The Issue: Toyota recalls millions of vehicles. The recalls spread beyond the United States to Asia and Europe. Toyota suspends the sale and production of eight popular models. The company faces federal scrutiny.

The impact? Billions of dollars in lost sales and warranty costs, potential loss of entire markets and most importantly, a loss of reputation. For a company that built its reputation on quality and dependability, these recalls amount to existential uncertainty.

Market watchers and industry analysts can argue about what caused this crisis. Was it management's excessive focus on cost cutting? A change in sourcing strategies from dependable suppliers to unfamiliar, new ones? Or was it the desire for a rapid expansion to become the No. 1 automaker in the world? The reality is that the once-revered company is facing the biggest crisis since its inception. While there may be many causes leading to the crises, the deeper underlying issue is the disconnect between the company's strategy and execution which was caused by a dissonance between the performance metrics at the operational level and at the strategic level.

Toyota's story is symptomatic of the issues facing most large enterprises today. Companies with complex, global supply chains have limited visibility across their supply chain, which makes performance monitoring and management difficult. Often, a decision taken by one business unit can have a significant impact on the performance of the entire supply chain and the company overall. The situation is even more challenging because it is usually difficult to get to the root of the problem due to multiple disconnects at department and geographic levels.

Most companies have done a good job of establishing performance metrics at the operational and departmental level. However, they have done so in isolation with a view to improve the performance of individual processes. They continue to struggle with building and maintaining alignment between cross-departmental metrics and mapping those operational metrics to enterprise KPIs. This prevalence of conflicting metrics and KPIs across the supply chain causes sub-optimal and, at times, counterproductive decisions.

The problem is difficult but not unsolvable. Companies can go a long way toward weeding out inefficiencies and improving overall performance across the entire supply chain by focusing on three primary factors:

Measuring What Really Matters

A number of companies get caught in measuring just for the sake of measurement. Performance of each objective can be measured in multiple ways: by time dimension, by cost or by effectiveness. The result is too many meaningless and conflicting metrics that don't directly relate to the end objective.

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