Supply Chains: A Manager's Guide

Aligning Incentives

In sum, improving the performance of your supply chain involves using formal models to find the performance levels that maximize profit, setting objectives for moving toward these levels, and taking systematic measurements to track your progress. This picture of success is nearly complete, but there is still a large piece missing: motivating your people to achieve the objectives. As any experienced manager knows, it isn't enough to set objectives and exhort people to strive toward them. You have to provide incentives that reward people for making the right kinds of choices, and the incentives have to be powerful enough to produce significant changes in behavior.

To date, incentives have not been handled very well in supply ...