How can you measure the performance of the supply chain?

What are the performance measurement

metrics?

While working in any business organization we first need to understand its supply chain strategy. Then
we need learn how to measure supply chain performances. There are key indicators that can help us
understand whether chains are working effectively or not. Supply chain performance measures point
out what is working and how to fix what isn't. There are four primary areas we may focus on, which have
crucial indicators to determine how our supply chain functions.

The first area is planning. We may identify flaws in planning by reviewing two indicators: stock turnover
and planned versus actual production. Stock turnover is the ratio of the total sales versus the actual
stock or inventory at a point of time. Knowing our stock turnover means we can optimize our inventory
to ensure sufficient stock available for the customers at any time.

According to Investopedia.com," Inventory turnover shows how many times a company has sold and
replaced inventory during a given period." It helps businesses make better decisions on pricing,
manufacturing, marketing, and purchasing new stock. A low turnover implies weak sales and possibly
excess inventory, while a high ratio implies either strong sales or insufficient inventory.

Comparing planned production versus actual production can tell us whether we meet our goals.
Production figures can tell us whether we are meeting targets weekly, monthly, or annually. We can then
adjust our plan for efficiency based on that.

The second area we can focus is on the "operations." The goal of operations is to make sure the
customer receives their orders just-in-time. The key indicator of this is order-lead-time. This is the time
when a customer pays for order and until he gets the actual shipment.

The third area of supply chain performance measurement is the delivery of products and services to
customers. The key indicator for delivery performance is "order fulfillment" & "on-time-delivery." Order
fulfillment helps ensure whether the product has been shipped with the right quantity, right quality, and
on-time in the first-try. This should relatively easy to find out by obtaining customer feedback. Thus
accurate order fulfillment tells us how our supply chain is performing. Low order fulfillment indicates an
inefficient delivery process. Again on-time-delivery refers to orders delivered to customers by the
deadline. Undelivered goods increase the cost of the supply chain because we have to return stock to
suppliers. Customers would not be happy either.

The fourth area we may focus on to measure supply chain performance is the " Post-delivery
performance." The key indicators are Shipment 'Return" and "Invoice Accuracy." Returns occur when
wrong products are delivered, or products were defective or " delivery was late." An accurate invoice
here will ensure we also get paid on time. And when invoices are full of mistakes, it leads to unhappy
customers.

Above explained all key indicators, thus can tell us how efficiently are supply chains are performing and
areas of focus that we still need to work for further improvement in the supply chain.

References:

Hargrave M. ,Inventory Turnover. Investopedia. April 28, 2020. Retrieved from

https://www.investopedia.com/terms/i/inventoryturnover.asp

While working in any business organization we first need to understand its supply chain strategy. Then
we need learn how to measure supply chain performances. There are key indicators that can help us
understand whether chains are working effectively or not. Supply chain performance measures point
out what is working and how to fix what isn't. There are four primary areas we may focus on, which have
crucial indicators to determine how our supply chain functions.

The first area is planning. We may identify flaws in planning by reviewing two indicators: stock turnover
and planned versus actual production. Stock turnover is the ratio of the total sales versus the actual
stock or inventory at a point of time. Knowing our stock turnover means we can optimize our inventory
to ensure sufficient stock available for the customers at any time.

According to Investopedia.com," Inventory turnover shows how many times a company has sold and
replaced inventory during a given period." It helps businesses make better decisions on pricing,
manufacturing, marketing, and purchasing new stock. A low turnover implies weak sales and possibly
excess inventory, while a high ratio implies either strong sales or insufficient inventory.
Comparing planned production versus actual production can tell us whether we meet our goals.
Production figures can tell us whether we are meeting targets weekly, monthly, or annually. We can then
adjust our plan for efficiency based on that.

The second area we can focus is on the "operations." The goal of operations is to make sure the
customer receives their orders just-in-time. The key indicator of this is order-lead-time. This is the time
when a customer pays for order and until he gets the actual shipment.

The third area of supply chain performance measurement is the delivery of products and services to
customers. The key indicator for delivery performance is "order fulfillment" & "on-time-delivery." Order
fulfillment helps ensure whether the product has been shipped with the right quantity, right quality, and
on-time in the first-try. This should relatively easy to find out by obtaining customer feedback. Thus
accurate order fulfillment tells us how our supply chain is performing. Low order fulfillment indicates an
inefficient delivery process. Again on-time-delivery refers to orders delivered to customers by the
deadline. Undelivered goods increase the cost of the supply chain because we have to return stock to
suppliers. Customers would not be happy either.

The fourth area we may focus on to measure supply chain performance is the " Post-delivery
performance." The key indicators are Shipment 'Return" and "Invoice Accuracy." Returns occur when
wrong products are delivered, or products were defective or " delivery was late." An accurate invoice
here will ensure we also get paid on time. And when invoices are full of mistakes, it leads to unhappy
customers.

Above explained all key indicators, thus can tell us how efficiently are supply chains are performing and
areas of focus that we still need to work for further improvement in the supply chain.

References:

Hargrave M. ,Inventory Turnover. Investopedia. April 28, 2020. Retrieved from

https://www.investopedia.com/terms/i/inventoryturnover.asp

In the heart of the SCOR model, it assumes that all supply chain processes can be subdivided into one of
five general subtypes: Planning, Sourcing, Manufacturing, Delivery, and Return. However, complex
supply chains are often made up of multiple combinations of these fundamental processes. SCOR uses
the past data of the supply chain to see how it functions and advances. It specifies five general
performance attributes and three levels of measures that an analyst may use. Once a company has a
good perception of the As-Is process's strengths and weaknesses, it can evolve the To-Be model after
considering all corrective action. In essence, the SCOR model helps business organizations create new
designs and assumes

that individual firms will identify their own need to implement changes.

SCOR, thus a management tool helps process a reference model for supply-chain efficiency, spanning
from the supplier's supplier to its customer. By telling supply chains using process building blocks, the
model can describe supply chains that are very simple or very complex using a standard set of
definitions. As a result, different industries can be linked to describe virtually any supply chain's depth
and breadth. The model has been able to tell successfully and provide a basis for supply chain
improvement for global projects and site-specific projects.

To achieve a strategic fit, a company should change only those processes and operations that impact
achieving the goals determined in the competition model and performance metrics. The company's
techniques and supply chain operations have to be changed,

replaced, or stay as they are according to the new TO-BE diagrams and new goals to achieve. For
example, if we want to decrease some stock

of the sources or raw materials, we need better coordination of our work with the supplier. Better
cooperation between a producer and supplier can lower a cost and give a better performance of
deliveries sources, which improves a whole supply chain from a single company and the entire supply
chain.

In conclusion, the SCOR model is a powerful tool of analysis to support the definition of competitive
strategies for one company. On having shared information, handling quality issues with suppliers, and
planning in a standard way the demand and supplies, many optimization opportunities are opened.

Several years back, I was working onboard a container ship. The ship operator was anxious about the
ship's poor turnaround time into a particular port. It was a medium-sized container ship and engaged in
a feeder service in the south china sea. When such a vessel failed to connect with a mother vessel, it
incurs significant losses to the operator due to waiting for the next mother vessel. A frequent cargo gear
breakdown was the root cause of all the trouble. The issue was ultimately resolved with some extra
effort from the local agent coordinating with some service provider for a permanent rectification of the
problem. Therefore, any bottleneck can be fixed when all network partners work for a common goal with
cooperation and information sharing.

SCOR: Supply-Chain Reference Model

ILIM, INSTITUTE OF LOGISTICS AND WAREHOUSING