Saturday, April 19, 2014

Thank you MMAM! (Math, Metrics, Analytics & Money) Part 1 (Math & Metrics)

The past few weeks have been very busy for me between teaching several Supply Chain/CSCP classes, taking a class myself, speaking to three classes at UIC, co-chairing the CSCMP Chicago Roundtable Spring Seminar, and attending the SCOPE Conference (and yes, work!)  A few concepts jumped out at me at these events and I want to share them.  I believe these are particularly important for emerging supply chain leaders.

The first concept is Math.  Supply Chain Managers (and Leaders) need to be comfortable with not just arithmetic but also more advanced mathematical functions.  Below is the Logistic function which is interpreted as the probability of the dependent variable being a 'success':

Supply Chain practicioners are often making decisions that don't involve binary outcomes (0/1, yes/no) but rather involve probabilities (possibly/possibly not).  We need to be comfortable with measures of risk and probability even if the calculations are done in 'black boxes' within Advanced Planning & Optimization engines or special software packages (and many would argue that we need to be even more so when 'black boxes' are involved!)  As a Supply Chain practicioner you need to be comfortable dealing with more than just 'business math'.

I've been working to become more adept in my own analysis and I am taking an EDx MOOC (Massively Open Online Course) through MITx entitled The Analytics Edge:

This course is an introduction to Analytics and machine learning techniques.  At work I frequently deal with large datasets (but not Big Data) and lead a small team that does some very good analysis - this often involves discussing different approaches to analysis or techniques to arrive at business results that can drive better decisions in the future.  However, it's been a long, long time since I've had to exercise my 'math' muscle.  I'm not saying that anything is coming back to me from freshman year Honors Calculus course at Northwestern but I am having to do some math that involves 'thinking' and it's been a lot of fun to learn some new Analytics tools.

Metrics is the second concept that jumped out at me numerous times over the past week.  At the CSCMP Spring Seminar Lora Cecere, the Founder and CEO of Supply Chain Insights presented her ideas on "Metrics That Matter".  Lora has a fantastic background in Manufacturing, Software, Supply Chain research and has held leadership roles at several large CPG companies; that has given her a unique perspective on supply chain and financial Metrics and how they are linked.  What I like most about Lora is that there are no sacred cows - she calls it like she sees it (or rather, what the data tells her) and her opinion is that most supply chains are failing at their mission.  Presentation at CSCMP Chicago Roundtable event on April 8, 2014 from Lora Cecere Supply Chain Insights:

Unfortunately many organizations presently have Metrics that incent behavior that we don't want.  As Lora mentions in her presentation, "A Supply Chain with Complex Processes with Increasing Complexity", it is increasingly complex to establish Metrics (natch!) that incent supply-chain appropriate behaviors.  Leaders within the organization must de-optimize operations within their silos and start partnering with other functional areas in the organization to optimize the overall system.  Without Metrics that drive that cross-functional behavior the organization will have suboptimal results.

Six days later at the SCOPE Conference attendees heard Daniel Myers, Executive VP of Global Integrated Supply Chain at Mondelez International speak about the transformation of the Supply Chain team at his organization.  Metrics that cascade through each level of the business from leadership through individual contributors are a key measurement of their success (or rather will be as they are still on the journey).

More to come on Analytics and Money in my next post!  Please share your comments regarding Math & Metrics below.