"Why Companies Flunk Supply-Chain 101: Only 33 Percent Correctly Measure Supply-Chain Performance; Few Use the Right Incentives"

Miles Cook and Russ Hagey

Journal of Business Strategy

2003, Vol. 24, No. 4, pp. 35-42

Research by Bain and Company has identified four major reasons why companies are not doing well on supply chain basics:

1. Most companies are hazy about their supply-chain performance—"Only 15 percent say they have full information on what's happening in their own companies…Even among companies that say supply-chain improvement is a priority, slightly less than two-thirds say they have got all the necessary information"
2. Too many companies are supply-chain introverts—"In other words, many companies fail to adequately recognize that the supply chain extends far forward to customers, and back, to suppliers and their suppliers"
3. Incentives do not tie to supply-chain improvements—"Only two out of five respondents said their companies use pay-for-performance rewards to motivate their supply-chain executives...But even those doing so often make the mistake of using the wrong targets. Almost 80 percent of those incentives fail to take into account customer feedback and vendor results"
4. There is still a bias toward quick IT fixes—"Businesses too often rely on sophisticated software to solve their supply-chain problems. And most of them turn their inventories no faster than they did a decade ago."

The authors provide five fundamentals to shore up supply-chains and begin to see bottom-line benefits:

1. Get the strategy right first
2. Put star players on the problem
3. Replace hunches with metrics
4. Reach past your four walls
5. Realize that not all parts are created equal

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