Supply Chain Performance Measurement

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Chapter 13

• Supply Chain Performance Measurement

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Learning Objectives - After reading this
chapter, you should be able to do the following

• Understand the scope and importance of
  performance measurement.
• Explain the characteristics of good performance
  measures.
• Discuss cost and service performance measurement
  and quantification.
• Understand transaction and revenue measurement
  and quantification.

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Learning Objectives

• Explain supply chain channel measurement.
• Discuss overall supply chain metrics.

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Logistics Profile Micros and MoreA
Final Sequel

• If you cant measure it, you cant manage it.
  Micros and More was uncertain if their recent
  gains were appropriate.
• Micros and More was unsure about where they are
  and where they have been this makes it
  difficult to evaluate performance.
• Developing a set of performance metrics will help
  Micros and More chart a course for the future and
  evaluate their performance along the way.

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Supply Chain Performance Measurement
Introduction

• The Micros and More logistics profile points out
  a very important issue for all organizations
  Each needs performance measurements or metrics.
• Achieving efficiency and effectiveness objectives
  requires a set of standards to compare to actual
  performance.
• These standards are called metrics.
  

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Dimensions of Performance Metrics

• Establishing appropriate metrics is a complex
  problem.
• Measuring inappropriate performance can lead to a
  company chasing the wrong goal.
• Metrics drive behavior --- what you measure is
  what you get.
• Logistics cost metrics should focus on the total
  supply chain, not on just one link.

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Figure 13-1Raising the Performance Bar
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Overview of Performance Measurement1

• Figure 13-2 contains a list of performance
  measures captured on a regular basis within
  companies.
• Knowing what metrics to use is a very important
  issue.
• Figure 13-3 provides some insight into the
  characteristics of good performance measures.

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Figure 13-2 Measures Captured on a Regular Basis
Within the Company
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Figure 13-3 Characteristics of Good Measures
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Other Useful Performance Guidelines2

• The metrics must be consistent with overall
  corporate strategy.
• The metrics must focus on customer needs and
  expectations.
• Prioritize your metrics.
• Focus upon processes not functions.

• Use a balanced approach in selecting and
  developing metrics.
• Precise cost measurement is an important aspect
  for gauging improvement.
• Use technology to enhance efficient performance
  measurement.

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On the Line Measuring Performance

• The current economic slowdown has sent many
  companies looking for ways to cut costs and
  improve productivity without increasing
  resources.
• By establishing performance metrics throughout
  the supply chain, companies are more likely to
  reach overall corporate goals.
• Systems such as KPIs, SCOR, and e-SCOR are being
  used to develop these metrics.

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Evolution of Metrics Utilization

• Most organizations go through several phases in
  the development of meaningful metrics
• Stage 1 awareness of the importance of
  using the appropriate metric
• Stage 2 developing the actual metric
• Stage 3 performance improvement
• Stage 4 integration internally and across
  the supply chain

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Performance Categories

• There are a number of approaches that can be used
  to classify performance metrics.
• The next two slides illustrate performance
  metrics
• Figure 13-4 identifies four principle process
  measure categories.
• Figure 13-5 shows various customer service
  metrics and how important they are to customers.

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Figure 13-4 Process Measure Categories
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Figure 13-5 Do Customers Use These Measures to
Evaluate Your Performance?
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Figure 13-6 Logistics Quantification Pyramid
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Another Approach to Metric Classification

• The next four slides demonstrate other approaches
  to metric classification
• Figures 13-7 and 13-8 illustrate for ABC Power
  Tools, cost and management of inventory metrics.
• Figure 13-9 shows basic logistics service outputs
  or service performance for metrics development.
• Figure 13-10 shows the results of a 1999 survey
  of the percentage of companies that measure
  performance of each of the five service outputs
  as well as the percentage that measures value.

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Figure 13-7 Distribution Inventory Costs
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Figure 13-8 Distribution Inventory Management
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Figure 13-9 Logistics Outputs That Influence
Customer Service
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Figure 13-10 Service Measurement
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Supply Chain Metrics

• Supply chain metrics are very different from
  traditional logistics metrics in that they
  measure inter-company performance rather than
  just internal performance.
• These measures of performance must be common
  across the firms in the supply chain to be
  meaningful.

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The Supply Chain Operations Reference (SCOR) Model

• This model was attempts to integrate well known
  concepts of process reengineering, benchmarking,
  and process measurement into a cross functional
  relationship by
• Capturing the as is state of a process and
  derive the to be future state (reengineering)
• Quantify the operational performance of similar
  companies and establish best of class
  performance (benchmarking) and,
• Characterize and describe the management
  processes that will result in best in class
  performance (best practice analysis).

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Figure 13-11 SCOR is Based on Five Distinct
Management Processes
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Chapter 13 Summary and Review Questions

• Students should review their knowledge of the
  chapter by checking out the Summary and Study
  Questions for Chapter 13.

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End of Chapter 13 Slides

• Supply Chain Performance Measurement