Managing Supply Chain Presentation

8/13/2019 Managing Supply Chain Presentation

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WHAT ABOUT MEASURING SUPPLYCHAIN PERFORMANCE


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Ingredients for measuring on

going performance

Continuous improvement in an

organization relies on measuring,

measuring and measuring again

Organization should choose a limited

number of metrics and align executiveto management- level measures


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Historical background

Using measurements to support

manufacturing operations has its root

back to late 19thand 20thcentury

espoused by Frederick W. Taylor

Running the business by stop watch

Over the time exaggerated types ofmonitor and control methods were

replaced by a focus on a measuring

business performance rather than that

of individual


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Following Questions are

addressed

Why is performance measurement important?

What general approaches are available to measure

supply chains?

What advice can be followed when selectingperformance measures?

What methods are available for setting performance

targets?

What are application vendors doing to supportsupply chain performance measurement?

How should a company get started


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Why is performance

measurement important?

Measurement is important as it affects the behavior

that impacts supply chain performance

The importance of using measures to help ensure

that a supply chain is performing well can be

illustrated by anecdotal story

Driving a supply chain based on after the fact

measures, like loosing an important customer or

having poor financial performance is not very

effective


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What general approaches are available

to measure supply chains

Traditionally, companies have tracked performance

based largely on financial accounting principles

These measures tend to be historically oriented

and not focused on providing a forward lookingperspective

These measures do not directly tie to operational

effectiveness and efficiency

Balanced score card Supply chain councils score model

Logistics score board

Activity based costing

Economic value analysis


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Balanced score Card

Recommends the use of executive information

systems. That track a limited number of balanced

metrics that are closely aligned to strategic

objectives

Financial perspective ( Cost of manufacturing and

cost of warehousing)

Customer perspective( On time delivery and order

fill rate)

Internal business perspective( manufacturing

adherence to plan and forecasting errors)

Innovative and learning perspective( APICS-

Certified employees and new product development

cycle time)


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Supply chain Councils

SCOR Model

Cycle time metrics( Production cycle time and cash

to cash cycle)

Cost metrics( Cost per shipment and Cost per ware

house pick) Service/ Quality metrics( On time shipment and

defective products)

Asset metrics( Inventories)


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Logistics Score Board

Logistics Productivity measures(Orders shipped per

hour and transport container utilization)

Logistics Financial Performance( Expenses and

Return on assets) Logistics quality measures( inventory accuracy and

shipment damage)

Logistics cycle time( in-transit time and order entry

time) Applications

TCS and DHL etc


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Others

Activity Based CostingMethod involves breaking down activities into

individual tasks or cost drivers, while estimating the

resources ( time and cost) for each one. Costs areallocated based on these cost drivers.

Economic value addedFinancial analysts advocate estimating a

companys return on capital or economic value

added. These are based on premise that share

holder value is increased when company earns

more than its cost of capital


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What advice can be followed when

selecting measures?

Approaches described above, Provide less help in

assessing specific metrics to be used

Measures should be aligned to strategic objectives

Functional excellence Enterprise wide integration

Extended enterprise integration

Do not focus only on Function based measures

Align Executive to Management level measures


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What methods are available for

setting Performance targets

Historically Based targets

External Benchmarks

Internal Benchmarks

Theoretical targets


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What are application vendors doing

to support Supply chain Performance

measurement

APS ( Advanced planning and scheduling)

applications focus on the future rarely concerned

with what went on in the past

Traditionally SCM application vendors havefocused their development efforts on enabling

planning, scheduling and execution, targeted

towards supporting decision making, not tracking

historical performance

VIT, which offers the See Chain software

application suite that consists of 5 modules:

Demand accuracy, Raw materials, Production

Performance, Finished goods and Fulfillment


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Contd Some ERP vendors also offering SCM functionality

have put more focus on historical performance

measurement

SAP( Walldorf , Germany) has been offering a

logistics-related performance reporting product

Oracle a data base vendor that has always

provided some performance measurement

functionality, has plan to expand it. Similar to SAP,

it will offer ABC Costing functionality, having

recently purchased Price Water house-CoopersLLPS


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How Should A Company Get Started

Have Executive articulate the strategic Supply

Chain vision and Company Objectives

Define Executive level measures for each objective

for their scorecard Establish Managerial level objectives and measures

that align to the executive level ones

Identify Supply Chain initiatives that specifically

address the executive and managerialperformance improvement objectives


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Contd

Establish targets for all metrics defined, using a

combination of historical performance,

external/internal benchmarks and theoretical

estimates

Implement new initiatives in concert with a formal

measurement system to keep track of performance

improvement over time


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Managing Supply Chain Presentation

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