Supply Chain Management Tools: Passive Transponders Do Not Have Their Own Energy Supply. Rather, The

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chains are easy to print on later, it is possible to equip them with an additional
bar code. Transponders require energy to perform their functions, to operate
their microchip and to send data to the reader. Depending on their type of
energy supply, they can be subdivided into passive and active tags .
Inexpensive variant ÿ Passive transponders do not have their own energy supply. Rather, the
energy for operating RFID is provided by the reading device. When the
goods enter the electric field of a reader, an electromagnetic field is
generated that penetrates the antenna coil of the receiver. The data can
now be read out.
Strong performance ÿ Active transponders have their own energy source. They have a battery
at a high price that supplies the microchip with sufficient power and ensures the
preservation of the stored data. The transponder gets the energy for data
transmission from the electromagnetic field generated by the reader.
Active transponders can exchange data with the reader over greater
distances and offer higher data transmission rates.
levels of RFID The RFID process represents a cross-sectoral technology that is used across
all sectors for identification purposes. Labeling and identification can basically
take place at three different levels : unit level, case level and item level.
ÿ When identifying at load carrier level (unit level), each load carrier (e.g. a
Attach
pallet) is provided with an RFID tag.
tags to load
If the pallet contains single-variety goods, the product data (item number,
carriers
best-before date) is stored on the transponder. In the case of non-
homogeneous goods, only one unit ID is stored on the tag. Access to
product information stored in a database is guaranteed by linking the unit
ID with product-specific data. At the unit level, the use of writable units is
particularly suitable in order to be able to record additional data (such as
the goods receipt date).
to.
Case level ÿ The identification of products at carton or container level (case level) is
on similar to that at the load carrier level (unit level). In the case of single-
cardboard and variety goods, product information is again stored directly on an RFID
containers tag, which is now applied to cardboard or a reusable container. For
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If the goods are not of the same type, the case ID refers to the product information
stored in a database.
ÿ When identifying at item level (item level), each product has a globally unique transponder am
identification number. At the item level, read-only or write-once-read-many Apply the
(WORM) transponders are used. All product data is recorded in a central product yourself
database, which can be called up using the article ID.
In principle, radio frequency systems are to be used across the entire Strong supply
supply chain. However, it should be noted that to date there has been chain affinity
a hodgepodge of different transponder types. Because there is still no
standard for radio frequency technology, friction losses arise at the
interfaces of a value chain. The data often still has to be converted
between the partners.
A closer look at the diverse properties of RFID solutions quickly
reveals their wide range of applications (cf.
Finkenzeller 2015; Justin 2005; Tamm/ Tribowski 2010).
ÿ Data changes and additions: With the "Read and Write" tags, it is possible to Transponders
overwrite the data more than 100,000 times. can be overwritten
In addition, the original information can be updated or expanded at any time.
The rigid barcode does not offer these alternatives.
ÿ Speed and reach: The reading speed of RFID is significantly higher than that of lunge range
barcodes, which promotes the traceability of information. In addition, the reading solutions
distance increases.
“Long range systems” already have a range of more than twenty meters.
However, this results in the risk that the reading units will also identify objects
outside of the targeted detection field.
ÿ Data capacity: Compared to conventional barcodes, a transponder can display small and large
much larger amounts of data. The smallest type is the "fixed code memory". It applications
holds between 16 bits and 64 bits and manages pure binary data. Most
transponders are equipped with processors, RAM or ROM memories. An
example of this is the EEPROM (“Electrically Erasable Programmable Read Only
Memory”). This memory has a capacity of up to 8 KB.
With large storage formats, however, the decoding of the information depends
directly on the amount of information to be processed.
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tion. However, an extended "readout time" increases the already not low prices for
the radio frequency solutions.
Distinction after ÿ Operating data: The operating modes are differentiated according to fullÿduplex
data transmission systems, partialÿduplex systems and sequential transponders.
With full duplex systems, data can be transmitted on both sides at the same time.
Partial duplex systems also ensure data transfer in two directions, but alternately
and not simultaneously. Sequential transponders, on the other hand, only allow
data transmission in one direction.
Readers classified ÿ Operating frequency: With regard to the operating frequency of the readers, there is
according to their a subdivision into the three areas of low frequency (from 30 kHz to 300 kHz), high
frequency frequency (3MHz to 30 MHz) and radio frequency (300 MHz to 3 GHz).
Barcode in the price ÿ Costs: The transponder would probably have supplemented the barcode much more
unbeatable if it were not significantly more expensive than the barcode.
Depending on the requirements and the quantities, the prices for tags vary between
a few eurocents and several thousand euros (RFID solutions in the “longÿrange
area”). For the use of radio frequency systems, the existing infrastructure usually
has to be expanded (such as the hardware in the area of information technology).
Collection in bulk ÿ Individual and bulk acquisition: With the help of the reader, specific tags can be
possible targeted. It is possible to jointly target hundreds of transponders in an antenna field
(bulk detection). However, the direct "positioning" of the individual antennas on top
of each other (in the sense of "anti-collision positioning") is problematic.
environmental resistance ÿ Environmental factors: Metals in particular influence the electromagnetic fields. They
generate eddy currents that lead to "data chaos". Even if a ferrite shield can
dampen this effect, the performance of RFID remains limited. However, most
transponders are largely resistant to harsh environmental influences (such as dirt,
moisture, temperature fluctuations or vibration). For example, special radio
frequency systems in foundries still work without any problems at temperatures of
over 250 degrees Celsius. The exception to this is the rather sensitive tube
transponder made of glass. This is often used to identify pets, livestock and
laboratory animals (dogs, cats, cattle, sheep, goats, birds).
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ÿ Optical cover: Finally, the radio frequency technology can be used without visual lamination
contact to the reading unit. The chip must be attached to the product itself or to technique
packaging. For example, the mail-order business uses the option of laminating
the transponder in a foil, in order to ensure that the shipment can be continuously
tracked during transport.
In the supply chain, the use of RFID has different economic effects RFID in the
(see below). First of all, the processing time and the consumption of supply chain
resources are reduced. Furthermore, there is less shrinkage in
production, and the rate of process errors also decreases. The flow
of information tends to accelerate and customer satisfaction increases.
The processing time in the supply chain is reduced through the use Fast supply
of RFID by relieving employees of time-consuming manual routine chain processes
using RFID
activities. The degree of automation is increasing, which has an
impact on the cost structure of the goods produced. In addition,
people can now be used in other value creation processes.
Another effect of using radio frequency technology in the supply reduction of

chain relates to the consumption of resources (money, materials). depletion of
For example, RFID can be used in order picking. The rate of manual assets
activities (using handheld scanners) decreases and fewer pickers

are needed in the process. If fewer people work in the hall, fewer
industrial trucks are needed.
With the help of RFID, shrinkage rates can also be reduced. For Less shrinkage in
example, the tags serve to protect customers and employees from the supply chain
theft, to reduce loss of goods, by digitally recognizing a limited best-
before date, and to automatically pass on information in the event of
damage to the goods.
An additional effect that goes back to the use of RFID in the supply lowering the
chain is connected with the reduction of process errors . In terms of follow-up costs
total cost of ownership, fewer process errors mean a reduction in
undesirable follow-up costs. In this way, the rate of rework can be
reduced in a targeted manner. Furthermore, customer satisfaction is
likely to increase (increase in trust, fewer claims for damages).
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The level of Another economic effect that results from the use of radio frequency
detail of solutions in the supply chain relates to the improved flow of
information information (increased data granularity and updating of process
improves
data). The throughput time in the overall process is reduced due to
the forced automation. This reduces personnel costs, since fewer
process steps are necessary and the information quality improves. In
addition, the analysis and evaluation options within an organization
improve, which favors continuous process optimization and can
ultimately also lead to increases in sales (e.g. the sale of additional
information services).
The customers Finally, improving customer satisfaction is closely linked to

make happy increasing the flow of information. The cost saving options outlined
above can be passed on to the customer in the form of reduced sales
prices. Finally, adherence to delivery dates also increases with RFID,
as promised delivery dates are better met (e.g. same day delivery,
next day delivery).
Practical examples Various fields of application of RFID technology in different

for the use of industries are shown below. In some areas, such as the automotive
RFID industry, the process has been used for many years. However, trade
and the consumer goods industry are now also using radio frequency
technology extensively. RFID has already become a widespread
technology in a number of industries
molted. A few practical examples from industry and trade are briefly
presented below.
"Cars: outside The automotive industry is one of the original areas of application
the tires, inside for radio frequency technology. Ignition keys with integrated
the transponders for electronic immobilizers in motor vehicles have been
used since the mid-1990s. BMW has also been using RFID
immatures." (M. Hinrich)
technology for identifying car bodies in warehouse management and
order picking at the Dingolfing plant for a number of years. For this
purpose, an active tag, which is described with type-specific data
(such as the chassis number), is applied to the bonnet.
The required data can be read out and updated in all assembly
sections. In total, more than 3,500 transponders are in circulation in
the factory and around 80 readers are installed. Volkswagen has
now equipped more than 800,000 reusable containers with passive
UHF tags. This circumstance is the global supply of production
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work with prefabricated parts and the reduction in the shrinkage rate
(cf. Finkenzeller 2015, p. 384 and p. 403).
The chemical industry is also a market segment in which RFID identification
technology has been established for years. It is used, for example, tion of
for the clear labeling and identification of refillable gas cylinders and gas cylinders
containers with chemicals. In most cases, writable tags are used for
this purpose, on which special information (such as container number,
content, volume, maximum filling pressure or TÜV dates) is stored.
After the container has been filled, the data stored on the transponder
is updated.
The pharmaceutical industry uses radio frequency technology to RFID to

provide clear evidence of the origin of the drug with the tags applied tracking of
to drug packaging. Besides that plagiarism
protect RFID solutions from counterfeit medicines by improving the
counterfeit protection of medicines. RFID acts as a kind of dynamic
certificate of authenticity, which means that counterfeit products can
be read out. In the pharmaceutical sector, radio frequency technology
has a wide range of applications in this regard. After all, the proportion
of counterfeit drugs in the USA alone is around 20 percent.
Retailers are now also making frequent use of RFID. The fashion Anti-theft device in
segment there has its own laws. The time-consuming application and modebran
che
removal of hard tags sometimes causes great difficulties for
manufacturers of fashion items. In addition, the labels have to be
pierced through the seam so as not to damage the outer fabric. This
is why clothing manufacturers and fashion retailers are currently
coming together in the "fashiongroup RFID" . They are supported by
the consulting company "GCS". The "fashiongroup RFID" would like
to use the tag more to protect against theft in the future ("Electronic
Article Surveillance, EAS"). Due to inadequate goods security
systems, there are quite high stock differences in the fashion industry.
In March 2017, C&A announced the group-wide “Source Tagging”
project. Source tagging is understood as an electronic item security
already in the country of production. Consequently, C&A has the EAS
elements directly from the manufacturers to the clothing
staple dung. Brand protection is also of great importance for the
fashion sector. Manufacturers of branded goods no longer want to
stand by and watch counterfeit products being sold. From the intensified
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With the use of radio frequency technology, luxury labels are hoping for
better batch traceability.
RFID for Likewise, the RFID technology has already found its way into the service
service provider sector . For example, the logistics service provider TKÿLOG uses RFID
technology to monitor the temperature curves during transport for frozen
goods. For this purpose, active transponders with integrated sensors are
applied to the pallet and container level.
Furthermore, RFID technology is used at Frankfurt Airport – for the
maintenance of security-relevant facilities. Fraport AG optimized the
annual maintenance of fire dampers and fire doors by using RFID tags.
Information required for checking (such as information on the last
maintenance date) was stored on the transponders that are attached
directly to the flaps and doors. With mobile RFID readers, the stored data
can be determined and updated at any time. Another possible use of
RFID technology in the airport environment is the handling of baggage.
Warehouse The special possible uses of RFID technology in warehousing are

Management via examined below. A number of processes in the warehouse area, in which
RFID
employees previously had to manually and time-consumingly scan in
individual barcodes of stored goods, can be processed more efficiently
with the help of RFID technology. Stored goods equipped with modern
radio frequency solutions can be automatically identified with mobile
readers and the information stored on the chip can be transmitted more
quickly and without contact. Furthermore, RFID readers positioned in
incoming and outgoing goods (due to the ability to record bulk
transponders) allow the automatic location of complete incoming and
outgoing deliveries of goods within a few seconds. However, this is
subject to the condition that the goods are tagged at item level. To do
this, the employee must pass the reading area of the RFID system with
the delivery. The consignment can even remain packaged or be ready for
dispatch, as the data on the chip can be read and transmitted without
visual contact. Furthermore, RFID solutions have a much higher storage
capacity than barcodes. In addition to a unique identification number,
expiry dates or temperature profiles can be recorded for food, for example.
Finally, in warehouses with a finishing function, radio frequency systems

provide information about the maturing period of products.
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As an identification technique, the barcode is unbeatably cheap in RFID and bar
terms of price. There are costs of a few eurocents per barcode assignment.Code: Together
Simple, passive tags cost three to four times as much. In terms of we are strong!
price, RFID (despite the existence of economies of scale) will probably
not reach the barcode, let alone undercut it. The future should therefore
lie in the integration of RFID and barcodes (cf. example block d.7).
In the meantime, however, a rather heated discussion has erupted around RFID. Heated discussion
In addition to the technical possibilities identified above, dangers must about RFID
also be pointed out. The first thing to mention here is the fear of the
transparent consumer (“No RFID!”). Animals are extensively injected
with glass transponders under the skin in order to be able to trace
batches back, for example, during the BSE scandal. The first people
have also had chips implanted under their skin. The chip opens doors,
reveals personal data and lasts around 30 years. A cover made of
highly polished glass ensures that the transponder does not grow
together with the skin. However, Benetton got a real feel for people's
fears about transponders, as people started a campaign against the
company on the Internet. In this they called for a boycott against
Benetton : “Send Benetton a message. Don't buy clothing with tracking
devices".
In addition to this privacy issue , data security is also a much- latent danger of
discussed aspect when RFID comes into play. How is it to be prevented knowledge drain
that information does not leak to unauthorized third parties? There is
no doubt that RFID offers great opportunities. But if this knowledge
flows away, the original advantage leads directly to catastrophe.
Further difficulties derive from the still quite high costs, lack of standards Chaos at suns
and disturbing environmental influences . Radio interference limits storm
the reading accuracy hit rate.

