How Digital Frameworks Will Help Fix the Supply Chain Crisis
The costs of the supply chain mess in the last two years have been staggering. Apart from the empty shelves of items like baby formula, consumers have had to pay a premium for cars and sometimes take the delivery of cars without certain parts and accessories. We've all read about the large number of ships waiting outside Los Angeles filled with containers waiting to be offloaded. Just as things were settling down, the Ukraine war has thrown another spanner in the works. While many of these reasons are outside the control of any company, the response of different companies in the same sector have been different. Some have been able to be more agile and better manage their risks and come out stronger than their competitors.
The Problem of Silos and Lack of Alignment
Many companies have highly competent people and teams in various departments that constitute the supply chain — sourcing, production, logistics, demand planning, warehousing and transportation. But they often work in silos and may not have knowledge of the goals of the organization and the big picture. This is because they may not have access to the goals and priorities of the overall organization and other departments, and may not be aware about how their work contributes to the organization's goals.
What Are OKRs and How Can They Help Supply Chain Organizations?
OKR is a goal management system used by teams, large and small, to collaborate and achieve stretch goals through a framework that requires regular check-ins, feedback, continuous learning, collaboration and problem solving. Objectives (the O in OKR) are qualitative, inspirational, time-bound (typically in a quarter) goals to be executed by a team (say, logistics):
For the shipping department:
Objective: Make dramatic improvement in delivery time for customers.
This makes for a good OKR objective because there's a clear goal that teams can strive towards.
Key results (KR), on the other hand, quantify the OKR’s objective and break it down to specific metrics that can be used to measure the achievement of the objective.
- KR 1: Increase on-time shipping rate from 87 percent to 95 percent.
- KR2: Improve shipping accuracy from 98 percent to 99.9 percent.
Now, we can look at a similar OKR for the warehousing department:
Objective: Improve warehousing operations. This objective is measured by the key results stated below:
- KR1: Improve Inventory accuracy from 98 percent to 99.9 percent.
- KR2: Increase picking accuracy from 99 percent to 99.9 percent.
Similarly, at a higher level the supply chain department may have OKRs related to customer satisfaction, operational efficiency, cost management, etc.
Using OKRs and a good tool that makes it easy for every department to know the goals of the organization along with the goals of other departments. This can improve transparency and alignment. Even in the above example, unless warehousing improves "picking accuracy” and “inventory accuracy,” it may impact the shipping department’s OKRs. So the dependencies between the various departments are also well established.
Similarly, a supply chain department can choose to have OKRs for all the important departments — production, warehousing, shipping, demand planning, technology, etc., and clearly define how they're aligned to each other and the company-level OKRs. Executing the goals of organizations through the OKR framework and a good cloud-based digital tool can improve alignment and help the entire supply chain become more agile and execute better.
As part of digitalization of the supply chain there are many promising technologies that add value to the various parts of a supply chain — Internet of Things (IoT), artificial intelligence, machine learning, 3D printing, big data, robotics, and last-mile delivery solutions. While all these technologies are great for “optimization” of certain specific parts of the supply chain, it's important to use a framework like OKR to manage the supply chain in a holistic manner. There are several progressive organizations that are beginning to use OKRs for managing their supply chain and seeing tremendous success.
Senthil Rajagopalan is the president and COO at Profit.co, a San Francisco Bay area-based SaaS startup that helps companies improve their goal management and execution through its industry leading offering software.
Related story: The Path to Recovery for Broken Apparel Supply Chains
Senthil Rajagopalan is the president & COO at Profit.co, a San Francisco Bay Area-based SaaS startup that helps companies improve their goal management and execution through their industry leading offering software. Senthil is responsible for marketing, sales & customer success at Profit.co. He has nearly 25 years of experience in technology and consulting, including 12 years working with enterprise customers in North America. He has been in B2B SaaS for the past 10 years, co-founding a startup in Bangalore, India. He is an OKR lead coach and a certified agile coach and spends 50 percent of his time with customers helping them with their goal management (OKRs) and performance management initiatives. To learn more, visit https://www.profit.co/.