Supply Chain Metrics that Matter. Cecere Lora M.

cash to the corporation. The company was in a growth mode, and Joe wanted to deliver on the corporate strategy. As he spoke, the team in the room felt challenged, and a little resentful. Recently the company had experienced layoffs, and today they faced rising costs, increasing demand and supply volatility, and what they felt were ever-changing business priorities. It was hard for them to focus.

      As I looked around the room, the group seemed detached and dispassionate. They stared blankly forward into space, occasionally looking at their cellphones. It was as though they had been here before. It was a new inventory goal in the list of many management programs that were being developed without asking anybody about the feasibility of meeting the targets.

      I was the guest speaker. As I got up to present, the atmosphere was icy, and the team seemed broken. The mood was despondent. I ruefully went through my presentation, sharing stories and what I thought was my best research. It was difficult. As I made eye contact, I got a few laughs, but the mood was definitely down. As I finished I thought, What do I do now? Joe is one of my favorite clients. I have known him for years, and he is a great leader. How do I help him?

      As we took a break, I drew Joe aside, put a hand on his shoulder and carefully started a dialogue. I looked him in the eye and said, “How do you know that 77 fewer days is the right inventory target? I know that this is an important meeting for you, but why is this substantial inventory reduction so important for the business? Do you know that the group is struggling with this as a goal?”

      Joe returned my gaze and shrugged his shoulders as he said, “It just feels right. I want the team to have a stretch goal. Nothing is ever easy these days. As you know, the company is focused on growth right now. The reduction of inventory would give us dollars to reinvest in research and development (R&D). New products are essential to meeting our growth plan. R&D budgets are being slashed and it now costs us four times more to bring a new product to market than it did five years ago. No one has asked me to do this, but I think that it would help the company. I want to help.”

      “I know that actualizing the growth agenda is important to you, and no doubt about it, you are a good corporate citizen,” I said empathically. “But let's step back. Where are you now? How do you know what is possible? I am just worried about the reaction that I see from your team. They have not bought into the goal.”

      Joe's mind was cranking on overdrive as he responded, “We have been reducing inventory over the past couple of years, but have had a tough time sustaining it.” He then shook his head side to side as he said, “I know that this is a significant cut; however, when I set a stretch goal, I have such a good team that they are able to deliver. I believe in them, and they make things happen. But, to answer your question directly, no, we have not tested to see if this goal is feasible. My thought is that by setting a stretch goal, then the team can achieve it.”

      “Even so, Joe, I'm worried. How do you know if you can achieve this goal and maintain balance with your other metrics? You know that metrics are tightly interwoven as a complex system. Don't you think that there is a reason you haven't been able to sustain inventory levels before?” I asked quietly.

      “I know that we do not have a lot of time now, but I would like to know what you mean by balance. Your concept of a complex system intrigues me. Can we talk later? I would love to know more,” Joe said with great intensity.

      “Yes, we can talk later. But for now, let me give you a few thoughts. As you and I have discussed many times, the metrics in a company are tightly interrelated,” I continued. “There is an intrinsic relationship between cost, service, and inventory. Each organization has its own potential. I think that it makes sense to look at the metrics together as a system to see what this cut of inventory would impact. What do you think?”

      “These are all good points. We cut inventories drastically at the end of the recession and it severely impacted customer service. How do I better understand what is possible? What do we want to do today with the group? It appears that we are stuck.” he continued.

      “I am not sure,” I said. “Metrics systems need to be aligned. As a business leader, you are managing a complex system with increasing process complexity. There are finite trade-offs between metrics. Inventory is only one of the metrics in that complex system. I am worried about a goal to attack inventory in isolation. Your company is driving a growth strategy and 37 percent of your products are on product allocation. Demand is outstripping supply, and processes are unreliable. So, why did you pick inventory as the BHAG metric? Why not set a goal to reduce items on allocation as your BHAG for the New Year?

      “What if we work together to facilitate a group discussion to see what they think? With the current level of energy in the room, I think that we need to change the dynamic,” I continued, while quietly gesturing toward the group gathered over coffee. “Do you think that it would be possible to engage the group in a dialogue to see what they think of your BHAG?”

      “Whoa! So many tough questions all at once. The reduction of inventory just seems easier than tackling a broader goal. No doubt about it, process reliability has been a constant struggle for us. I am game to engage the group in a dialogue to get their thoughts, but I am not willing to change my business goal. My BHAG of 77 stands,” Joe said defiantly. “After all, this is a business, not a democracy.”

      Meet Joe

      To understand my interaction with Joe and his team on this crisp winter day, let me introduce Joe. Prior to this team meeting, I had worked with Joe Samparini as a member of a divisional leadership group. This was my first meeting with Joe's global team.

      I always enjoyed our interactions. He was full of energy and I was captivated by his infectious smile. At first glance, you'd think Joe was a newspaper reporter because of his slightly disheveled appearance, the dark five o'clock shadow on his jaw, and his loosened tie, rumpled white shirt, and rolled-up sleeves. With his low-key, understated ways, it was easy to take him for granted.

      He was a man of few words. Affable and curious, Joe got along with everyone, and people scrambled to be on his team. When tempers flared, he could diffuse anger with humor. It was his wit that set you back and let you laugh at the situation and humanize the people on the team. He was known as a great mentor, and as such it was hard for him to not have direct reports. In fact he was often advised by his human resources team to shed some direct reports and have the team report at multiple levels, but Joe loved people, and people loved Joe. So, currently, he had 40 direct reports. When he gathered the group together, they hung on his every word, and wanted to work hard. They did not want to tell him no. His team relished his smile, and loved to get a pat on the back from Joe when they had done a good job.

      He had a lean frame, and stood a bit more than six feet tall. You could tell he was used to being the tallest person in the room by the way he leaned forward when he talked to you. As he would bend down to shake your hand, a loose curl of his dark wavy hair would flop onto his forehead. His eyes were dark brown, and he had the kind of dark circles under them that proclaimed his Mediterranean ancestry. While some people with dark eyes have a sparkle in their eyes or suggest a deep mystery, Joe's eyes looked concerned and interested – he was always a good host.

      Joe grew up in a working-class family in Pittsburgh, Pennsylvania. His grandfather was a steel worker, and his grandmother worked in a sweatshop sewing coats. His father and his six uncles and aunts were raised by their eldest sister. Joe's father was raised with a strong work ethic, and by the time Joe came of age, the steel jobs were gone, but his father was a successful owner of an auto dealership. Everyone in Joe's father's family had prospered as the result of hard work and perseverance, defying multiple recessions. The family worked hard, helped others, and spent money conservatively.

      Like most of his cousins, Joe had the benefit of a college education. To Joe, the way to succeed was to devote your time and effort to making your employer successful. He was always looking for ways to help the company improve. This was his second company, after he had experienced a reduction in force in his prior manufacturing role just as his career was starting. He realized that the old, unwritten contract of mutual benefit between worker and company was no longer something that could be counted on, and Joe was intent on making himself so indispensable in this new job that he'd never be “downsized” again.

      He