Researchers at the University of Amsterdam have discovered that
radio tags can affect the suitability of medical devices.
In 34 of the 123 test runs, they found faults. For example, dialysis
machines, cardiac pacemakers and ventilators were affected. In 22
cases, the disturbances were judged to be dangerous.
For example, an ECG monitor showed a nonexistent cardiac arrhythmia.
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example block d.7 Quo Vadi's RFID?
For integration of The question is probably not, barcode or RFID? Rather, the future probably lies in the
RFID and barcodes interaction of both identification technologies. A combination of barcode and transponder
can be found commercially, for example.
Labeling via RFID at item level often proves to be simply too expensive. The tags are
therefore mainly attached to pallets or load carriers. In the past, however, problems arose
with RFID technology, particularly when it came to mixed pallets (mixed loads) and media
discontinuities. To counter this dilemma, a combination of barcode and RFID tag is
chosen. A common variant is the so-called smart label. This means a paper-thin form of
transponder. The transponder coil is attached to a 0.1 mm thick plastic film and coated
with an adhesive on the back so that the transponder can be used as a self-adhesive label.
These laminated labels can easily be printed later, so they can be combined with a
barcode (cf. Finkenzeller 2015, p. 20f.). Modern printing technologies mark labels in three
ways: first electronically with RFID, second with a barcode and third with a clear character.
All three sub-processes are completed in the same printing process.
D.6.4 Data Warehouse

History and clarification A data warehouse (cf. Bauer/ Günzel 2013; Gerken 2018; Gomez et al.
of terms 2006; Karamagi 2020; Mehrwald 2013; Schneider/ Jordan 2016) is a
database system separate from operational IT systems, in which
company-wide information from different (sub)systems - sometimes
supplemented by additional data - is stored and processed in a user-
oriented manner. The term emerged in the early 1990s and has its
roots in the 1988 IBM project "European Business Information
Systems" (EBIS). In 1991 the study was renamed “Warehouse
Strategy”. IBM developed a concept that should create mechanisms
to cope with the general information explosion. The project aimed to
provide authorized individuals with business information from all areas
of an organization. Access to different systems should be possible via
a standardized interface (cf. the connection to Customer Relationship
Management on p. 159).
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The elements in the data warehouse are the actual database and transformation management information
programs for the transfer of internal and external information. Furthermore, mation
archiving programs are used for data storage and information security. Internal
data sources (operational source systems from the functional areas) and
external data sources (e.g. information from suppliers) represent the input for
the data warehouse. Information from the Internet can also be used in the data
warehouse. The output is user-oriented according to sales channels, customer
or product content. The focus here is on the following criteria (cf. Gerken 2018,
p. 15):
ÿ In most cases, the users have direct access to the information in the
data warehouse.
ÿ If the flood of data is too great, the user can be granted a selection from the entire
repertoire. This solution is called a data mart .
ÿ Finally, the data warehouse offers the user the option of data refinement: in the
information factory, the data for consolidation of controlling is processed from
a business point of view and compressed in special applications.
OLAP and data mining are used in a data warehouse for management support. What can OLAP
Traditional management information systems contain pre-structured or pre- afford?
selected information. OLAP (Online Analytical Processing) places high demands

on a management system, which becomes clear below (cf. Gomez et al.
2006, p. 57):
ÿ Multidimensionality: OLAP is the basis for the aggregation of different

dimensions (a formation of data cubes). An example of this is the consolidation
of sales by product and region. As with a cube, the information can be viewed
(slice), rotated (dice) or fed to a higher level of compression (drill down).
ÿ Flexibility: OLAP is used to carry out analyzes or presentations. The user can
carry out various comparative calculations or time series analyses.
ÿ Ergonomic user interface: The interface is integrated into the user's previous
work environment. New knowledge does not have to be learned to use OLAP.
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ÿ Speed: The system guarantees short response times, which are derived from fast feedback
and small iteration loops.
Working areas of The basic principle of data mining is the automatic recognition of data
data mining structures, such as trends in market segments. To do this, the raw data
is filtered and processed according to patterns. For the control , the user
gives commands for the parameterization of the components. The
database interface supplies the system with processed extracts from the
warehouse. The necessary know-how is taken from a knowledge base ,
whereby within the framework of this focus it is decided which knowledge
is relevant at all. Analysis algorithms examine the data for potential
abnormalities. The information must be subjected to a fundamental
evaluation (e.g.: "Are the data useful for us"?). Finally, they can be
presented to the user (cf. Gabriel et al. 2009, p. 113).
NCR as an example The company NCR offers different data warehouse applications. One of
the difficulties banks face, for example , is the increasing anonymity of
their customers. NCR developed a data warehouse solution for the
National Australia Bank . First, over 800 events were defined – such as
“a customer moving” – and links between the events were established.
If a customer of the bank actually moves, he is automatically reminded
to report his new address. In addition, he receives information about the
nearest branch to his new place of residence. A forwarding agent is

recommended for the move, which works together with the bank and
may grant special discounts. The bank also automatically prepares
forms that the customer only has to sign
must.
“Customers are like However, a solution via a data warehouse also involves some problems.
small dogs: Due to the abundance of alternatives for obtaining information, there is
At first everyone a risk of transparent customers. Difficulties arise from access to
wants them, but
information by unauthorized persons, combined with misuse of data.
when they are Another problem is the information overload
there, nobody goes with them
Data Warehouse (Big Data, cf. p. 258). It is true that data collection and
walk.”
data processing is possible. However, the purposeful use of the
(calendar saying)
information in order not to sink into the "sea of data" is open.
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D.6.5 Computer Integrated Manufacturing
Computer Integrated Manufacturing (CIM, cf. Dangelmaier 2003; basics of
Groover 2014; Heinen 1991, p. 578ff.; Scheer 1992; Webber 2020; CIM
Zelewski et al. 2008) represents a possibility for IT support in supply chains.
CIM describes the integrated IT use of all functional areas of a
company that are networked with production. The instrument
includes the IT-oriented interaction of all key parameters of production
planning, which use a common database for the integrated use of
computers.
The term "Computer Integrated Manufacturing" came up in 1973 in History and clarification
Anglo-American-speaking countries. Harrington published his of terms
eponymous writing that year (cf. Harrington 1973). In it he describes
the possibilities for computer-aided design, machine and production
plant management, materials management and quality assurance.
Harrington 's work is the basis for various modifications. Computer
Integrated Manufacturing established itself in Japan at the beginning
of the 1980s. In Germany, the term found its way into literature and
practice in the mid-1980s.
At CIM, previous isolated solutions are essentially coordinated and “A computer
merged. The CIM architecture encompasses two main components: would only then
human if he
began to
ÿ The business PPS module (production planning and production control). lie.” (H.-
J. Quadbeck
Seeger)
ÿ The technical components CAE (Computer Aided Engineering), CAD (Computer
Aided Design), CAP (Computer Aided Planning), CAM (Computer Aided
Manufacturing) and CAQ (Computer Aided Quality Assurance). See Figure
D.18 for the structure of the CIM architecture.
The information systems of business management and technology Avoid isolated

were developed separately. Harrington mastered the art of bringing solutions: "La
the components together. He designed a continuous flow of information isla
based on the same database. If the subsystems are not connected bonita..." (Madonna)
next to each other, manual information input can result in redundancies
or pleonasms. Duplicate entries take time and are prone to errors.
The problem with isolated solutions is that not all functional areas
have the identical and up-to-date database
feature.
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process chains Within the supply chain, the production processes (sub-processes)
determine are connected with the help of Computer Integrated Manufacturing.
This results in continuous process chains. In companies, CIM
usually requires structural and process organizational restructuring.
Proceed further The components of Computer Integrated Manufacturing are to be

characterized in more detail below . First, there is a description of the
business management PPS component. The technical pillar of CIM
is then discussed.
Figure D.18 CIM architecture
Computer Integrated Manufacturing (CIM)
Business component Technical components
Production Planning and Control Computer Aided Engineering (CAE)

(PPS) Computer Aided Design (CAD)
Computer-aided planning
(CAP)
Computer-aided manufacturing
(CAM)
Computer Aided Quality Assurance

(CAQ)
D.6.5.1 Production planning and control (PPS)

Business pillar Production planning and control is the business management module
of CIM (cf. Zelewski et al. 2008). It includes the computer-aided
planning, management and control of the production processes (from
the solicitation of an offer to the dispatch of the goods). Quantity,
deadline and capacity restrictions are taken into account for these
tasks. The core activities of PPS include basic data management
(information base), production planning (product program, quantity,
deadline and capacity planning) and production control (order initiation
and order monitoring).
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PPS is based on the use of standard software, whereby module basic data from
components are combined here. The programs consist of the basic PPS
data of production planning and control, whereby the following types
are to be distinguished:
ÿ Order data (customer orders).
ÿ Parts master data (item number of the product, technical data and value
information).
ÿ Product structure data (quantity relationships and technological relationships of

the product components and parts).
ÿ Material procurement data (stock management and supplier

steering).
ÿ Operation data (assignment of the repetition factors to the machine

nen).
ÿ Equipment data (performance range of potential factors).
The PPS system is based on the successive planning concept : A Interdependencies

complex task is broken down into sub-problems and solved in of data content
coordinated planning stages. In these phases, the added value increases.
First, tasks are distributed (ÿWho does what?ÿ). Production planning
uses the order data to determine the primary requirements. These
form the basis for the material disposition and the planning of the
production processes. The parts master data are used to break down
the product structure through material planning. To do this, MRP
uses the primary requirements, derives parts lists and determines the
inventory data. Material procurement planning clarifies which parts
are manufactured in-house (make) and which are obtained from third
parties (buy). Finally, the production control calculates, with the help
of work process and equipment data, the compilation of the production
orders into lots: Repetition factors are optimally assigned to the
potential factors (sequence and machine allocation plan).
By comparing the production documents with the operating data, it control mechanism
is determined to what extent the realization of the production orders mush of PPS
corresponds to the planned processing steps ("monitoring of the
order progress"). This process represents a BDE (operational data
acquisition) . If it is determined that capacity utilization, throughput
time or workshop inventory does not match the plan data
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ment, the processes are reviewed as part of BDE and adjustment
measures are to be initiated.
Interactions with The structure of PPS can be based on that described under point C.3.5
procurement set procurement strategies . If companies focus their activities on the

strategies customer, PPS is based on Kanban. Production planning and control
includes the entire supply chain. The focus is on the internal processes.
They are suitable for similar manufacturing processes (flow production).
However, PPC systems reach their limits when they encounter
discontinuous production processes.
D.6.5.2 Computer Aided Design (CAD)
Transition from CAE Computer Aided Design (CAD) is a technical component of CIM and
to CAD means computer-aided design. If the system requirements are primarily
in the early phases of research and development, the Computer Aided
Engineering (CAE) module is used. The basic principle of both variants
is identical. The contents of CAE are summarized under the description
of CAD. CAD fulfills two areas of activity, design and detailing.
ÿ Design: The focus of design is on calculations and the creation of

production documents. A design includes finding a function: For this, the
overall function of a product
duct into its sub-functions. Drafts are made
made true to the members (geometric models).
ÿ Detailing: The optimum combination must be selected from the multitude

of alternatives. The drafts from the design are supplemented with
technical information (materials, surfaces, etc.) and the item numbers
for each product are stored in parts lists. One form of detailing is the
CAD-supported creation of prototypes (rapid prototyping, cf. p. 122 of
this publication).
aids of For the design and detailing, the designer needs a range of geometric
construction and technical data to create his graphics. It is supported by workstations
and software (e.g. "Catia"). CAD mainly refers to calculations and
drawings. It also supports the generation of parts lists and work plans.
Through the use of CAD there is the possibility of adapting construction
and variant construction.
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ÿ In the custom design, individual assemblies become one
existing product concept changed.
ÿ In the variant construction, in accordance with the modular principle, parts that have
already been constructed are to be used, which only have to be lined up next to
each other. This results in time savings.
The originally technically designed Computer Aided Design can also strategic
be used commercially . As part of the accompanying calculation, cost management
the subsequent production and material costs must be estimated at ment
an early stage. Different design alternatives are simulated, which

means that the cost effects are quickly known.
The use of Computer Aided Design intensifies the relationships automotive industry
between suppliers and manufacturers. This bond is very close, for che as an example
example, in the automotive industry. A study by the Fraunhofer
Institute for System Technology and Innovation Research in Karlsruhe
shows that over 90% of automotive suppliers can process their
customers' CAD data.
D.6.5.3 Computer Aided Planning (CAP)

Based on the results of Computer Aided Design, Computer Aided CAD as a basis
Planning (CAP) carries out computer-aided planning tasks . They are

necessary for the manufacture of products or product components.
The focus of CAP is on the generation of work plans. The
programming of NC machines and industrial robots as well as testing
and assembly planning are also based on computer-aided planning.
Computer Aided Planning determines the processing steps in the Computer-aided

manufacturing process with IT support. The specifications contain creation of
data about the resources to be used (machines and tools) and the work schedules
duration of a processing. The sequence of operations is defined in

the work plans, the repetition factors are assigned to the potential
factors (workstations) and the production resources are fixed. A
distinction is made between the following systems for creating work plans :
ÿ Work plan management: At this lowest level, special activities are selected from a Link from
large amount of existing production information and linked with one another. New basic information
work schedules are created by sequencing existing activities. You can cover
complete supply chain processes
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cken. Work plan management (continuous production) is particularly suitable for
activities with a high level of repetition.
basic type for ÿ Variant principle: The variant principle is based on similar components. A basic type
create is defined for them. In addition, standardization features must be defined. New
standardization variants arise due to modifications of this basic type. The work plans are created
automatically by entering the specified parameters.
Existing Plans ÿ Adaptation principle: An existing work plan that is as similar as possible should be
to use selected for a new project. The specifics in the new process are taken into account
by exchanging elements. The original work plan is subject to modifications. An
adaptation to the revised problem definition takes place.
"All to zero, ÿ Generation principle: This procedure is the most extensive, since a comprehensive
press reset..." (Alpa replanning has to be carried out. The calculation algorithms are derived via CAD
Gun) directly from the available geometric and technical data. A work plan must be
created from scratch.
D.6.5.4 Computer Aided Manufacturing (CAM)

continuation of The results of CAP trigger a Computer Aided Manufacturing (CAM).
CAP This means automated production . CAM includes the actual
machining or processing of modules and parts. This technical
component connects the manufacturing processes with the transport
and storage systems in supply chains. The focus of activities is on
production logistics. CAM includes the following sub-functions:
machining systems in the sense of NC, CNC and DNC, workpiece
and tool handling systems, automated transport and storage systems,
IT-oriented assembly systems and computer-aided maintenance
systems.
What is an NC NC systems are a further development of mechanically automated
Machine? machine tools. CAP-supported work plans represent the foundation
for workpiece machining. The machine control runs on information
for the coordination of tool movements and switching processes.
There are three basic types of NC machines :
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IT support tools
D.6
ÿ Pure NC (numeric control) machines: They represent the simplest form. On the Simplest way of
basis of fixing the control parameters, the rigidity of this alternative is high. The processing
entry is not made online (in some old models even via punched tape).
ÿ CNC (Computerized Numeric Control) machines: The CNC machines are equipped Online
with microprocessors. They are programmed online and individually in the workshop. programming
ÿ DNC (Direct Numeric Control) machines: With DNC machines, several workstations Machine integration
are managed together centrally online via a control computer. The machines are
networked via a server.
A special form of CAM are industrial robots (handling devices). A Programming

robots
distinction is made between two techniques for programming industrial
robots: the play-back method and the teach-in method. A playback
method is the manual guidance of the robot. The individual
movements are first saved, and the robot then repeats the learned
movement patterns as often as it likes.
With the teachÿin method, the movement pattern is entered directly
online, without prior manual guidance. In this form, too, the frequency
of repetition is not limited. Industrial robots are used for welding,
drilling, milling, grinding or painting processes.
They are equipped with sensors and can recognize different geometric
shapes.
Computer Aided Manufacturing does not only include the actual Benefits within
manufacturing processes. In the value chain, internal transport is the supply chain
also covered by CAM. For example, activities for storage and retrieval,
order picking and control of industrial trucks are CAM-supported.
The highest degree of automation is achieved with flexible Adaptation-

production systems , in that there is complete automation of work oriented
steps. The difference to NC machines is that they control individual manufacturing systems
work steps. However, NC machines cannot handle a closed

production process. Therefore, NC machines have to be retooled
frequently. In flexible manufacturing systems, a distinction is made
between the machining center and the manufacturing cell.
ÿ Machining center: The machining center represents an electronic workpiece more automated
changing system. The machines can have several tool change
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Carry out processing steps on a workpiece with CAM support .
The change takes place automatically from the magazine. Similar work steps are
carried out sequentially on the workpiece on a rotating platform.
Workpiece storage ÿ Production cell: In addition to the mechanical workpiece change, the workpieces are
for processing automatically stored. This enables the processing of several workpieces in any
complete order. The different work operations can be carried out one after the other on
processes different systems and on various products. Manual intervention is not necessary.
The workpiece memory is processed successively (workpiece by workpiece).
D.6.5.5 Computer Aided Quality Assurance (CAQ)
Preventive quality Computer Aided Quality Assurance (CAQ) does not only follow after
management CAD/CAE, CAP and CAM. Computer-aided quality assurance
accompanies all of the technical components of CIM. Some of the
production planning and control is already embedded in CAQ.
Quality requirements for a product or a process must be taken into
account in the early stages of research and development in order to
avoid subsequent changes or conversions. CAQ promotes the
implementation of preventive quality management. The computer-
aided quality assurance begins with the quality-focused verification of
the geometry data from CAD (for example: "Are the models true to
scale?"). The use of CAQ continues with the review of work plans in
CAP. As part of CAM, limit values for error tolerances and fitting
accuracy are checked.
D.6.6 Enterprise Resource Planning and Advanced

