flow Metrics – the Flow Metrics building blocks”.
Once targets are set, they need to be measured, reviewed and kept up-to-date. CAMELOT provides best practice work flows for the definition, implementation and review process for Flow Metrics. To review processes, data needs and availability as well as to define IT system requirements and capabilities, CAMELOT uses a structured approach to develop a meaningful benefit and cost estimation, providing a roadmap and management recommendations.
Change Management and communication measures will establish a common mindset among stakeholders and within the organization. The impact of changes on organization, people, processes and technology is assessed and communication strategies and plans are derived accordingly. The training empowers users to run successfully through the change.
Phase 3 “Process & IT implementation”: To fully leverage the power of Flow Metrics, the IT-related implementation including IT systems and data topics need to be ensured: First of all, the technical setup (infrastructure and systems) are configured and/or customized. In the following data setup, required master data are imported and -if necessary- cleaned. The third step is the test & training where functional and non-functional requirements are tested, a user acceptance test is conducted, end users are trained, and a trial run is made. After successful completion, the system is set live and handed over from the project team to the IT operations. After the go-live, system operations are monitored, maintained, and supported.
We can conclude this series of Flow Metric blog posts with the realization that companies face diverse challenges in today’s volatile environment which are impossible to meet, if individual departments do not pull together instead of striving for silo optimization. The change to a flow-based culture is a path that is worth travelling.
Further articles of this blog series:
Part I: When supply chain performance indicators lead into the wrong direction
Part II: The right direction of performance management – Flow Metrics
Part III: Supply chain performance management with Flow Metrics
Part IV: Implementing Flow Metrics – the Flow Metrics building blocks
