scm9 perform ace measurement

8/9/2019 SCM9 Perform Ace Measurement

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PERFORMANCE

MEASUREMENT ALONG

THE SUPPLY CHAIN


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Introduction

You cant improve what you dont measure

Companies using performance measurement are

more likely to achieve leadership positions &

twice as likely to handle a major change

successfully.

Performance measurements vary from company

to company.

World-class status may initially cost more.

Adding several tiers of suppliers & customers

complicates performance measurement.

Performance measures must be visible &

communicated to all members of the SC.


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Performance measurement system

(PMS): Desirable Features

Transparent

Simple

self-regulating

Objective

Motivating and stimulating to all

stakeholders


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Viewing the SC as a

Competitive Weapon

Understanding End Customers

Supply chains need to look at each segment of

the market they serve & determine the needs

of those customers. Variety of products required

Quantity & delivery frequency needed

Service level desired

Product quality desired

Price of the products


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Viewing the SC as a

Competitive Weapon (Cont.)

Understanding SC Partner

Requirements

Supply chain strategies must consider the

potential trade-offs existing between: Cost

Quality

Quantity

Service


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Viewing the SC as a

Competitive Weapon (Cont.)

Adjusting SC Member Capabilities

SC members audit their capabilities &

partners to determine consistency with

needs of end customers & SC. Firms & their partners must continually

reassess performance with respect to

requirements.

The best SC performers are moreresponsive to customer needs, quicker to

anticipate changes in the markets, &

control costs much better.


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Traditional Performance

Measures

Traditional Performance Measures

Traditional cost-based information does not

reflect the underlying performance of an

organizations productive systems; costs &profits can be hidden or manipulated.

Decisions to maximize current stock prices

do not necessarily reflect that the firm is

performing well.

Financial performance measures, while

important, cannot adequately capture a

firms ability to excel in these areas.


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Measures (Cont.)

Use of Organization Costs, Revenue,

& Profitability Measures

Problems associated with using costs & profits

to gauge performance: Uncontrollable environmental forces (e.g.,

windfall profits that occur when prices rise

due to supply interruptions)

Accurate attribution of cost, revenue, orprofit contributions to the various

functional or business units


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Measures (Cont.)

Use of Performance Standards &

Variances

Establishing standards for comparison purposes

can be troublesome. Employees & managers do whatever it takes to

reach the goal

Shoddy work & Cooking the books.

Performance variance- the difference between

the standard & actual performance.

Managers can be pressured to find ways to make up

these variances, resulting in poor decisions.


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Measures (Cont.)

Use of Firm-Wide Productivity &

Utilization Measures

These measures are useful but have the same

problems as revenues, costs, & profits. Productivity decisions may actually increase costs

& reduce quality.

Tendency to continue producing & adding to

inventory to keep machines & people busy.

Less time is spent doing preventive maintenance &training for greater performance & profits in future.

Traditional measures favor the short-term.


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World-Class Performance

Measurement Systems

Developing World Class PerformanceMeasures

Identify the firms strategic objectives.

Develop an understanding of each functional areas

role & the required capabilities. Identify internal & external trends likely to affect the

firm & its performance over time.

For each functional area, develop performancemeasures that describe each areas capabilities.

Document current performance measures & identify

changes that must be implemented. Assure the compatibility & strategic focus of theperformance measures to be used.

Implement the new performance system.

Periodically reevaluate the firms performancemeasurement system.


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SC Performance

Measurement Systems

Performance measurement systems must:

Link SC trading partners to achieve breakthrough

performance in satisfying the end users.

Overlay the entire supply chain to assure that all

contribute to supply chain strategy.

In a successful chain, members jointly agree on

a SC performance measurement system.

Demand driven supply networks are supply

chains with enough flexibility to quickly respondto changes in the marketplace


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SC Performance Meas.

Systems (Cont.)

Environmental sustainability- Addressing the need for protecting the environment &

reducing greenhouse gas emissions as well business

& consumer needs

Green supply chain management (GSCM)- Sharing of environmental responsibility along the SC

such that sound environmental practices predominate,

& adverse global environmental effects are minimized.

Carbon footprint- Supply chains evaluate design configurations and

various options for reducing total carbon emissions


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SC Performance Meas.

Systems (Cont.)

Supply Chain Performance Measures1. Total SCM costs: cost to process orders; purchase &

manage inventories; & information systems.

2. SC cash-to-cash cycle time:Avg. # of days between

paying for materials & getting paid by SC partners.3. SC production flexibility: avg. time required to provide

an unplanned 20% increase in production.

4. SC delivery performance: avg. % of orders filled byrequested delivery date.

5.

SC perfect order fulfillment performance: average%

oforders that arrive on time, complete, & undamaged.

6. Supply chain e-business performance: avg. % ofelectronic orders received for all SC members.

7. Supply Chain Environmental Performance:% of SCw/ISO14000 partners; avg. % env. goals met.


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The Balanced Scorecard

Developed by Kaplan & Norton to align an

organizations performance measures with

its strategic plan & goals. The BSC

framework consists of four perspectives:

Financial perspective

Internal business process perspective

Customer perspective

Learning & growth perspective

Also referred to as scorecarding


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Customer Perspective

Objectives Measures Targets

Internal Business Innovation and LearningObjectives Measures Targets Objectives Measures Targets

Financial PerspectiveObjectives Measures Targets

How do our

customers see

us?

How do we look

to

stakeholders?

What must

we excel at?

How can we

continue to

improve and

create value?

Visionand

Strategy

How do

customer see us?

How can we

continue to

improve and

create value

What must

we excel at?

How do we

Look to

shareholder?

Four Perspectives


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The Balanced Scorecard

(Cont.)

Web-Based Scorecards

Dashboards

Web-based software applications used to design

scorecards, which also link via the Web to a firms

enterprise software system.

Provide managers a way to see real-time

progress toward organizational milestones & help

to ensure that decisions remain in sync with the

firms overall strategies.


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How Does a Balanced ScorecardAssist in Strategy Implementation?

It enhances

accountability of

managers to achieve

transformation

targets

Making Strategy

Everybodys Job

STRATEGY

FormulateFormulate

ExecuteExecute

CommunicateCommunicateNavigateNavigate

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It helps gain

consensus and

ownershipIt translates

strategy into

operational

terms

Makingstrategy a

continuous

process


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Supply Chain Operations

Reference (SCOR) Model

Developed by the Supply-Chain Council for

SCM diagnostic benchmarking, & process

improvement. The SCOR model separates

supply chain operations into 5 process

categories:

Plan

Source

Make

Deliver

Return


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SCOR Model (Cont.)


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SCOR Model (Cont.)


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SCOR Model (Cont.)


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SCOR Model (Cont.)


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SCOR Model (Cont.)

Additions have been made to the SCOR

model

Original SCOR model did not address sales &

marketing processes, some aspects of service, &

support processes (i.e., HR & technology

development).

Customer Chain Operations Reference model (CCOR)

Defines the customer part of the SC as the

integration of Plan, Relate, Sell, Contract, Service,

& Enable processes.

Design Chain Operations Reference model (DCOR)

Defines the design portion of the SC as the

integration of Plan, Research, Design, Integrate,

Amend, & Enable processes.


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Remarks

PMS helps in assessing the

strength as well as identifying the

weak spots

It directs improvement process

It motivates variety of

stakeholders

Guides in implementing strategy

scm9 perform ace measurement

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