Planning and Scheduling
From CIM to ERP The systems for production planning and control of a CIM architecture
focus on program, potential and process modeling. Over time, they
were extended to Enterprise Resource Planning (ERP, cf. Gronau
2014; Heben 2016; Ritter 2008). The intermediate stage in this
transition are MRP tools (see term block D.IX), which already ensure
company-wide integration of production, sales and success planning.
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IT support tools
D.6
MRP systems Block of terms D.IX
ÿ MRP I: Material Requirement Planning is a system for material requirement planning. Material
The material requirements are derived from specified production quantities, although requirements planning
the available capacities are not taken into account. MRPÿI systems have gradually
been expanded over time to include CRP (Capacity Requirement Planning), MPS
(Master Production Scheduling), and DRP (Distribution Requirement Planning) .
However, all approaches are based on successive planning.
ÿ MRP II: MRP I systems were later expanded to MRP II (Manufacturing Resource Coordination with
Planning) . This tool takes into account the available capacities. However, this the capacities
approach is also based on successive planning, in which the capacities and the
material requirements are coordinated step by step. This results in inconsistencies:
Due to a lack of capacity, the material plans have to be constantly redefined .
The structural planning of MRP II and ERP is almost identical: higher- Company-wide
level overall strategies are successively broken down into different successive plan
special plans. In contrast to MRP II, however, the Enterprise tion
Resource Planning modules also guarantee functions such as

maintenance, order management or human resources management.
The foundation for Enterprise Resource Planning was laid in the
1990s. A company-wide ERP system regulates the business
processes in a transaction-oriented manner. To do this, the necessary
information is taken from a relational database, stored in special
tables and individually reassembled when accessed via search
queries.
Enterprise resource planning ensures the operational and automated ERP in supply
control of company processes in the supply chain. The software Chain
from SAP (SAP R/3) or Oracle serves as the basis for ERP. The
production plan is processed successively, and the optimization is
based on the logistical subsystems within the company.
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Even ERP However, the ERP systems have a number of difficulties (cf. Gronau
Systems still 2014, p. 97):
know quite a few Be
limits ÿ ERP is based on the concept of successive planning, the material requirements
are compared with the capacities one after the other (and not in parallel).
ÿ There are no interrelationships between the subordinates

plans taken into account.
ÿ Furthermore, ERP hardly covers the administration area and engineering. This
shortcoming weighs all the more heavily because overhead costs are
disproportionately high in these functions.
ÿ The approach is not very flexible, for example by assuming fixed processing and
waiting times. Simulations hardly take place.
ÿ The provision of information is time-critical because there are so many

Individual access to the parts master, product structure, material procurement,
operation and resources at short intervals
gene.
ÿ As an overall system, the supply chain is not taken into account in ERP because
there is no direct access to supplier and customer information. This restriction
weighs particularly heavily when demand fluctuates (bullwhip effect, cf. p. 47).
From the Successive APS (Advanced Planning and Scheduling) addresses these
planning to difficulties of ERP . APS can be used across the entire supply chain
simultaneous planning (cf. Betge 2006; Gronau 2014; König 2009; Zeilhofer-Ficker 2015).
These systems are a supplement to the ERP modules. The
optimization of the planning parameters at APS is based on
mathematical algorithms. Providers of these systems are, for example,
SAP, Oracle and Manugistics (JDA Software). APS obtains its data
from the operative transaction units of the ERP modules. To these decentralized
APS returns its information after processing. APS aims at the
simultaneous coordination of all activities of the entire supply chain
and is highly responsive. All activities that can contribute to an
increase in value must be synchronized with one another. With the
help of simulations, different alternatives
tively played through quite quickly. APS selects the option that
promises the greatest potential benefit (see example block d.8).
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IT support tools
D.6
The main features of Advanced Planÿ How APS
works...
ning and scheduling (cf. Betge 2006, p. 23ff.; Elÿ Berishy 2011;
Günther/ van Beek 2010).
ÿ Customer orientation: The focus is on the synchronization of capacities and pull control
requirements in order to find customer-oriented order processing (pull
orientation).
ÿ Realistic: APS shows the availability of capacities and requirements largely avoidance of
in real time . Bottlenecks (constraints) that lead to planning uncertainty are bottlenecks
to be uncovered in a special way . A distinction is made between soft and
hard bottlenecks.
Problems resulting from soft bottlenecks (soft constraints) can be solved
relatively quickly. A soft bottleneck occurs, for example, when a short-term
surge in demand hits a plant with a capacity utilization rate of just 65%.
This plant has no problem accepting the additional order. Hard restrictions,
on the other hand, lead to lasting difficulties in the supply chain. With regard
to the example given above, they exist when additional orders reach plants
with almost full capacity utilization.
ÿ Simultaneity: The Advanced Planning and Scheduling modules allow parallel held simultaneously
processing of individual activities in the planning process. This eliminates sequential

the disadvantage of successive planning (such as ERP).
ÿ Speed and flexibility: Another characteristic of APS is the high processing "Time killers on
speed. The systems are memory-resistant and the planning runs only take their way,
a few moments. If unexpected changes in the restrictions or planning tonight I belong to
deviations occur, the APS modules react to them with a high degree of
adaptability. This fulfills the requirements for an available-to-promise and a them..." (Blumfeld)
capable-to-promise.
ÿ Integration: In addition to the company's own data, information from suppliers supply chain
and customers also flows into Advanced Planning and Scheduling. As a orientation
result, APS covers the entire supply chain.
ÿ Simulation: With the help of stochastic forecasts, real or planned systems What if
are run through on the computer in different models (what-if scenarios). simulations
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D
example block d.8 Advanced Planning and Scheduling
For example, Röhm gained experience with the use of Advanced Planning and Scheduling
with the help of SAP APO in the production of Plexiglas. APO stands for "Advanced
Planner and Optimizer". The activities relate in particular to the “PP” (Production Planning)
and “DS” (Detailed Scheduling) modules. This was followed by the specification of the
network planning ("SNP", Supply Network Planning) for Röhm. The project managers
then used simulations to examine the relationships for procurement, storage, production,
handling and transport of Plexiglas in this network. Finally, Röhm defined the parameters
for collaborative planning between the partners involved, for which purpose planning
folders based on ITS (Internet Transaction Server) were created on the Internet.
power modules The structure of APS can be seen in the advanced planning and
scheduling matrix (cf. Betge 2006, p. 75ff.; El-Berishy 2011, p. 93f.;
Günther/ van Beek 2010, p. 103ff. ). It reflects the structure of the APS
systems of most software providers and includes the following modules:
foundation ÿ Strategic Network Planning: Strategic network planning is geared towards the long
term (three to ten years). It includes the configuration of the entire value chain
and includes simulations based on stochastic optimization models (what-if
simulations). For this purpose, the nodes in the supply chain are visualized. This
includes, for example, production facilities, storage locations, suppliers or
distribution centers ( called "Cockpit" in SAP ). But important information from
sales planning also flows into strategic network planning.
capacity and ÿ Master planning: For most software providers, the main planning extends over a
needs comparison medium-term period of around twelve months. It regulates procurement,
production and distribution activities within the supply chain. In this context, the
available capacities are coordinated with the requirements - without building up
large buffers. Important prerequisites for this are procurement, production,
transport and material requirements planning from ERP.
operations ÿ Demand Planning: Demand planning involves making forecasts about future
Research demand. In this regard, time series analyzes and causal relationships are carried
out
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IT support tools
D.6
certainly. An example of this is the sales of sunscreen and road salt depending
on the temperature.
ÿ Material Requirement Planning: A medium- to short-term material requirement Simulate material

requirements
plan is responsible for ordering inventories. To do this, different transactions
are run through in APS.
ÿ Production Planning and Scheduling: Here it becomes clear that APS is not manufacturing orientation
a replacement, but rather a supplement to ERP. Within the company, tion

bottleneck-oriented capacity planning takes place via ERP, which extends to
the factors of personnel, use of materials and machine occupancy. An
important goal in this context is the reduction of throughput times. For this
purpose, the production sequences are simulated. APS selects the alternative
that promises the greatest probability of success.
ÿ Distribution and Transport Planning: The distribution and transport planning Distribution
includes the distribution of goods. Manufactured goods can be distributed logistic implication
directly to the customer or temporarily stored in a distribution center. In this to
regard, the respective software for APS must ensure that transport and
storage costs are minimised. But premises – such as perishability, material
handling and packaging regulations – must also be taken into account.
Therefore, the distribution and transport planning is derived from information
about transport volume, vehicle availability and Incoterms.
ÿ Demand Fulfillment: Finally, Demand Fulfillment means checking the availability ATP: Checking
of goods. This is where the Available-to-Promise (ATP) principle comes into the availability
play: the delivery dates must be bindingly promised. Therefore, a comparison of goods
between the stock and the customer order takes place. If there are enough
goods in a warehouse, the delivery promise is unproblematic. Demand
fulfillment runs via simulations, with particularly urgent orders being given
priority using a priority rule.
A critical appraisal of APS systems rounds off the Diverse

possibilities of APS
considerations in this chapter. Key benefits of APS include:
systems
ÿ The approach covers the entire supply chain. In contrast to ERP, supplier and
customer information is played directly into the system, which leads to a
reduction in frictional losses (due to iteration loops) at the interfaces.
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D
ÿ With the help of Advanced Planning and Scheduling, an organization
will be able to react quickly and in real time to market changes. In
addition, APS behaves very responsively because the modules
adapt to changing competitive conditions.
ÿ APS systems mean the transition from successive planning (this is
available for PPS, MRP I, MRP II and ERP) to simultaneous
planning. Of particular importance is the possibility of processing
the bundles of activities at the same time.
ÿ In the entire supply chain, stocks are to be reduced using APS
systems. In addition, throughput times are pushed, which results
in shorter delivery times.
ÿ The APS modules can form the basis for an early reconnaissance system.
For example, the SAP "Alert Monitor" first shows the user the triggering
event and immediately suggests a function that serves to clarify this
problem.
ÿ Advanced Planning and Scheduling is based on the pull concept, in

which the wishes of the customers are taken into account in the
long term.
But also APS After the initial euphoria about Advanced Planning and
Systems are Scheduling, the approach is meanwhile also met with reservations :
reaching their limits
ÿ The systems for purchasing, inventory management or invoicing are

not replaced, but only supplemented. These operational modules
still have to be maintained, which means additional administrative
work and the initiation of additional transactions.
ÿ By taking software into account in terms of APS, the dependencies

in the supply chain increase. If, for example, the systems between
the manufacturer and the module supplier are permanently linked,
both partners are at the mercy of each other. In addition, the
transparency within the cost calculation increases: Smaller
suppliers in particular could fear pressure on their profit margins
as a result.
ÿ The supply chain processes will not automatically improve simply by
implementing APS. Even the best system fails due to inferior data
quality. In order to achieve high data quality and to ensure that
APS generally runs smoothly, employees must be trained.
390
comprehension questions
D.7
D.7 Understanding Questions
ÿ How do you make up the total costs of storage?

men?
ÿ Name inventory reduction tools. ÿ What is an ABC analysis?
What is an XYZ analysis? ÿ Characterize the types of material

procurement. ÿ Combine the ABC analysis and the XYZ analysis with
the types of material procurement. ÿ Describe the nature of the marketability analysis.
Draw up a table in which you
compare the advantages and disadvantages of Excess and Obsolete.
ÿ What is the difference between OES, OEM and AM

Split?
ÿ Show measures to reduce slow-moving inventories. ÿ Mark the traffic light

procedure of the coverage monitoring.
Give an example from medical technology.
ÿ Discuss the phenomena “inlet control” and “outlet
steering". ÿ
Clarify the term “cost charge back”. ÿ Describe
the consignment analysis. Give reasons for consignment from the customer
and supplier perspective. ÿ Describe the "Payment-on-
Production" procedure. ÿ What are the steps to set up a
consignment
onslagers?
ÿ Delimit the consignment processing from the supplier logistics
center off.
ÿ Describe the process of inventory financing. Derive cash-to-cash effects from the
point of view of the partners involved in the process.
ÿ Characterize the contents of the throughput times and set-up

time analysis.
ÿ Name and discuss instruments for reducing freight costs
tion.
ÿ What does a milk run mean?
ÿ What do you mean by the last mile? Which strategies and which technologies do you
know to overcome this last mile in the best possible way?
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D
ÿ Discuss the possibilities of courier, express and parcel services for the last mile.
ÿ What are the advantages and disadvantages of hub and spoke compared to point to
point in air traffic? ÿ Describe the types of
benchmarking.
ÿ What are the advantages and disadvantages of competition-focused benchmarking?
ÿ Discuss the term
“reverse engineering”. ÿ Answer the following questions about
Quality Function Deployment: history, definition of terms and characterization, quality
plans, steps to create a House of Quality (shown using the example "lawn mower")
and critical appraisal.
ÿ Mark the instrument "Failure Mode and Effects Analysis". Make a critical appraisal of
the FMEA.
ÿ Give an example of bottleneck engineering. ÿ Characterize EDI,
EDIFACT and ODETTE. What is behind these abbreviations? What are the advantages
and disadvantages of EDI.
ÿ Mark the transition from EDI to Web-EDI. see where

the strengths and weaknesses of Web-EDI?
ÿ Describe the tasks of barcodes. What is the difference to RFID?
ÿ Characterize possible areas of application and properties of RFID in the supply chain.
ÿ What do you mean by a “data warehouse”? Clarify those

