What’s the business value of using social media in supply chain management? How much money will we save? How much more productive will we be?

I get these questions all the time from supply chain executives, and the honest answer is that I really don’t know because very few companies are using social media technologies in supply chain applications, and even fewer are talking about their experience to date (one exception is TEVA Pharmaceuticals, which I highlighted last summer in “Want a Fast-Response Supply Chain? Facilitate People-to-People Communication”).

This inability to quantify the business value is one of the main reasons why companies aren’t using social media in supply chain management. It’s the classic chicken-and-egg problem: it’s hard to answer these questions until you actually start using social media to enable new supply chain processes, but it’s hard to get approval from upper management to start without having these answers.

(Note: When I talk about social media, I mean more than just Facebook, LinkedIn, and Twitter. My definition also includes “enterprise social software” — from best-of-breed providers, as well as existing enterprise vendors — that companies can deploy internally to facilitate communication and collaboration between employees, and with external partners, in a private and secure environment).

What I tell executives is to start small — and within their team. Define and execute a small-scale, low-risk project that uses social media to enhance the way team members communicate and collaborate with each other (for example, to solve problems, generate and prioritize continuous improvement ideas, or document and discuss action items that emerge from team meetings). I also tell them to encourage young professionals on their team to take a leadership role in finding opportunities to improve existing processes using social media and to train colleagues who are less experienced using these tools. Executives and their teams can then apply the experience and knowledge they gain at this stage to define and execute larger projects involving other functional groups, and ultimately, external partners like suppliers and customers.

But even with a small-scale project, the question remains: how do you measure the business value of using social media in supply chain management compared to the way you currently work? Asked differently, what metrics should you use to establish a baseline and track performance?

I plan to explore this question next month with executives attending “Coming to Your Supply Chain: Social Media,” a forum organized by The Center for Strategic Supply Leadership (A.T. Kearney and the Institute for Supply Management). I can’t wait to hear what ideas and comments come out of the workshop session I’m leading. But here’s what I’m thinking going in:

Exceptions are the norm in supply chain management (delayed shipments, supply shortages, unexpected demand spikes, and so on). Can social media technologies help you identify and resolve exceptions faster and more effectively than you can today? I believe so, especially since responding to exceptions often requires collaboration and communication between many different people, and existing approaches (back-and-forth emails, endless conference calls) are inefficient. And so I see metrics related to exception management as being particularly relevant.

Supply chain management is also about managing risks. And since risks are dynamic in nature, with new ones emerging all the time, companies must continuously study the landscape and determine which risks are worth addressing now and how. Can social media provide you with more timely and insightful insights about emerging risks and events, enabling you to take corrective action sooner and thus prevent (or minimize the impact of) a supply chain disruption? I believe so, and examples already exist.

According to an October 2011 Wall Street Journal article, “When Virginia’s magnitude 5.8 earthquake hit [in August 2011], the first Twitter reports sent from people at the epicenter began almost instantly at 1:51 p.m.—and reached New York about 40 seconds ahead of the quake’s first shock waves…The first terse tweets also outpaced the U.S. Geological Survey’s conventional seismometers, which normally can take from two to 20 minutes to generate an alert.” The article also highlights how researchers and firms are mining Twitter messages “to monitor political activity and employee morale, track outbreaks of flu and food poisoning, map fluctuations in moods around the world, predict box-office receipts for new movies, and get a jump on changes in the stock market.” Simply put, I believe social media will have a positive impact on metrics related to supply chain risk management.

(For related commentary, see “Lesson from Pink Slime Incident: Social Media is a Supply Chain Risk”).

Finally, can social media help companies generate more — and better — ideas for improving supply chain processes and solving existing problems by tapping the collective insights, knowledge, and expertise of employees across all levels of the enterprise (and beyond)? If companies are already using “crowdsourcing” to drive innovation in product development, why not apply the same concept to drive innovation in supply chain management? In short, I believe social media will also have a positive impact on metrics related to continuous improvement and the ongoing development and sharing of best practices.

Bottom line: When it comes to using social media in supply chain management, we’re still in the “early observer” stage. But it’s not too early to start thinking about metrics, and the thought process might actually lead you to the starting line.

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