Building Blocks of Supply chain

network
◼ At the core of any Supply chain strategy
are ten building blocks

◼ We will go through these building blocks

in three levels.
Level 1: Strategic

◼ This level has only one element, which is the

most critical one- Customer value
alignment. The key questions here are:
◼ (i) What would be the Supply Chain structure
and capabilities that will be required to meet
customer service needs in an optimal way.
◼ (ii) How can you leverage your Supply Chain
to create value for your customer, partners
and your organization?
Level 2: Structural

◼ There are two key elements in the structural

layer of a Supply Chain strategy:
◼ (1) Network optimization: What should
be the best Supply Chain network
configuration to meet channel and customer
service requirements.
◼ (2) Channel design: What level of
operational integration needs to be achieved
among the channel members?
Level 3: Operational

◼ (1) Sourcing, production and inventory

management: How should the company
source inputs, manufacture products and deploy
inventory to match supply and demand at the right
cost?
◼ (2) Facilities and Transportation
operations: What type of distribution and
transportation will optimize service, investment and
cost?
◼ (3) Integrated Planning: What is the most
optimal and best in class way to plan end to end
Supply Chain operations in collaboration with all the
partners?
 Level 4: Foundational
Supporting elements

◼ (1) Technology: What type of technology

infrastructure is needed to manage and plan the end to
end Supply Chain ?
◼ (2) Processes: What processes and procedures need
to be in place for flexible, effective operations?
◼ (3) People: What type of skills, capabilities and
organizational structure are required to achieve service
and operating objectives?
◼ (4) Performance Management: What infrastructure,
measures and incentives need to be in place to ensure
ongoing peak performance?
Summary
◼ The building blocks/elements are the
basis for the strategy and you need to
evaluate your strategy against these
elements regularly to ensure that you are
operating a best in class Supply Chain.
Supply Chain Performance
Measurement:
◼ Achieving efficiency and effectiveness
objectives requires a set of standards to
compare to actual performance.
◼ These standards are called metrics.
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.
Figure 13-1
Raising the Performance Bar
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.
Figure 13-2 Measures Captured on a Regular
Basis Within the Company
Figure 13-3 Characteristics of
Good Measures
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.
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

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.
Figure 13-4
Process Measure Categories
Figure 13-5 Do Customers Use These
Measures to Evaluate Your Performance?
Figure 13-6
Logistics Quantification Pyramid
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.
Figure 13-7
Distribution Inventory Costs
Figure 13-8
Distribution Inventory Management
Figure 13-9 Logistics Outputs
That Influence Customer Service
Figure 13-10
Service Measurement
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.
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).
Figure 13-11
SCOR is Based on Five Distinct
Management Processes
MINOR PROJECT
Research Publication
Kocaoğlu, B., Gülsün, B. & Tanyaş, M. A SCOR based
approach for measuring a benchmarkable supply chain
performance. J Intell Manuf 24, 113–132 (2013).
https://doi.org/10.1007/s10845-011-0547-z

Mishra, P., Sharma, R.K. Benchmarking SCM performance

and empirical analysis: a case from paint industry. Logist.
Res. 7, 113 (2014). https://doi.org/10.1007/s12159-014-
0113-0