Terms "Data Mining" and "OLAP".
ÿ Characterize the technical components of CIM. ÿ Describe CAPÿsupported
systems for creating work
plan.
ÿ What types of NC machines do you know? Name flexible
manufacturing systems.
ÿ Identify similarities and differences between
ERP and APS systems.
ÿ List advantages and disadvantages of APS systems.
392
Learning objectives and approach

E.1
E Controlling of the supply chain
E.1 Learning objectives and approach

The learning objective of Chapter E is to show the importance of Why controlling
controlling for supply chain management. On the one hand, the the supply
chain?
management is supplied with information by his controlling at fixed
intervals, for example in the context of monthly statements. On the
other hand, the controlling system must also allow ad hoc queries.
The integration of supply chain processes in an adequate planning,
management and control system serves to guarantee both
requirements.
In Chapter E, the business basics for controlling the supply chain are Procedure at a
described in the further procedure . Cost tracking is used to glance
determine the effects of logistics activities on the balance sheet and
the profit and loss account. Subsequently, a key figure typology of
the supply chain management is derived, which leads to the
representation of value driver trees.
Tools are available to the controller that contribute to the planning, Modern
management and control of processes within modern supply chains instruments of
and ensure that the company management is supplied with controlling in use
information. These tools include hard (soft) analysis, target costing,
activity-based costing, economic value added, working capital
management and supply chain performance measurement. Its main
representative, the supply chain scorecard, is also combined with a
strategy map. All instruments are characterized in detail and related
specifically to supply chain management. This chapter also ends with
comprehension questions.
© Springer Fachmedien Wiesbaden GmbH, part of Springer Nature 2020 H. 393

Werner, Supply Chain Management,
https://doi.org/10.1007/978-3-658-32429-2_5
Controlling of the supply chain

E
E.2 Business basics and
cost tracking
E.2.1 Business basics

Financial Supply Supply chain controlling is a management subsystem. His tasks
chains
include the planning, management and control of all activities within the
supply chain. These activities are expanded by ensuring that information
is supplied to (supply chain) management. Controlling uses different
tools for this purpose. In the following, newer controlling instruments of
the supply chain are described. First, however, some business basics
must be clarified.
supply chain as The supply chain management represents a control loop system . The
control loop controller is the guide and the controlled system is the order-to-payment-S.
Possible manipulated and controlled variables within value chains are
inventories, freight costs, throughput times, set-up times or material
prices. The importance of the manipulated and control variables for the
effectiveness of selected measures is described on the basis of
inventories, freight costs and material prices. The focus is on their effects
on the balance sheet and the income statement.
capital commitment Stocks tie up capital because the money invested is not available for
other purposes. Free capital could generate interest through its
investment. This results in opportunity costs ("lost profits") for a company.
In Chapter D it became clear that the total costs of stocking are made up
of storage costs (warehousing costs, interest costs and other costs) as
well as shortage costs (cf. p. 295).
improvement of The phenomenon of capital being tied up by inventories is well known in

cash flow
business administration. However, it was only since the late 1960s that
inventory reduction programs have been pursued with vigour. Since
inventories are a component of current assets on the balance sheet ,
their reduction has a positive effect on cash flow (“excess funds”).
Inventories are mostly assigned to class 0. Inventory reduction measures
have become very important since the advent of just-in-time. By reducing
inventories, there is an opportunity to
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Business fundamentals and cost tracking

E.2
Exchange of assets in the balance sheet by reducing current assets
and increasing fixed assets. The released capital is invested, for
example, in property, plant and equipment (machines, buildings).
For financial analyses, a distinction must be made between gross "More net from
inventories and net inventories . As a result of the impracticability of gross..."
materials, the gross stocks are devalued to net stocks via the "Inventory
Reserve". Responsible for this are, for example, planning uncertainties
in the retrieval behavior of customers, series discontinuations of products
or the establishment of new fashion trends (cf. on excess and obsolete
stocks p. 301). The effect of an allowance on slow-moving inventories
is included in the Profit and Loss Account (see below). This phenomenon
is measured by the key figures inventory turnover rate and inventory
range.
Both indicators are described in more detail starting on page 419.
With the exception of the inventory revaluation at the end of the year, interest and
the level of inventories is only indirectly reflected in the income P&L effect
statement. The effects of stocking up can be found in the cost of sales
in particular, for example in the overhead material costs, tool costs and
personnel costs. For imputed calculations, interest is calculated on the
inventory effect on the operating result of the income statement via the
WACC (Weighted Average Cost of Capital) . This weighted cost of
equity and debt is between 6% and 10% and differs between companies
and sectors. If the inventories amount to EUR 100 million, which are
reported in current assets on the balance sheet, and if the WACC is set
at 7%, this results in an imputed burden for EBIT of EUR 7 million.
Freight charges and material prices are components of an income Impact on the
statement. Freight costs are usually booked under class four and income
material prices under class seven in the income statement. Their statement
increase or decrease has a 100% impact on EBIT. Both variables can
either be found in the cost of sales in the income statement, or they are
reported separately in the income statement.
The following shows how the controller can implement cost tracking hard spot and
for material prices, freight costs and inventories. All three factors Soft spots in the
influencing supply chain management are part of a hard (soft) analysis. supply chain
An example underlines these connections (cf. p. 463).
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E
E.2.2 Cost tracking Cost
What is cost tracking is a special monitoring system that is used to measure the
tracking? effectiveness of corporate activities. It is often integrated into a
reporting system (reporting). In the following, cost tracking refers to
three selected areas of the supply chain:
ÿ Cost tracking of material prices ÿ

Cost tracking of freight costs ÿ Cost
tracking of inventories
"No one plans to All three types of cost tracking in supply chain management are
fail, but most based on the use of forms. An example serves to describe the cost
fail at tracking of material prices, freight costs and inventories : The phantom
planning." (L.
company View AG manufactures television sets in Germany at the
Iacocca)
Frankfurt location. At the beginning of the 2020 fiscal year, View AG
changed suppliers for LCD panels . So far, the organization has been
supplied with LCD panels from Italy, and in the future it will source
them from Taiwan. The cost tracking of material prices, freight costs
and inventories extends to the reporting month of July of the current
fiscal year.
E.2.2.1 Cost tracking of material prices

basis of As mentioned briefly above, material prices are usually booked under
Material price class seven in the profit and loss account. The controller finds them
deviation either reported separately in the income statement, or they are
included there under the cost of sales. Changes in the material prices
(increases or reductions) are therefore reflected 100% in the "EBIT"
key figure. Controlling at View AG drafts Chart I for cost tracking of
material prices (cf. Figure E.1 and Werner 1999e, p. 150ff.). This
chart shows the material price deviation for LCD panels . All figures
are given in thousands of euros (T€) and negative figures in brackets.
The material price deviation measures the performance of the
purchaser. It indicates the difference between the material prices
budgeted in the previous year and actually booked in the current
financial year (actual) as well as the material prices planned during
the year (forecast).
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E.2
ÿ Area A.1: Actual figures from the monthly financial statements will be available to periods specific
controlling by July 2020. From the month of August 2020, Controlling will include ren
plan figures (forecast) in the chart.
ÿ Area B.1: Area B.1 visualizes the total material price deviation. The numbers are Cumulative Darÿ
shown cumulatively. Up to the actual July, the material price deviation amounts position
to 194 T€. A forecast (synonymously referred to as “Outlook”) reflects the
material price planning during the year. Until December 2020, this amounts to
€322,000.
- Volume effect: The volume effect accounts for the robbery portion of this Reduction of
material price variance. Of the 194 T€ in Actual July 2020, 154 T€ go material prices
back to this alone. This component can be influenced by the buyer. With
the conversion of the LCD panel supply from Italy to Taiwan, the buyer
has succeeded in reducing the procurement prices.
- Exchange material: Copper is used in the production of the LCD panels. No potential for
The price of copper is quoted on the stock exchange. It cannot be influencing

negotiated through purchasing. Copper costs more than budgeted in
2020. This effect is to be reported separately. By the end of 2020, it will
accumulate to (51) T€.
- Exchange rate effect: Purchasing cannot have any direct influence on Cushion currency
exchange rates either. Of the total material price deviation as of fluctuations
December 2020 (€322 thousand), €125 thousand is attributable to via hedging?
exchange rates alone. If this impact is based on a hedging, then
Treasury has successfully hedged that currency.
- Tool costs: Tool costs are high in some branches. The (7) T€ are based on Material provided
the provision of tools to the LCD panel suppliers.
- Discount: Finally, the discounts drawn are shown. Explore

They are derived from the payment terms. For example, a payment term payment terms
can read: "Acquisition of a 3% discount for payment by the 10th day of
the following month or after 30 days net". As part of the purchase of the
LCD panel, View AG will probably achieve €5 thousand from cash
discounts by the end of the year.
ÿ Area D.1: Controlling enters the figures for the 2020 budget here. Based on the Budgeted material
change of supplier to Taiwan, a positive effect of €10 thousand per month is prices
expected.
ÿ Area E.1: The deviations between actual and forecast as well as budget can be deviations
found in block E.1. By July 2020, Actual will have one measure
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positive deviation of 124 T€ achieved. This increases to €202
thousand by the end of the year. Although controlling has already
included a reduction in purchase prices of €120k in the budget due
to the change of supplier, this expectation has been exceeded by
€202k in the current fiscal year.
measures and ÿ Area F.1: Finally, actions to be taken to improve the material price
Define deviation and explanations for these deviations are entered and
responsibilities quantified in this area.
Figure E.1 Cost tracking of material prices
Chart I: Material Price Variance (MPA)

ÿÿ
Project: LCD panel purchase from Taiwan
View AG 2020 All numbers cumulative (YTD) Month july
A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1 A.1
Month 01 02 03 04 05 06 07 08 09 10 11 12
period Act Act Act Act Act Act Fc FC FC FC FC
B.1
ÿMPA _ 45 66 95 112 132 164 194 217 242 269 295 322
C.1 components of the MPA

ÿ Volume effect 34 51 75 91 103 131 154 170 190 210 230 250
ÿ Exchange Material (3) (7) (13) (17) (23) (27) (31) (35) (39) (43) (47) (51) 85 95 105 115 125
ÿ Exchange rate effect 15 23 34 41 55 62 73
ÿ Tool costs (1) (1) (2) (4) (5) (5) (5) (6) (7) (7) (7) (7)
ÿ Cash discount 0 0 1 1 2 3 3 3 3 4 4 5
ÿÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿÿ
D.1 MPA Bud

10 20 30 40 50 60 70 80 90 100 110 120
E.1 MPA Act/Fc vs. Bud

35 46 65 72 82 104 124 137 152 169 185 202
F.1 Material price variance improvement actions and variance explanations

Month 01 02 03 04 05 06 07 08 09 10 11 12
ÿ ÿÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿÿ
Actions to improve material price variance

ÿ ÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ
Discrepancy Statements (Act/Fc vs. Bud)

Legend: Act = Actual, Fc = Forecast, Bud = Budget, YTD = Year to Date

MPA = material price variance, all figures in thousands of euros (T€)
Negative numbers are shown in brackets
398

E.2
E.2.2.2 Cost tracking of freight costs
Because View AG posts its freight costs under class four, they affect Effect on the
the EBIT in the income statement by 100%. Delivery ex works is operating result
assumed for the LCD panel purchase from Taiwan. View AG pays
the freight costs itself. The cost tracking of the freight costs can be
found in Chart II (see Figure E.2).
ÿ Area A.2: The period is entered in this area. reporting periods
ÿ Section B.2: The freight costs are to be stated cumulatively. Until the actual July Enter total freight
2020 they amount to 166 T€ for the purchase of the LCD panel from Taiwan. The costs in the chart
forecast up to December 2020 totals €283k. carry
ÿ Area C.2: First of all, there is a distinction between incoming and outgoing loads. departure of
They are broken down into the areas of normal freight costs, special trips and black box
customs duties (the latter can only be indirectly influenced by logistics). The inbound
freight accounts for the stolen share of freight costs at €267,000 (year-end value).
By breaking down freight costs into individual components, potential problem areas
can be identified immediately. For example, the selective special trips for the month
of March in the entrance area amount to 27 T€. The controller will request a
justification for this from the freight manager.
ÿ Area D.2: The budget for delivery of LCD panels from Taiwan amounts to 240 T€ for budgeting of
freight costs (20 T€ per month). Underlyings
ÿ Area E.2: There is a negative deviation between the actual (forecast) and the budget Negative deviation
of € (43) thousand by the end of 2020.
ÿ Area F.2: Actions to improve the status quo and explanations for deviations in the who does what
form are to be entered in section F.2. This information is provided by the Logistics When?
functional area.
ÿ Area G.2: In area G.2, the key figure “freight costs in relation to sales” is calculated. Relative targets
The freight costs at the end of 2020 are expected to deviate negatively by (43) T€ beat absolute values
in absolute terms . However, absolute targets can lead to wrong decisions: in times
of better budgeting and beyond budgeting, they should be supplemented or even
replaced by relative targets. The higher freight costs are due to the fact that the
forecast up to December 2020 shows an increase in sales of €5,000 thousand
compared to the budget. According to the 2020 budget, freight costs were
399

E
th, in relation to sales, of 1.00%. However, the forecast only shows a value of 0.98%: The
freight ratio is 0.02% better than planned in the budget (positive deviation).
Figure E.2 Cost tracking of freight costs
Chart II: Freight costs
ÿÿ
All numbers accumulated
View AG 2020 Month july
(YTD)
A.2 A.2 A.2 A.2 A.2 A.2 A.2 A.2 A.2 A.2 A.2 A.2
Month 01 02 03 04 05 06 07 08 09 10 11 12
B.2 ÿ freight costs 23 38 80 105 123 136 166 181 207 232 256 283
C.2 Freight Charge Components
Inbound freight 20 35 75 97 115 126 156 170 194 219 243 267
ÿ Normal freight 17 29 42 61 79 88 113 125 145 165 185 205
ÿ Special trips 2 4 31 33 33 35 38 39 43 47 51 55
- Duties 1 2 2 3 3 3 5 6 677 7
outbound freight. 3 3 5 8th 8th 10 10 11 13 13 13 16

ÿ Normal freight 3 3 5 5 5 7 8th 8th 10 10 10 13
ÿ Special trips 0 0 0 3 3 3 3 3 3 3 3 3
- Duties 0 0 0 0 0 0 0 0 0 0 0 0
D.2 Freight costs Bud 20 40 60 80 100 120 140 160 180 200 220 240
E.2 Act/Fc vs. Bud (3) (2) (20) (25) (23) (16) (26) (21) (27) (32) (36) (43)
F.2 Actions to Improve Freight Costs/Deviation Statements

