“What gets measured gets done”. That quote, attributed to Peter Drucker, captures a critical management principle. That statement is powerful in what it says.
Likewise, it’s also powerful in what it doesn’t say or in what it implies. For example, what doesn’t get measured doesn’t get done.
Both ideas are useful, as we enter a post-pandemic world.
They are significant because the world has changed. Thus your business must adapt to the new operating environment.
To change and adapt your business, you must relook the metrics you use to help manage
your business. Changing your metrics will help ensure your business measures what’s relevant.
Doing so will affect your competitive advantage in the short term. Longer term, it can affect your company’s survival in a post-pandemic world.
Operating in a World of Increased Uncertainty, Complexity and Volatility
Disruption has become the order of the day. The Coronacrisis, natural disasters, and ecommerce, have accelerated changes to supply chains.
Thus, supply changes must adapt or die. To adapt, you must understand the operating environment before and after Covid-19.
For starters, pre-Covid-19 sourcing was stable. Most trade centered on China and the EU. That simplified planning and execution. But the wholesale renegotiation of international trade agreements invited uncertainty, complexity, and volatility.
Another dominant factor introducing uncertainty, complexity and volatility, of course was Covid-19.
As the U.S. completed trade deals, some uncertainty subsided, but friction with China continued. This global chaos stressed supply chains were stressed. Global supply chains proved to be too rigid and too slow. We built supply chains for stability rather than agility.
To operate in the New Normal, supply chains must change. They needed to pivot, almost overnight. They had to shift from being slow and reactive to being fast and responsive.
Legacy supply chains focused on lean principles and cost efficiency. They had the luxury of long planning cycles. And they limited visibility to Tier 1 suppliers and viewed supply chains in a linear way.
The post-pandemic world looks quite different.
Today’s operating environment calls for agility and velocity in daily operations. During crises, it calls for resilience. Achieving agility, velocity, and resilience requires changes in what you measure.
Updating Metrics to Remain Relevant, Competitive, and Profitable
In a fast-paced, dynamic environment, you need to make better and faster decisions. That requires real-time data, relevant metrics, and dynamic reporting. It also calls for a balance between daily operations and long-term strategic goals.
To remain relevant, competitive, and profitable, you must balance immediate and long-term requirements. That places a premium on data and information to make sound, data-based decisions. To succeed, you need a first-rate data and analytics program.
In a post-pandemic world, the value of data and analytics is undisputable. Data-based decision making, by definition, relies on data and analytics. With that in mind, you must develop new metrics that answer new questions. A key question to consider revolves around reducing friction.
This brings us to continuous improvement. The New Normal will likely require continuous improvement efforts focused on dealing with uncertainty. One way to do that is to focus on reducing friction. That’s a shift from a deliberate focus on, say, reducing cycle times, stock-outs, and inventory turns.
Instead, reducing friction will identify new opportunities for improvement. By focusing on reducing friction, you can get at the “root cause” of a problem. In identifying root causes, opportunities for reducing friction will present themselves.
Also, you’ll also find opportunities to reduce costs and increase profits. Questions to ask are: 1) Where is the friction? 2) What should we do about it? 3) Where is it going wrong? 4) Where is it really going wrong? 5) What is the smallest viable change we can make? (Rethinking Work, Feb. 2017, Eric Termeunde)
This new perspective promotes the building of resilience into your supply chain. It does that by drilling down to the root cause and then resolving it. When you target your efforts to reduce friction, you’ll handle crises more easily.
That’s different from optimizing business processes for stable operations. Businesses that shift their data and analytics to reducing friction will beat their competition. That’s especially true when unexpected, adverse events occur.
Measuring What Matters Most by Taking a Customer-centric Approach
Before updating metrics, you should consider the backdrop for your data and analytics. Of course, speed is important, but not for speed’s sake. It’s important in meeting customers’ endless and increasing expectations. That means tailoring of services and products versus one-size-fits-all solutions.
To accommodate customers’ demands, supply chains must adapt. That is, supply chains must provide “always-on” responsive, sustainable, and affordable service. That contributes to the making of agile and resilient supply chains.
Customers want it all. They’re looking for value, which means you get more for your money. “Customer value strategies present products and services in a way that consumers realize they are immediately saving money or will be saving money in the long-term by working with your company.” (Chron, Customer Value Strategies)
Companies that can deliver increased value will see top line growth. So, increasing sales and revenues will depend on meeting customers’ needs. Accordingly, success in uncertain, complex, and volatile times, hinges on satisfying your customer.
Businesses that build data and analytics around the customer will gain strategic advantage. They’ll do so by excelling in any environment. They‘ll achieve that with customer-centric data and analytics that help reduce friction.
If there’s a golden nugget coming out of the pandemic, this is it. It’s the value of relationships. But we don’t have time to discuss that here. We’ll address this topic in depth in a future blog post.
Updating Your Metrics Strategically to Thrive in the New Normal
Competition in the world of logistics has always been challenging. Yet, today, competition is more challenging than ever.
Increased risk has made itself a part of daily operations. Risk is no longer an occasional occurrence. We can count on it.
More to the point, we find ourselves dealing with increased uncertainty and volatility. How we deal with that will determine whether our businesses survive or thrive.
By updating your metrics to adjust to performing in the New Normal, you can adapt and thrive. That means changing your focus to measure what matters – meeting your customers’ demands.
A new approach focused on resiliency and agility will help you compete in steady and shaky times. That’s where you’ll gain competitive advantage.
When faced with the increased risks of surviving in the New Normal, it may be better to seek a partner you can trust. There’s strength in numbers, so why go it alone?
Contact Terra Worldwide Logistics to learn how we can help you. We know and understand the obstacles you’ll face in measuring what needs to get done.
To start a conversation about how we can help you survive and thrive the New Normal, fill out this short form.