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Performance Measurement: Digital Camera Manufacturing Industry

Performance Measurement: Digital Camera Manufacturing Industry

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Published by Atiqah Ismail

Performance measurement and its importance within the high-tech, digital camera manufacturing industry, from the view of operations and supply chain management; emphasizing on the importance of evaluating supplier's performance.

Performance measurement and its importance within the high-tech, digital camera manufacturing industry, from the view of operations and supply chain management; emphasizing on the importance of evaluating supplier's performance.

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Published by: Atiqah Ismail on Feb 01, 2013
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2013 Supply Chain Management1Atiqah Ismail
Supplier Performance Measurement
Performance Measurement and Evaluation in the High-Tech Sector: Digital CameraManufacturing SectorPerformance measurement is the processes of quantifying the effectiveness and efficiency of action. The rationale underlying performance measurement is that, it is a form of a strategiccontrol system which can be used to influence behaviour. Performance measurement iscrucial for management and control. Control is achieved through performance measures andfeedback to stimulate and influence action. A well-designed performance measurementsystem should provide feedback.
 
 Importance of Measuring Performance
Every organisation needs some kind of measure to compare and contrast current performancewith previous performances, competitor performances or the industry standards, in order toimprove. Moreover, without performance measurement and evaluation, a firm will be in astate of oblivion, naive of its own performance, both internally and externally.Performance measurement can identify opportunities for improvements and identify poorperformances. Thus, enables management and corrective action to be taken. For example,identification of poor performance will drive management to identify and investigate rootcauses of poor performance, and subsequently drive further strategic decisions on whether thesource can be eliminated or solved. It enables continuous improvements.Performance measurements and evaluations can also facilitate management to motivate andguide employees and to be used as a basis for rewarding employees. Essentially, performancemeasures are implemented to monitor performance and to stimulate future actions.
 Importance of Evaluating and Measuring Suppliers’ Performance
 
As firms are moving towards outsourcing, they are increasingly integrated and competing as asupply-chain rather than as one individual company, the need to evaluate and measure
suppliers’ performances is important.
This is especially true in technology-intensive businessenvironments. Effectively, supplier performance evaluation enables the creation of competitive advantage through strategic management of suppliers.The digital camera manufacturing (DCM) market operates in the high-tech sector. Theenvironment is characterized by high-growth and constantly evolving market. It is atechnology-intensive environment, where fierce competition is primarily driven by innovationand intellectual capital. Competitive advantage lies in the knowledge, expertise and skills of organizational members, an
d the company’s ability to innovate.
The high levels of researchand development invested in products and processes drive the importance of low costoperations. The final products are characterized as high-value product, which consist of anintegration of smart, cutting-edge technologies, electronics, software and other high-value
 
2013 Supply Chain Management2Atiqah Ismail
components. Products are constantly evolving and developing, with constant emergence of new products. The short product lifecycle drives the importance of speed to market. Thus,competition is also based on timeliness to market.
Performance Dimensions and Indicators in the High-Tech, Digital Camera Market Industry
Traditionally, performance measurement can be defined in terms of:
 
Asset management,
 
Cost,
 
Customer service,
 
Productivity, and
 
Quality.However, due to the complex nature of operations, competition and environment of theindustry, traditional performance measures are
insufficient 
for the fast-paced, knowledge-based environment.
 Appropriate and accurate
performance evaluation measures and indicators which reflect thenature of operations and its environment are critical. Thus the following
 performancedimensions
and indicators are identified to have been commonly used within the high-tech,digital camera manufacturing industry:1.
 
Competitive performance (e.g. sales growth and market share),2.
 
Financial performance,3.
 
Manufacturing capability,4.
 
Innovation capability5.
 
Supply-chain performance6.
 
Environmental responsibilityThese performance measures are commonly used by manufacturers and external stakeholdersto
benchmark 
 
a company’s
competitive abilities
within the industry. Benchmarking is theformal process of comparing the attributes of one organisation to those of another. However,
as the focus was on supplier’s evaluation measures, the following will selectively concentrate
on the performance measures used by manufacture
rs to assess their suppliers’ performances:
 financial performance
,
manufacturing capability
,
innovation capability
, and
environmentalresponsibility
.
Financial performance measures
Financial performance measures the financial stability and asset management of a company(i.e. supplier). Asset management measures the efficiency or the management capability of thesupplier to generate cash from investments (i.e. returns on investment). The high-techindustry are capital-intensive, hence asset management is particularly important.
 
2013 Supply Chain Management3Atiqah Ismail
Financial performance indicators:i.
 
Profitability
 – 
 
the ability of the firm to generate profit 
 ii.
 
Capital risk and structure
 – 
 
gearing, the extent to which the firm is financed by debt over equity
 iii.
 
Cash turnover
 – 
 
measures the firms efficiency in the use of cash and its liquidity
 
According to Canon, evaluation of supplier’s financial performance is crucial to ensure the
supplier has a strong financial standing and can ensure business stability and continuity withCanon. This is particularly important as supply-chain members within the DCM industry,especially suppliers producing key components, are often closely integrated. In the event of 
these suppliers going bankrupt can adversely impact the company’s
operations andproductions.
Manufacturing capability
Manufacturing capability is the suppliers’ ability to produce a variety of products in flexible
volumes, while conforming to product and quality specifications, within the time framespecified by the customer (Tseng, 2009).Manufacturing capability indicators:i.
 
Product yield rate
 – 
the percentage of manufactured parts that meet the required designspecifications.ii.
 
Manufacturing flexibility
 – 
the ability to deal with different production processes andvolumesiii.
 
Productivityiv.
 
Product quality levelv.
 
Cost efficiency
 – 
measures the efficiency in the utilisation and allocation of capitaland resources
Innovation capability
Innovation capability of suppliers and partners is very important in the DCM industry ascompetition is based on innovativeness. Companies are increasingly and occasionally goinginto strategic alliances and joint collaborations to achieve mutual benefits from leveraging
each other’s innovation capabilities.
Manufacturers would seek suppliers with the innovationcapabilities that it needs to add-value to its products. For example, Sony supplies sensors for
 Nikon’s cameras
, for reasons that Sony is more competent in sensor development and design.Performance indicators:i.
 
Numbers of patents owned
 – 
reflects creative and development capability,ii.
 
Ability to obtain critical technology and patents
 – 
reflects ability of a company toimplement advanced technologies within its processes and products,

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