Month 01 02 03 04 05 06 07 08 09 10 11 12
ÿ
ÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ ÿÿ
ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿÿ
Freight charges/
G.2 01 02 03 04 05 06 07 08 09 10 11 12
Sales volume (%)
sales BUD 2000 4000 6000 8000 10000 12000 14000 16000 18000 20000 22000 24000
Freight
1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
costs/sales (%)
Sales Act/Fc 2013 5113 8356 10890 12993 14236 16730 19000 22000 25000 27000 29000
Freight
1.14 0.74 0.96 0.96 0.95 0.96 0.99 0.95 0.94 0.93 0.95 0.98
costs/sales (%)
Legend: Act = Actual, Fc = Forecast, Bud = Budget, YTD = Year to Date

All figures in thousands of euros (T€)
Negative numbers are shown in brackets
400

E.2
E.2.2.3 Cost tracking of inventories
Finally, the controller also creates a form for the cost tracking of imputed
inventories (see Chart III). The inventories are a component of the calculation
current assets in the balance sheet of View AG. They tie up capital
and generate opportunity costs. Due to the change of supplier from
Italy to Taiwan and the associated significant increase in delivery
times, additional safety stocks of LCD panels are required. With this
measure, View AG wants to cushion potential disruptions and delivery
delays in order to avoid imminent stockouts. See Figure E.3 below
for inventory cost tracking.
ÿ Area A.3: As in the first two cases, the periods of cost tracking are Set period
entered in this block (actual and forecast).
ÿ Area B.3: In area B.3 of the chart you will find the gross stocks (i.e. Gross Inventory
before devaluation due to immovability). In actual July 2020, the total
gross inventory of LCD panels amounts to €229 thousand.
ÿ Area C.3: The inventories are finally broken down into their components. disassembly of
The logistics management can see immediately which account groups total stock
the improvement measures for inventory reduction must first extend to:
Here it is clearly the purchased parts that could be taken on
consignment, for example.
ÿ Area D.3: For the 2020 budget, it was assumed that inventories are to planned values
be gradually reduced by a total of 75 T€: from 250 T€ in January to

175 T€ in December. Measures to reduce inventories must be
introduced for this purpose.
ÿ Area E.3: In the forecast, a compensation of the negative deviation Forecast on budget
(versus budget) is scheduled by the end of the year. Forecast and
budget are "in line" in December 2020 at €175,000. Based on the last
available actual, inventories have to be reduced by 29 T€ by the end
of the year.
ÿ Area F.3: Finally (as in the two previously characterized charts) actions Define actions
for improvement and explanations for deviations are entered in area
F.3.
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Figure E.3 Inventory cost tracking
Chart III: Gross stocks

View AG 2020 All numbers selective Month july
A.3 A.3 A.3 A.3 A.3 A.3 A.3 A.3 A.3 A.3 A.3 A.3
Month 01 02 03 04 05 06 07 08 09 10 11 12
B.3 ÿ Stocks 286 276 287 267 268 260 229 214 210 195 188 175
Components of stocks: ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿ ÿÿ
raw material 0 0 0 0 0 0 0 0 0 0 0 0
purchased parts 177 199 203 187 199 187 165 150 150 140 135 126 16 16 15
self-made parts 39 31 27 30 25 24 22 20 18
Work in process 33 29 23 19 22 25 27 30 28 28 26 25
finished goods 33 12 31 27 19 18 10 10 10 8th 8th 6
Material Down 0 0 0 0 0 0 0 0 0 0 0 0
payments Other 1 3 1 2 1 2 3 3 3 3 3 3
3 2 2 2 2 4 2 1 1 0 0 0
D.3 Inventory Bud 250 250 250 225 225 225 200 200 200 175 175 175
E.3 Act vs. Bud (36) (26) (37) (42) (43) (35) (29) (14) (10) (20) (13) 0
ÿÿ ÿÿ
F.3 Inventory Improvement Actions and Discrepancy Statementsÿÿ
Month 01 02 03 04 05 06 07 08 09 10 11 12
Actions to improve stocks

Discrepancy Statement (Act/Fc vs. Bud)

Legend: Act = Actual, Fc = Forecast, Bud = Budget

All figures in thousands of euros (T€)
Negative numbers are shown in parentheses
402
Key figure management in the supply chain

E.3
E.3 Key figure management in the supply
chain
E.3.1 General principles

Key figures (ratios) have the function of providing quick and key performance
meaningful information about business issues (cf. Binder 2019; indicator and
Gladen 2014; Krause 2010; Krause 2016; Steger 2014). They other measured
represent a reproduction of quantitatively comprehensible facts in a variables
concentrated form. Increasingly, new success parameters are used

in key figure management for performance evaluation with KPI, BPI and PPI.
ÿ Key Performance Indicator (KPI): Key Performance Indicators are real key
performance indicators. They have a highly strategic and long-term character.
As a rule, KPIs do not measure exactly, rather they seek an answer as to the
basic status of performance. Examples of KPIs in the supply chain are customer
satisfaction and order fulfillment time.
ÿ Business Performance Indicator (BPI): BPI are tactical indicators of selected

supply chain areas (functional unit, business unit, profit center). The "Order
Fulfillment Time" mentioned above can be broken down into the indicators
procurement time, storage time, packaging time and delivery time.
ÿ Process Performance Indicator (PPI): Process Performance Indicators are

operational process variables in selected business areas.
They measure exactly ("the second digit after the decimal point") and are to be
equated with the term "key figure" in the narrow sense. Selected PPI of the
"lead time" represent purchase requisition, material disposition, goods receipt
and goods receipt inspection time.
Key figures make it possible to link individual processes to one Only the
another. Viewed in isolation, key figures are not very meaningful. comparison makes
key figures really strong
Only in internal or external comparison do they gain in importance.
For example, an internal time comparison is useful if parameters from
several periods are weighed against each other.
The terms "key figure comparison" and "benchmarking" (cf. Key figures as
p. 342) are sometimes equated. However, this procedure is not indispensable

part of
followed in the present document: While a key figure only shows the
“where” (where is a company in the competition?), benchmarking benchmarking
describes the “how” (how is an organization
403

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nization managed to adopt a best practice situation?). Figuratively
speaking, a key figure "only" describes the temperature indicator of
a radiator. But it is not the thermostat (the automatic temperature
controller). A key figure shows where a company stands. However, it
does not automatically point the way to a best practice situation.
I do not agree Key figure management within a supply chain is currently undergoing
with the math. I change. In the past, only operational KPIs were used. These related
mean that the to their own company and its segments (location, profit center,
sum of zeros
business unit). In times of modern network management, on the
is a
other hand, strategic key figures are also used. The latter are not
dangerous only aimed at your own organization, but at the entire value chain.
number.” (S.
An important prerequisite for the use of strategic key figures is the
Jerzy Lec)
precise coordination of spatially or temporally distributed activities
within a supply chain.
E.3.2 Types of metrics
Systematization In this document, four differentiating alternatives of indicators are

of key figures distinguished. Further delimitation options - such as the subdivision
into normative and descriptive key figures - are not shown because
they hardly strengthen the progress in terms of content. The following
sections describe these key figure types in more detail:
ÿ Statistical differentiation: Absolute and relative indicators (members

section E.3.2.1).
ÿ Differentiation according to the target direction: profit, liquidity and value

increase indicators (Chapter E.3.2.2).
ÿ Differentiation based on effectiveness: strategic and operational

ve key figures (section E.3.2.3).
ÿ Differentiation according to the object reference: performance and cost

numbers (outline section E.3.2.4).
E.3.2.1 Absolute and relative ratios

Statistical Opinions differ when it comes to whether an absolute
distinction value is to be regarded as a key figure (e.g. the "sales" of a company
404

E.3
company), or whether a key figure is not only created through the
relation (e.g. the “net income in relation to sales”).
The relative indicators include classification numbers, relational
numbers and index numbers (cf. the typology of relative indicators
Figure E.4). While the breakdown number is a “part of the whole” (e.g.
the market share), the relationship number reflects a normalization of
basic data (e.g. turnover per employee in a fiscal year). The index
number, on the other hand, shows the development of selected
variables over a time horizon. An example is the price development
for aluminum over the last twelve months.
Typology of relative indicators Figure E.4
KPI Type Statement Example
part of absolute market share

outline number Entire in %
Normalization of base Sales per employee and

relationship number
numbers period
assessment of the time price index

index number
Development for raw materials
E.3.2.2 Success, liquidity and value increase ratios

The performance indicators fall under the key performance "To be
indicators. First of all, the return on sales (ROS) can be used to successful is to
calculate the company's success . The return on sales is calculated get up one more
from figures in the profit and loss account. When it is determined, the time than you
profit is set in relation to the sales achieved. The variable "profit" is fell down." (W. Churchill)
usually equivalent to "net income".
Profit ×100
ROS =
Sales volume
Another key performance indicator is return on equity (ROE), which return on equity
is the division of earnings to equity.
While profit is found on the income statement of a company, equity is
found on the balance sheet.
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profit × 100
ROE =
Equity capital
Return on total Like the return on sales and the return on equity, the return on total
capital capital (ROTC) also represents a more traditional measure of success.
The ROTC is also determined from the "profit". The following definition
of return on assets is common:
(Profit FK ÿÿ Interest) × 100

ROTC =
Equity + outside capital
Modern In addition to these three traditional performance indicators, the return

indicators for on capital employed (ROCE) and the return on assets (ROA) are
determining becoming increasingly important. They are now often taken into account
returns at balance sheet press conferences and in the context of key figure comparisons.
Both key performance indicators can be understood as the generated
"return on investment" of a company. The calculation options for ROCE
and ROA can be found in the following definition blocks.
EBIT × 100
ROCE =
Employed capital
ROCE and When determining ROCE, the operating result for a period (EBIT) can
ROA on the rise be read from the income statement. Capital employed consists of fixed
assets and net working capital – inventories, receivables and interest-
free liabilities – (see p. 452). In contrast to the return on capital employed,
the counter for the key figure return on assets is not derived from the
EBIT, but from the gross profit (gross profit). If you take a closer look at
the profit and loss account, when gross profit is reconciled with EBIT,
expenses and income are offset using the following three blocks:
ÿ Marketing and Sales ÿ Administration and

General ÿ Research and Development
406

E.3
Big Profit × 100
ROA =
Employed capital
The increasing use of ROCE and ROA in corporate practice is probably Disposability
due to the fact that a calculation of success is no longer derived from the particularly
annual surplus ("profit"). Rather, EBIT or gross profit are regarded as real pronounced
indicators of success for the return on capital, because these two variables
are highly disposable. They show bluntly the operative business success.
The annual surplus, on the other hand, is calculated after interest and taxes.
It is well known that (borrowing) interest and taxation can hardly be
influenced by the management because they are specified externally.
Finally, the return on investment (ROI) represents another success factor, ROI as a key
which is calculated by multiplying the return on sales and the capital figure system
turnover. In this regard, it is possible to break it down into a key figure
system (DuPont scheme, see Figure E.5).
A supply chain manager influences the profitability of a company directly Stocks have a
and sustainably. The following example illustrates this idea (see Figure E.6): lasting effect on
A company succeeds in reducing inventories by 20% as a result of initiated the ROI

inventory reduction activities. Expressed in absolute terms, inventories have
fallen from EUR 100 million to EUR 80 million. Ceteris paribus, this effect
results in a reduction in current assets of EUR 20 million: it decreases from
EUR 110 million to EUR 90 million.
Thus, the total assets are also reduced by 20 million euros: from 234 million
euros to 214 million euros. Based on this asset reduction, the capital
turnover increases significantly from 2.31 to 2.52. Turns The change in the
top metric ROI is also notable. This increases from 12.82% to 14.03%. As a
result, the example used allows the following interpretation: A reduction in
inventories by 20% improves the ROI by 1.21% percentage points (based
on the numbers used). This corresponds to a relative return increase of
9.5%.
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Figure E.5 Example of how to calculate the return on investment
price
2
+
Turnover
540,000 Quantity
270,000
Profit
30,000 ÿ
Return on Materials
sales : Cost 398,000
5.56% 510,000
+
ROI Turnover
x 540,000 Staff
12.82%
102,000
Turnover
: Fixed +
2.31
assets
124,000 Miscellaneous
Fortune 10,000
134,000 +
Current stocks
assets 100,000
110,000
+
Miscellaneous
10,000
Legend: Figures in thousands of euros (T€); except percentages.
effects of However, it should be explicitly pointed out again that the example
Correctly of the reduction in stocks described above only applies ceteris
interpret paribus . To attribute an improvement in returns exclusively to a
inventory reduction reduction in inventories seems adventurous: In the characterized
observation period, inventories were reduced by 20%. However, the
level of all other variables remained unchanged.
Complementary This assumption seems unrealistic. A reduction in inventory “at any
versus price” literally triggers trade-off effects (target competition). For
competing behavior example, inventory reductions tend to have a negative impact on
material prices, freight costs, production costs, or sales. These
negative effects could lead to a deterioration in profitability (see
Figure E.6). A supply chain controller would have to compare the
positive cash flow effects of inventory reduction with the expected
deterioration in EBIT in order to be able to make an overall optimal
decision for a company. The determined return increase of 9.5%
would no longer be sustainable.
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E.3
Improving ROI by reducing inventory Figure E.6
price
2
+
Turnover
540,000 Quantity
270,000
Profit
30,000 ÿ
Return on Materials
sales : Cost 398,000
5.56% 510,000
+
ROI Turnover
x 540,000 Staff
14.03%
102,000
Capital
: Fixed +
turnover 2.52
assets
124,000 Miscellaneous
Fortune 10,000
214,000 +
Current Holdings
assets 90,000 80,000
Miscellaneous
10,000
Legend: Figures in thousands of euros (T€); except percentages.
The cash surplus of a company represents the dynamization of the cash flow
static liquidity. It is an indicator of earning power. Consideration
The excess funds are synonymously referred to as cash flow. In the
simple case, the cash flow is determined as the difference between a
payments and withdrawals. The cash flow thus shows the ability of a
company to generate payment surpluses from the operational service
processes. However, direct deposits and payments from a company
cannot be viewed by a third party.
Therefore, other indicators from the annual financial statements are
used as a basis for calculating a cash flow.
The cash flow is used to depict financial flows in supply chains. In "Money, get away,
the Order-to-Payment-S on p. 8 it is to be classified in the lower, third get a good job
area. Especially in times of crisis (e.g. Corona), companies pay more with more
attention to securing their liquidity ratios. pay..." (Pink Floyd)
A related indicator of cash flow is working capital. Size has
experienced a veritable renaissance in recent years, in particular due
to the emergence of the cash-to-cash cycle.
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E
Various options for A cash flow is not a uniformly defined one
cash Identification number. Rather, there are a number of calculation options
flow determination to determine a financial surplus. That's why it's in the frame
of a benchmarking on the cash flow, to pay close attention to its definition.
The definition block below shows a pragmatic way of determining the
cash flow (cf. Alter 2016, p. 51; Lewe/ Schneider 2004, p. 41; Probst
2012, p. 59).
Net income ±
depreciation/write-ups ± increase/
decrease in provisions ÿ Praktiker Cash Flowÿ
=
Advanced cash However, this “practical cash flow” does not reflect that supply chain
Flow management sometimes has a significant influence on the surplus funds.
Therefore, the expanded cash flow is given below, the definition of
which reveals that changes in inventories and receivables directly
influence the amount of the excess cash (cf. Lewe/ Schneider 2004, p.
42).
net income
± Depreciation/write-ups on assets
+ Changes in provisions
+ Changes in special items with an equity portion
+ Changes in value adjustments
ÿ Changes in inventories
ÿ Changes in claims
ÿ Changes active RAP
ÿ Own work capitalized
= Expanded cash flow
Cash flows are Other ways of determining a cash flow are not pursued in order not to
very transparent go beyond the scope of the explanations. The reader is referred to the
specialist literature (cf. Alter 2016, p. 19ff.; Krüger 2011, p. 13; Lewe/
Schneider 2004, p. 41ff.; Ossola-Haring 2006, p. 108ff.; Reinecke et al.
2009 , p. 113ff.). Discounted (free) cash flow, indirect cash flow, operating
cash flow and net cash flow are defined there.
410

E.3
Finally, value increase key figures are differentiated according to economic value
their target direction. Probably the most important representative of Added
this category is the Economic Value Added (EVA). A detailed
characterization can be found under section E.4.4 (cf. p. 485).
Economic Value Added – like the related concepts Market Value
Added, Economic Profit, Added Value or Cash Value Added –
increase transparency in competition. These are key figures that
follow the idea of shareholder value.
E.3.2.3 Strategic and operational indicators

Strategic indicators are characterized by a high level of success "Strategy is a
(effectiveness indicators). They mostly measure long-term effects. system of
Operational key figures, on the other hand, are taken into account makeshifts." (H.
when evaluating efficiency. For example, they evaluate the profitability Graf v. Moltke)
of logistical activities. Strategic as well as operational indicators can
either be geared towards a complete network (external) or internally.
Figure E.7 shows this connection in a clear manner (cf. also Meyer
2011, p. 125ff.; Weber/ Wallenburg 2010, p. 245ff.). Of course, the
KPIs used are only to be understood as examples. In addition, they
cannot be assigned to a respective field in binary form.
Strategic and operational key figures Figure E.7
measure type
Strategic KPIs Operational KPIs
supply level
ÿ Total run SC - Cash-to-cash cycle

ÿ Total cost SC ÿ Interfaces SC
network metrics
- Time to market SC ÿ Customer Contacts SC
ÿ Total delivery time SC
ÿ Inventory turnover - Cost per order

Internal metrics ÿ Delivery service level ÿ Orders per year
ÿ Delivery flexibility ÿ Marketability of stocks
E.3.2.4 Performance and cost indicators

Finally, performance and cost indicators can be categorized. The Differentiation according
performance in supply chains mostly refers to the to their “object reference”
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E
Compliance with time and quality requirements. However, performance
criteria such as adaptability, complexity and willingness to cooperate
must also be evaluated in modern value creation networks.
The cost indicators , on the other hand, relate, for example, to
process costs, quality costs, storage costs, coordination costs and
distribution costs. Figure E.8 clearly shows this fact (cf. also Weber/
Wallenburg 2010, p. 243ff.).
Figure E.8 Performance and cost indicators
category
Metric category Example
KPI Type
- Speed ÿ Lead time

- Quality ÿ Reject rate
performance metrics - Adaptability ÿ Setup time
- Cooperation ÿ Same records
- Complexity ÿ Number of product variants
- litigation costs ÿ Transaction costs

ÿ Quality costs ÿ Recall costs
cost metrics ÿ Storage costs ÿ Inventory costs
ÿ Voting costs - Communication costs

ÿ Distribution costs - Freight charges
E.3.3 Key figure typology of the supply chain

more fundamental A two-dimensional typology of key figure management for the supply
Structure of the chain is discussed below. The increase in added value is characteristic
typology of the elements of the first dimension . Based on the breakdown of
an internal company supply chain, input, throughput and output
represent the three core areas of the logistics chain. In order to
reduce opportunity costs in the supply chain, additional key figures of
the payment are taken into account. With reference to their
contribution to value creation , the following key figure groups
emerge:
ÿ Input: Procurement key figures
ÿ Throughput: Key figures for storage, order picking and production
412

E.3
ÿ Output: Distribution key figures
ÿ Payment: Key figures of the financial flows
The increase in added value across the input, throughput and output reference to added
stages results in particular from the factors of personnel deployment, value
material consumption, logistical depreciation and operating and resource
consumption. These influencing variables range from the procurement
of materials to the dispatch of finished goods stocks. However, the key
figure system presented is not exclusively to be related to the direct
sector (production, assembly). It can also be used to measure activities
in the indirect area (services, service).
The second dimension of the typology lists different types of key Types of identification
figures. The key figures of the present system are divided into three pay
areas:
ÿ Generic key figures (structure key figures)
ÿ Key figures for evaluating productivity and profitability
ÿ Quality and service indicators
For a more detailed description of the various types of key figures in Structural
this typology, the concept of generic variables must first be clarified. indicators
The generic key performance indicators include strategic and

overarching variables that fundamentally characterize the respective
area of a supply chain (structural key figures).
The second category of different types of key figures relates to the From productivity
typology of productivity and profitability indicators. to economy
Productivity indicators are the result of certain output-input relations.
Labor productivity is often measured in this context: An example of this
is “picks per hour” in order picking. As part of the determination of
economic efficiency indicators, productivity must be evaluated via
expenses (income) or costs (services). Referring again to picking, these
are, for example, "costs per pick".
In the third area of different types of key figures of the Metrics of

Quality and service indicators (satisfaction indices) can be found in quality and
supply chain management . An important representative of this category service
is the delivery service level.
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E
claim and These two dimensions of the key figure typology are filled with a large
content number of key performance indicators in the following chapters. This
concept does not claim to be complete. The definitions of the key figures
can also vary in individual cases. In the following, however, an attempt is
made to capture the key value drivers of modern supply chain
management with the variables shown here. Figure E.9 shows a two-
dimensional matrix in which the content characterized above can be found.
Figure E.9 Structure of the indicator typology of a supply chain
added value
input throughput output payments
- Procurement - Storage - Distribution - Finances

- Provision
KPI Type
- Manufacturing
Generic metrics
I.1 II.1 III.1 IV.1
productivity
and profitability I.2 II.2 III.2 IV.2
indicators
quality and
I.3 II.3 III.3 IV.3
service metrics
E.3.3.1 Input: Procurement key figures
Low added The input is a sector of the key figure typology with low value added, since
value no material processing has taken place.
With reference to the inventory structure, you will find here primarily
purchased raw materials and production parts (purchased parts). The key
figures of the input of a supply chain originate in particular from the procurement.
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E.3
In general, they measure the performance of supplier integration (cf.
Cohen/ Roussel 2006, p. 303ff.; Schulte 2017, p. 641ff.; Stollenwerk
2016, p. 91ff.; Strigl et al. 2004, p 143ff.).
E.3.3.1.1 Generic indicators

First, the absolute generic key figures of the input of a supply chain General
are listed (cf. field I.1 in the typology box and the key figure block procurement
key figures
below). These sizes have a pronounced affinity for purchasing and
disposition.
number of purchased parts.

purchasing volume.
Number of order items.

number of suppliers.
Furthermore, the typology contains a number of relative generic key "A cynic is a
figures of the input of a supply chain. A classic among these variables person who
is the price index. Its conceptual clarification takes place in the knows the price
of everything and
following definition block. This segment of the typology also includes
the value of
the key figures volume structure and maverick buying rate (their
nothing." (O.
terminology is also reproduced below). The performance of the buyers
Wilde)
is measured with the help of price indices (cf. section E.2.2.1 on p.
396 for material price deviations). To do this, as many influencing
factors as possible that the buyer cannot negotiate directly should be
factored out. These include currency effects, tariffs or stock market
materials.
Price paid × 100

Price index (%) =
Price budgeted
The key performance indicator volume structure increases the volume per
transparency of procurement activities by breaking down the entire Determine
commodity
purchasing volume into various product groups (“commodity”).
With the help of the differentiation of procurement channels
(manufacturers, wholesalers, retailers, agencies), the informative
value of this key figure can be increased.
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Purchase volume per material type ×100
Structure Volume (%) =
Total purchasing volume per year
Wild shopping The term maverick buying (framework agreement quota) has already
been clarified in this publication (cf. p. 41). In short, it stands for a
type of goods procurement that is not carried out on the basis of
existing framework agreements. This can have a negative impact on
the total cost of ownership in particular (see p. 36). This deficit can
be uncovered with the help of the maverick buying rate.
Purchase volume RV × 100

Maverick ÿ Buying ÿ Odds (%) =
Total purchase volume
E.3.3.1.2 Productivity and profitability indicators
Key figures at In field I.2 of the matrix, the two dimensions of input as well as
a glance productivity and profitability indicators meet. The performance
measurement indicators characterized here are shipments per day,
goods receipt time per shipment, goods receipt inspections per day,
goods receipt costs per shipment, and goods receipt inspection costs
per day.
productivity in The number of shipments per day measures the productivity of the
Goods Receipt employees in the incoming goods department. As part of a key figure
comparison of shipments per day, the importance of different tools
for goods receipt (such as barcodes or RFID) should be emphasized.
These instruments have a lasting influence on supply chain
performance and can falsify the results of benchmarking.
Number of incoming shipments

shipments per day =
Number of employee hours
cost driver of Another representative for assessing productivity within the value
procurement chain is the goods acceptance time per shipment. Ceteris paribus,
disproportionately long receipts of goods drive up the process costs
because the activities lose efficiency.
Therefore, in this case, the reasons for low productivity in goods
acceptance must be worked out - and these deficits eliminated as
quickly as possible.
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E.3
Total goods receipt time
Acceptance time per shipment =
Number of incoming shipments
In corporate practice, there is a trend towards reducing the rates of Entry controls
incoming goods inspections (WEK) carried out. This should save eat up money
handling costs and personnel costs. This productivity indicator can be
used to check whether this goal has been achieved.
Number of controls in WE
WEK per day =
Number of units per day
The profitability indicator of goods receipt costs per shipment is widely Economics of
used in the context of determining process cost rates within procurement. receiving goods
Possible cost drivers can be the handling of goods and the deployment
of personnel.
Total cost of goods receipt

Cost of acceptance per shipment =
Number of incoming shipments per day
Finally, the incoming goods inspection costs per day must be determined.trust index
This profitability indicator is important for calculating transaction costs within the
within supply chain management. With the help of an intensified supplier value chain
integration (connected with the possibility of shifting activities of the
customer to the supplier) the attempt is currently being made in company
practice to drastically reduce the costs for incoming goods inspections.
Cost per goods receipt inspection

Costs for controls in WE =
Number of incoming goods per day
E.3.3.1.3 Quality and Service Metrics
Finally, under this section for the input segment, there is a description of "The king is
quality and service indicators (cf. in the indicator typology field I.3). gone, but he's
The "king" among these sizes is the delivery service level. In general, it not forgotten, this
measures the percentage of orders that a supplier has been able to fulfill is the story of
a Johnny
as agreed. Qualitative, quantitative and temporal deviations from the
targets are fundamentally conceivable. Rotten..." (Neil Young)
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Order-based The incoming service level measures the percentage of deliveries
orders that are on time, in quantity and in quality. This key figure evaluates
the availability of goods for a customer.
ÿ
Number of ordered items 100
Service level (%) =
Number of order items in total
"Forget all The rejection rate and the delay rate are used as "sub-key figures" of
about equality. the incoming service level. They are identified in more detail below.
We call it Both indicators stand for the quality of supplier shipments. The
master and rejection rate indicates the percentage of deliveries that suffer from
servant..." (Depeche Mode)
qualitative, quantitative or temporal deficits. These difficulties do not
necessarily have to concern the goods themselves. For example, they
can also be caused by damaged or dirty reusable packaging.
Number of accesses rejected 100

ÿ
Shipments rejected (%) =

Total number of entries
Who is The delay rate only measures the timing of incoming goods deliveries.
late... This performance indicator thus determines the percentage of delivery
backlogs (“logistics backlogs”).
Number of late arrivals 100 ÿ
Backlogs (%) =
Total number of entries
E.3.3.2 Throughput: Key figures of the storage, the

picking and production
throughput as After the key figures of the input have been assessed in more detail
supply chain above, the throughput area is then characterized . With increasing
component added value, the three segments of storage, order picking and
production are subsumed under this. For possible indicators of
throughput see Cohen/ Roussel 2006, pp. 305ff.; Gunasekaran et al.
2001, p. 80ff.; Krüger 2014, p. 87; Ossolaÿ Haring 2006, pp. 357ff.;
Reinecke et al. 2009, p. 113; Schulte 2017, p. 650ff.; Siegwart 2002,
p. 98ff.; Strigl et al. 2004, p. 165ff.; Weber 2010, p.55ff.
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E.3
The description of the throughput performance indicators begins with parent
the generic key figures (cf. field II.1 in the key figure typology). absolute values
Similar to the discussion about the content of the input, the following
block of indicators initially contains some absolute values.
Number of items stored.

Number of packaging units.
Quantity of parts stored.
Number of storage processes.
order volume.
Number of articles to be planned.
Number of incoming orders.
Two indicators stand out in the characterization of relative sizes of Turn rate
storage management : the turnover rate and the range of storage. as a strategic
The inventory turnover rate (turn rate) is a strategic indicator that is indicator
of great importance for (top) management and logistics management.
For day-to-day business, on the other hand, the turn rate is of little
use, since it represents a aggregation of part numbers (e.g. at product
line level) and is of little service to dispatchers in the operational field
of activity.
A turn rate indicates how often the stocks are exchanged (“turn Also understandable
for third parties
over”) in the warehouse per period, mostly related to a fiscal year.
They are calculated from figures from the profit and loss account
(sales or production costs of sales) and the balance sheet (average
inventory). The inventories are to be given as an average if possible,
because an absolute value at the end of the year could lead to a
distortion of the actual situation. Since sales and inventories can be
easily read from the annual report (at least this applies to companies
subject to publication), the calculation of a turn rate from an external
point of view (investor relations) shown below is often used.
Sales (manufacturing costs)

Turn Rate (Investor Relations) =
Average inventory
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example for gymnastics An example for determining a turn rate underlines the statements: A
rate calculation medium-sized automotive supplier achieves a turnover of 500 million
euros. In the balance sheet, this organization has a stock of 60 million
euros. This results in an inventory turnover rate of 8.3 per year.
500,000,000 euros
= 8.3 turns
60,000,000 euros
Internal stock For internal determinations of the turn rate, the cost of goods used
turnover via material (synonym: material consumption) can replace the turnover in the
consumption
calculation formula in the counter . This calculation of the inventory
turnover rate is certainly "sharper". However, it excludes the possibility of
an external key figure comparison, since the cost of goods sold cannot
be viewed by a third party.
material consumption
Turn Rate (internal calculation) =
Average inventory
operational In contrast to the turnover rate, the range of the warehouse (days on
heavyweight of hand, ranges) represents an operational key figure of warehouse
camp management. This indicator is broken down down to the individual item
number and helps the dispatcher in the daily control of his inventory.
Easily derivable from the semantics, this key figure indicates how many
days (weeks, months) the stock of a material type in stock is "sufficient".
In some cases, the terms “storage time” and “covering time” are used
synonymously in the literature (cf. Krüger 2014, p. 129; Lewe/ Schneider
2004, p. 111). Analogously to the turnover frequency, the external
calculation method (Investor Relations) is first shown. Subsequently,
two internal options for defining ranges of storage are discussed: the past-
oriented and the future-oriented setting time. The retrospective inventory
range is calculated as the reciprocal of the inventory turnover (see below):
Average inventory
Ranks (Investor Relations) =
Revenue (Cost of Sales)
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E.3
The example used for calculating an inventory turnover rate (see p. Calculation of
420) is taken up and continued here. To do this, the average stock stock range
must be multiplied by the calendar days (or weeks) of a year and
divided by the turnover. The range of inventories is 43.2 days on
average. Finally, a test can be made: the turnover rate (8.3) is
multiplied by the reach (43.2). The result of 360 gives the calendar
days of a whole year.
60,000,000 euros x 360 days

43.2 days =
500,000,000 euros
Using a past-focused reach is useful for companies whose business consumption as
is subject to seasonal, trend-driven, or cyclical fluctuations. The past calculation basis

consumption refers to the stocks already installed during production
or assembly.
Duration
Internal reach of the camp (retrospective) =
consumption
A requirement, on the other hand, is determined by the future- Not for everyone
oriented reach from the delivery and the JIT call-offs. For "difficult" business suitable
customers who change their orders frequently and therefore only
have a low level of sales forecast accuracy, inventory control via a
forward-looking range is not recommended.
Duration
Internal range of stock (prospective) =
Requirement
The inventory turnover rate and the inventory range are two important Other key figures of
indicators for measuring the performance of warehouse management. the bearing

Additional generic indicators used in warehousing are discussed in sens
the definition blocks below (cf. in particular Krüger 2014, p. 95;

Schulte 2017, p. 652ff.).
Handling costs have a significant influence on warehouse Define extended
management. Opportunity costs (lost interest profits) and shortfall storage cost rates
costs (due to understocking), on the other hand, are not taken into ren
account when determining the storage cost rate. As a result, the

informative value of this key figure suffers. Consequently, the conventional
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Onal calculation of storage cost rates (the division of storage costs by
average stock levels) can be extended to include interest costs and
shortage costs.
Storage rate
+ interest rate (of the tied-up capital)
+ costs for shortages
= Extended storage cost rate
High fixed costs The degree of space utilization is an indicator of the fixed cost burden
shares of the warehouse: A low degree of space utilization (caused by high
vacancy rates) indicates a disproportionate burden of fixed costs, for
example from rents and depreciation. This is because the fixed costs
are allocated to a relatively small number of production units.
In addition, a pronounced degree of space utilization often indicates the
need for warehouse expansion or outsourcing.
ÿ
Utilization of warehouse (occupied shelf space) 100
Land use (%) =
Storage capacity (total area)
Better use of storage The importance of a storage area is determined with the help of the
space storage area share . According to Schulte (cf. Schulte 2001, p. 484),
the ratio of the production area to the storage area is usually between
0.6 and 1.6 in practice. With a reduction in the storage area, the
improved use of space is achieved, which leads to an increase in the
efficiency of production control (increase in "storage density").
Production area 100ÿ

Area storage (%) =
area warehouse
Hermaphrodite The inventory ratio indicator is a hybrid variable and stands between
between the the worlds of logistics (“number of goods stored” in the numerator) and
fronts purchasing (“number of items procured” in the denominator). The
disadvantage of this metric is that while it provides information about
the quantity of items stocked and procured, it neglects the value of
goods. This performance indicator should therefore be supplemented
with the range or the turn rate if possible.
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E.3
Number of goods stored 100 ÿ
Stock Ratio (%) =
Number of items procured
Following the presentation of generic key figures of warehouse Evaluate picking
management, a discussion of selected generic indicators of a picking processes
follows in the further explanations (cf. the following definition blocks

"picking positions per order" and "degree of automation of picking").
The manager of a value-added chain is not only interested in the

sheer number of picks, but also in their assignment to orders: for
example, to calculate subsequent average processing times per
employee on the basis of this information.
total picks
Picks per order =
number of orders
The indicator degree of automation of picking provides information Mechanical vs.
about the proportion of manual intervention in the provision: A low manual picking
degree of automation indicates high personnel and handling costs for sioning
picking processes.
Picks automated 100

ÿ
Picks automated =
total picks
Finally, for the throughput segment, the generic key performance Manufacturing KPI
indicators of a production have to be examined. The first key figure
presented here, "Area share of traffic routes", represents the direct
transition to order picking (this variable could also be included under
provision).
The more generous the area of traffic routes in the hall, the less Traffic routes
space is available for production and logistics. The traffic routes in swallow up space
the storage area can be optimized using simulations.
ÿ
Area of traffic routes 100
Proportion of area traffic routes (%) =
area production
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E
outsourcing vs. The vertical range of manufacture quantifies the share of self-
insourcing production (in-house production) in sales. In other words, this indicator
measures a company's outsourcing rate. To determine the added
value, the preliminary and third-party services are to be subtracted
from the self-produced services.
ÿ
Added value 100
Vertical integration (%) =
Sales volume
How is "adaptability" Upside production flexibility (delivery flexibility) is an integral part

measured? of SCOR (see SCOR p. 70). It measures the amount of time in days
that a company needs to satisfy an unplanned surge in demand.
SCOR anticipates an unpredictable 20% increase in customer orders.
Key figure comparisons (cf. p. 82) show that in times of modern IT -
combined with the possibilities for cross-company communication -
the market partners only need a few weeks to satisfy a sudden
demand. In the late 1950s, Forrester measured (Forrester surge)
that it took organizations about a year to adequately respond to an
unplanned 10% surge in demand. With the help of modern IT (which
serves to improve information transfer between the partners), the
bullwhip effect has not been completely defeated, but has at least
been contained.
A bullwhip effect describes the logistical whiplash: stocks swing up in

stages along the stages of a logistics chain.
Supply and demand are not in alignment. Possible reasons for the
emergence of a logistical whiplash are incorrect sales forecasts,
erratic ordering behavior by customers (e.g. caused by sales
promotion measures), accumulated ordering processes and forced
discount campaigns by retailers (cf. in detail p. 47).
Upside Production Flex.(%) = Time in days to satisfy an unplanned

20% increase in demand.
disposal and Not only the key figures of the supply are used for the evaluation of
Recycling is production processes. KPIs for disposal and recycling are also used
becoming more importanthere. An example of this is the recycling rate. It can be used to
determine the proportion of used or recycled materials that are fed
back into the production process. In some industries
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E.3
this value increases almost automatically due to the shortage or
increase in the price of resources (green supply chains).
ÿ
Percentage of recycled material 100
Recycling rate (%) =
Total material consumption
The contents of this section are dedicated to field II.2 of the indicator "See I'm leaving,
typology. This is where the two dimensions of “throughput” and this warehouse
“productivity and profitability indicators” meet. In the first step, various frightens
warehouse key figures of this segment are described. This is me..." (D.
followed by a closer examination of the KPIs for picking and production. Matthews Band)
The productivity of the employees in the warehouse is evaluated with Limited

the indicator warehouse movements per employee. When comparability
benchmarking this key figure, it should be noted that the employees
may have very different tools (trucks) at their disposal, which means
that there is a risk of comparing “apples with oranges”.
Total number of stock movements

Warehouse movements per employee =
Number of employees in the warehouse
The degree of space utilization shows how efficiently the available The place thieves
storage space is used. A key influencing factor is the potential on the track
stackability of the goods themselves or their packaging carriers.
Large load carriers or small load carriers are available as decision
alternatives.
storage volume 100

ÿ
Warehouse space utilization (%) =
storage volume
The average storage space costs determine the profitability of the Record storage
warehouse. However, this key figure should be calculated in costs
combination with the degree of space utilization (see above), as
otherwise the volume of the available storage space would not be
taken into account.
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Total interior storage costs
Cost per bin =
Places camp total
High proportion of The numerator of the key figure costs per warehouse movement
personnel costs is derived in particular from the personnel and material costs of
warehousing. The core of the indicator indicates which orders cause
particularly high costs due to their type or size.
cost of storage
Cost per stock movement =
Entry warehouse / exit warehouse
productivity and Following the labeling of selected warehouse key figures, key
economics of provision performance indicators for picking are discussed below, which serve
to determine productivity or profitability. The key figures shown below
are picking per employee, picking orders per employee and costs
per picking order.
How productive are the A picking process is referred to as "picking". Therefore, the metric
warehouse workers? "picks per employee" is also known as picks per employee . It
measures the productivity of the workers in the camp. In combination
with the degree of automation, which can also be measured per
employee, this figure gains in importance.
pick 100
ÿ
Picks per employee (%) =

MA camp
Compress picks into The key performance indicator picking orders per employee
orders serves as a supplement to the "Picks per employee". The key
figure measures the processed orders per employee. It provides
information about the scope of incoming customer orders.
Picks processed per MA

Orders per pick and employee ÿ
MA camp
Differentiate picking How economical is a picking process? An answer to this question is

processes according to given with the help of the costs per picking order . It should be
their type
noted that the complexity of a picking order has a significant impact
on the cost structure of this activity.
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E.3
Total deployment costs
Cost per order deployment ÿ
Number of orders provision
After all, productivity and profitability are one efficiency in the

to measure the production that takes place after picking . The first key increase production
figure for evaluating performance in the segment under consideration is

the number of incoming orders processed per employee. This
variable provides information about the productivity and the degree of
utilization of employees within the scheduling. For a comparison of key
figures, it must be taken into account that the number of orders
processed may depend heavily on the respective equipment and the
degree of automation of the workplace: for example, the equipment of
the workplace with information and communication systems.
Processed orders per MA

Incoming orders processed per employee ÿ
MA order processing
In addition to the “number of incoming orders processed per employee”, Compare inventory
the frequency of maintained inventory accounts per employee is accounts
used to reveal productivity within a disposition. The individual incoming

orders can vary greatly in scope. To level out this imbalance, the number
of inventory accounts maintained by an employee is also included in the
analysis.
inventory accounts total

Maintained stock accounts per employee ÿ
MA for inventory management
A machine utilization intensity measures labor productivity within a measurement of

supply chain. It is to be understood as an indicator for the utilization of a labor productivity
company's potential factors. The size
becomes more informative when it is considered in combination with the
value driver "downtime per machine" (see p. 431).
amount of production
Intensity of used machines ÿ
Machine usage (hours)
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evaluate The profitability of a production control is evaluated with the help of
productivity the processing costs per incoming order . It can be used to
determine the cost-benefit of order processing. Ideally, the processing
costs of an incoming order should be included in a transaction cost
analysis.
Cost of processing per order

Cost per order provision ÿ
Incoming orders processed
Reduce disposition Disproportionately high costs per MRP activity (this key figure is
costs synonymously called "costs per order") indicate that production
planning is not very economical. This shortcoming can be due to the
inefficiencies in the use of technological resources (such as IT) or to
a lack of communication with neighboring functional areas.
cost of orders
Cost per order ÿ
number of orders
Process costs Finally, the key figure processing costs per production order is
dominate preferably used as part of a process cost determination. For key
figure comparisons, however, it applies that different heterogeneities
of the production structures have a significant influence on the
processing costs of production orders.
Total processing costs

Processing costs per order production ÿ
Number of orders production
E.3.3.2.3 Quality and service metrics
"It may be that the As shown in section E.3.3 on p. 412, the two dimensions “throughput”
customer is king, and “quality and service indicators” are combined in field II.3 of the
but I would like to indicator matrix. While retaining the previous procedure, the key
know in which figures of the storage should first be mentioned. After their
country." (D.
discussion, the order picking key figures are classified in this field of
Fleischhammel)
the matrix. Finally, the production key figures are characterized in
more detail.
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E.3
Based on the past-oriented range, stocks are broken down into the three identification of
areas “current”, “partially non-current” (excess) and “completely non- Excess and
obsolete stocks
current” (obsolete). The marketability analysis has already been intensively
discussed in Section D.2.2 (cf. p. 301). The key figure excess-and-obsolete-
ratio indicates the proportion of inventories that are only turning over slowly
or are no longer rotating at all, based on the past inventory range. In the
worst case, there is a risk that these part numbers will be scrapped , which
will have a negative impact on EBIT. The excess and obsolete ratio
(quantitative consideration) should be supplemented with reasons for the
emergence of these impracticalities (qualitative supplement).
ÿ
Uncommon inventory 100
Inertia (%) =
total stock
Loss of inventory is caused in particular by shrinkage and spoilage. fading and
Theft and poorly refrigerated goods are possible causes of stock shortages . measure spoilage
Retail in particular suffers from

perishable goods with a best before date (fruit and vegetables).
ÿ
Loss of inventory 100
Loss of stock per period (%) =
total stock
After a few key figures for storage have been named, indicators for picking Quality of picking
are to be worked out as a result . On the one hand, these are classified in
the area of supply chain throughput.
On the other hand, these are quality and service indicators. For this
purpose, three KPIs are considered in more detail below: The internal
service level, the internal rejection rate and the internal delay rate. These
variables have already been presented as quality and service indicators of
the input (procurement) in field I.3 of the matrix and described there from
the perspective of external supplier relationships. The reverse performance
measurement of supply chain indicators in the direction of the customer
now takes place under this section.
As part of the calculation of the internal service level, deficits in terms of internal service
time, quantity and quality of picking in the direction of the customer are to guarantee
conceivable. However, local errors can also occur during staging: such as
incorrect assignment of materials in the staging areas.
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Order-based picking 100 ÿ
Internal service level (%) =
total pickings
Avoid stock outs The internal rejection rate is a sub-metric of the internal service
level. Many picking errors are uncovered per se in the subsequent
production by delaying it or perhaps even leading to a line standstill.
Creeping picking errors that are only discovered after the goods have
been delivered to the customer are particularly problematic: An
increase in the rate of returns is then to be feared.
Rejected picks 100 ÿ

Internal rejections (%) =
total pickings
Reveal temporal Furthermore, the internal delay rate (backlog) stands for delayed
deficiencies production processes that - due to incorrect picking - are not initiated
in time. Deployment errors lead to limited occupancy times of the
machines.
Delayed production hours 100 ÿ
Internal Backlogs (%) =

total production hours
consumption deviation Finally, the quality and service key figures of a production are listed
changes burden under this section. The first variable described in this regard is the
the EBIT
consumption deviation. It is an important representative for
assessing the quality of production processes. Significant deviations
in consumption are indicators of inefficiency along the production
process and have a direct impact on EBIT: they are fully effective.
Actual consumption value 100 ÿ

Consumption variance (%) =
Planned consumption value
Rate scrap and Disproportionately high scrap and rework rates reflect underlying
rework manufacturing deficits. All-
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E.3
However, these key figures do not indicate at which production stage
an error occurred.
scrap/rework 100 ÿ
Ratio scrap or rework (%) =
total material consumption
Downtimes (also called "downtimes") and repair times of the machines rob idle time
reduce productivity within a value chain. However, this size does not productivity
allow any statement to be made about the reasons for a line standstill.
In order to increase the informative value of these key figures, additional
downtime costs or repair costs (see below) of machines must be
determined.
Downtime per machine 100 ÿ

Downtime per machine (%) =
total running time per machine
The performance driver downtime/repair costs per machine is a direct Supplementary key
supplement to the key figure downtime (repair time) per machine figure
described above. A combination of both indicators enables a

simultaneous time and cost analysis.
Downtime costs per machine 100

ÿ
Downtime costs per machine =
Total cost per machine
E.3.3.3 Output: Distribution key figures

The output area is aimed at external customers. Modern supply chains High added value
are primarily based on the pull principle (“make-to-order”, “engineer-to-
order”). The inventory refinement is now complete, so the added value
contribution of this segment is high.
Finished goods inventories are used in the output area. For the key
figures of distribution see Berrisch 2013; Cohen/ Roussel 2006, p. 310ff.;
Gunasekaran et al. 2001, p. 80ff.; Krüger 2014, p. 147; Schulte 2001,
p. 484ff.; Schulte 2017, p. 659.
A primary task of supply chain management is the adequate delivery whiplashes of

of goods to the customer. In this regard, low sales forecast accuracy demand
(e.g. due to short-term fluctuations in demand) leads to inefficiencies in
supply chains. The result is an increase in stocks. for the manufacturer
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the crucial question in exploring the balancing act between a high
level of service and a low inventory level.
meaning of A customer is not necessarily to be equated with the ultimate end
B2C and B2B consumer (B2C connection). Intermediate trade levels (B2B
processing, such as retail and wholesale) also represent selected
forms of customer connection. The key figures of the output are,
analogous to the previous explanations, divided into the three areas
of generic key figures, productivity and profitability indicators as well
as quality and service indicators.

Generally valid Based on the key figure typology, the structural key figures of a
sizes distribution refer to field III.1. Analogously to the areas of input and
throughput, absolute generic key performance indicators must first
be specified for the output . The following key figure block shows
these variables in a clear form.
Number of customers (current/potential).

number of deliveries.
Number of (intermediate) deposits.
order volume.
Distance between storage levels.
Relative KPI at The relative generic key figures of distribution include: sales per
a glance customer, self-transport rate, order fulfillment time, throughput time
and inventory turnover of finished goods. In this order, the indicators
are described below.
Contribution The turnover per customer measures the importance of the

margins for strategic customer, it is to be calculated for current and potential customers.
calculate customers This KPI represents an important key figure of category management.
However, this figure does not include the costs that would have to be
included in a relevant analysis. Therefore, the turnover per customer
should be increased to the contribution margin per customer . In the
B2B area, this indicator is quite easy to calculate. This is much more
difficult for stationary B2C transactions.
total sales
Revenue per customer (%) =
number of customers
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E.3
The self-transport rate is an important indicator of fleet management fleet
(fleet). It indicates the percentage of self-transports in the direction of the management
customer. However, this key performance indicator hides the amount
distributed in each case.
Number of own transports 100

ÿ
Own transport rate (%) =
Number of external transports
When determining a delivery lead time (Order Fulfillment Time), a Plan times for
replacement lead time must be taken into account for goods planning. delivery runs
The parameters "Perfect Order Fulfillment" and "Fill Rate" can be included
in these Key Performance Indicators - as a kind of sub-key figures. With
the help of the delivery quality (Perfect Order Fulfillment), a delivery is
measured not only by its punctuality, but also by other factors that could
give a customer reason for complaint (e.g. quantity, specification,
documentation, damage).
The readiness to deliver (fill rate), on the other hand, indicates the extent
to which a supplier is able to deliver directly from his warehouse.
Consequently, a fill rate is in a continuous field of tension between
impending delivery bottlenecks and capital-intensive warehousing
(opportunity costs).
Delivery lead time = time span in hours (days/weeks) for

the complete processing of a customer's order.
The total throughput time (Total Cycle Time) is measured from the Factors influencing
receipt of the order to the distribution of the goods. The pure production the throughput time
time, which is synonymously referred to as "throughput time in the narrow

sense", is included in this key figure. The levers of throughput time are
actual production time, set-up time, downtime, idle time, storage time,
preheating time and availability time.
Throughput time = period of time in hours (days/weeks)

from the receipt of the order to the distribution of the goods.
An increase in stocks of finished goods tends to increase the agility of Finished goods
companies in order to be able to react quickly to unexpected customer increase flexibility
demands. However, this gain in service level is partly bought at a high
price due to the increased capital commitment. The-
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This relationship can be measured with the inventory turnover of finished
goods inventory .
Revenue (Cost of Sales)

Inventory Turnover Finished Goods Inventory =
Finished Goods Inventory
Tighten distribution In field III.2 of the key figure typology of supply chain management, the
two dimensions of output and key figures for measuring productivity and
profitability meet.
In this regard, the order processing rate is first described in more detail.
Addition of The order processing rate is used to determine the productivity of the
selected positive scheduling staff. This size is modified or supplemented by taking into
ones account the number of processed order items in the counter.
Orders processed 100 ÿ

Order Fulfillment Rate (%) =
Employee order scheduling
productivity of A shipping completion rate adds value to the previously discussed order
apply for sending fulfillment rate. A completed order does not necessarily have to be
ten
dispatched later. However, just knowing the rate of mailings says nothing
about the difficulties of distribution processes.
Number of shipments 100

ÿ
Shipping Completion Rate (%) =
working days
Establish fixed cost The next key figure used measures the degree of capacity utilization of
degression materials handling equipment (internal) and means of transport (external).
With increasing utilization of the means of transport , the distribution of
fixed costs improves because the packing density increases.
takes.
Actual transport volume

Means of transport utilization =
Possible transport volume
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With the help of the order processing costs , the profitability within Observe process
the distribution is measured. Possible cost drivers of order processing cost rates
are personnel costs, travel costs, IT costs (including depreciation),

rent, vehicle fleet, taxes, insurance and energy costs.
Total order processing costs

Order processing costs =
Revenue (per month/per year)
Another alternative for measuring the profitability of the output is the Add quantities
shipping cost ratio. It serves – especially in combination with the
previously characterized order processing costs – to increase the
transparency of distribution. However, it is advisable to supplement
this cost-focused view with quantity information.
total shipping costs

Shipping rate =
Shipments made
E.3.3.3.3 Quality and Service Metrics
The end of the description of output-oriented values within a supply Reverse view
chain are the quality and service indicators (cf. field III.3 of the of
typification matrix). At its core is a reversed consideration of the inputs
quality and service-oriented key figures of the input: In field I.3, the
supplier performance was measured using quality and service
parameters. This analysis is reversed under this heading. Now the
delivery quality of the manufacturer itself is evaluated by its customers.
With regard to their measurement , however, the quality and service Difficult to measure
indicators differ between procurement and distribution. Determining sung

supplier performance does not pose any major problems as a
manufacturer can directly assess the incoming performance of its
suppliers at any time. Conversely, the manufacturer is dependent on
customer feedback when measuring its outgoing delivery performance.
If there is no feedback, the manufacturer usually assumes that the
delivery has been processed as ordered.
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top dog the The outgoing delivery service level describes the percentage of
Quality consignments of goods in the direction of the customer in terms of
their time, quantity and quality.
Order-based delivery items 100 ÿ

Delivery service level (%) =
Total delivery items
Distribution A rejection rate determines the percentage of deliveries with regard

rejections to qualitative, quantitative or temporal deficits of the consignment.
Rejected extraditions 100 ÿ

Rejection rate (%) =
Total outbound shipments
temporal misÿ The delay rate only takes into account the timing of outgoing
stands deliveries. It measures the percentage of late distribution processes.
Delayed deliveries 100 ÿ

Lag Ratio (%) =
Total outbound shipments
E.3.3.4 Payment: Key figures of the financial processes

Net working As part of the characterization of supply chain management in
Optimize capital general, as well as in the description of order-to-payment-S in
particular, it became clear that modern supply chain management
explicitly captures financial flows. Modern supply chains aim to reduce
opportunity costs (lost profits). In this regard, the manufacturers
require the promptest possible payment receipts for their customer
invoices. However, the success of this objective depends very much
on the power constellation of a supplier-customer relationship. If the
customer does not pay for weeks or even months, the manufacturer
provides a kind of pre-financing towards the customer: an interest-
free loan is granted.
Financial indicators A closer look at key figures and key figure systems in the supply
are chain reveals that they hardly or not at all deal with financial flows (cf.
underestimated Krüger 2014; Ossola-Haring 2006; Reichmann 2017;
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E.3
Schulte 2001; Schulte 2017). This key figure typology fills this gap .
Taking this knowledge into account, some key figures of supply chain financial flows from
management that are used explicitly for the evaluation of financial supply chains
flows are examined in more detail below . Analogously to the previous

explanations on the key figure typology, these variables are to be
divided into the three fields of generic key figures, productivity and
profitability key figures as well as quality and service key figures.

The generic variables of the financial flows of a supply chain include Proceed further
supply chain costs, discount rate, rebate structure, purchase
commitments, liquidity, extended cash flow, working capital, cash-to-
cash cycle, economic value added (EVA) and return on capital
employed (ROCE). These indicators are entered in field IV.1 of the
key figure matrix (cf. their more detailed identification below).
The entire supply chain costs are to be measured in relation to costs of supply
chain activities
sales. An absolute increase in sales usually also causes an increase
in supply chain costs. In the following definition, it should be noted
that the order processing costs, material procurement costs and
inventory costs are fully included in the total supply chain costs.
However, the financing costs, planning costs and IT costs are only
charged proportionately. The essential reference value of their
determination is the internal cost allocation. However, the question
arises as to what percentage of these costs per company should be
allocated to the supply chain in each individual case.
In particular, external key figure comparisons across the entire Be careful with
supply chain costs should therefore be treated with caution. The competitive comparisons
respective definition of the supply chain costs per partner should be

questioned in order not to compare apples with oranges. Nevertheless,
an attempt is made to give recommendations for practice. According
to the above definition of terms, best-in-class companies across all
industries achieve benchmarks of their supply chain costs for sales
of between 4% and 6%. Average companies level off between 8%
and 11% in this respect (cf. Werner 2013a, p. 55 and p. 83 of the
present publication).
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order processing costs
+ Material procurement costs
+ inventory costs
+ Financing costs (pro rata)
+ planning costs (pro rata)
+ IT ÿ costs (pro rata)
= supply chain costs
Aim for A discount ratio represents the proportion of discounted purchases to

standardization the total number of purchases made by a company. This key performance
of payment terms indicator can be used to check whether an entitlement discount amount
was actually offset when paying supplier invoices. To monitor this process,
it makes sense to standardize the terms of payment within the company.
Otherwise, it would have to be checked for each invoice whether the
employees in the back office (accounting) have also de facto realized
potential payment deductions when paying a supplier invoice (process
cost inflation).
Purchases with a discount of 100 ÿ

Discount ratio (%) =
total purchases
Opportunities Discounted purchases are granted in particular as volume discounts,

for discounted sales discounts, loyalty discounts, seasonal discounts or special discounts.
purchases This key figure measures the proportion of discounted purchases in relation to
the total purchases made. However, the size of the discounts granted is
not clear. It would be desirable to add this information to the indicator.
Purchases with discount 100 ÿ

Discount Structure(%) =
total purchases
pending payment A purchase commitment describes a company's outstanding payment.

of orders Based on a high order backlog, liquidity could be endangered in the long
term: There is a risk of disproportionately high future supplier liabilities.
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E.3
order stock
+ Order value receipt
ÿ Invoice receipt (by date)
= order commitment ÿÿÿÿÿÿÿÿÿÿÿÿÿÿÿ
Third-degree liquidity is a suitable indicator for measuring the stocks and

financial flows in value creation networks. Stocks and receivables are record
explicitly included in the determination. An increase in inventories receivables
tends to reduce a competitor's liquidity. The extended consideration
of third-degree liquidity is given in the cash flow analysis below.
Liquid funds Stocks

ÿ Receivables
ÿ
Liquidity 3rd degree
= short-term liabilities
As a key figure, the cash flow embodies the dynamization of a static Dynamization of
liquidity. It is an indicator of the earning power of companies and is liquidity
synonymously referred to as "financial surplus". As highlighted above,
changes in inventories and accounts receivable affect the expanded
cash flow.
net income
± Depreciation/write-ups on assets
+ Changes in provisions
+ Changes in special items with an equity portion
+ Changes in value adjustments
ÿ Changes in inventories
ÿ Changes in claims
ÿ Changes active RAP
ÿ Own work capitalized
= Extended Cash Flow
Another key figure that can be used to measure the liquidity of a generation of
company is the working capital (see p. 490, here the current ratio cash inflows
calculation option). The general rule is: the higher the working capital,
the more secure the liquidity. However, high working capital causes
opportunity costs. The supply chain acts on the meter, inventories
and accounts receivable are
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Components of Current Assets. Their increase or decrease affects
working capital directly. However, inventories (excess and obsolete)
and receivables (disputes) with a term of more than one year are not
included under working capital.
Current assets (1 year)

ÿ
100
ÿ
Working Capital(%) =
Current Liabilities
shareholder value An important representative of working capital management is the

Relation cash-to-cash cycle. It measures the liquidity cycle in days. The
number should be as small as possible, ideally even negative.
Average cash-to-cash cycles of two to three months are measured in
supply chains (cf. Heesen 2012; Weber et al. 2007, cf. also p. 84 of
this publication). This result certainly does not reflect the “win-win
situation” that is often quoted in supply chain management. Rather,
the impression arises that some players are exploiting their market
power. They can be paid quickly by their customers, but in turn only
pay the supplier invoices several weeks or months later. In the
meantime, the supplier pre-finances the customer (interest-free).
Opportunity costs arise for the supplier because they cannot invest
the money in the meantime. In addition to accounts receivable
management (Days Sales Outstanding) and accounts payable
management (Days Payables Outstanding), the liquidity cycle is
derived from the inventory range (days on hand). Working capital and
cash-to-cash cycle are described in detail under section E.4.5.
Cash - to - cash - cycle = period of time in days, which is derived from the
customer's payment, the range of the warehouse and the supplier's
invoice (synonymous with ÿcycle of liquidityÿ).
value increase concept The Economic Value Added (EVA) is an absolute key figure in the
management of value increases and is embedded in the philosophy
of shareholder value (cf. for a detailed discussion of EVA p.
485). EVA stands for the added value that a company generates (the
EVA indicator shows a positive amount) or destroys (the result of the
EVA calculation is a negative number) per year. The management
within a supply chain has different value levers for influencing this
size. On the one hand, this applies to the Net Operating Profit After
Tax (NOPAT). For example, material prices, write-downs on
inventories, freight costs and depreciation determine
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E.3
genes on logistical assets the operative business success directly.
On the other hand, supply chain management influences capital.
Examples of this are make-or-buy decisions in fleet management,
procedures for sale-and-buy-back or sale-and-lease-back of logistic
systems, inventory optimization and receivables management.
Economic Value Added = NOPAT ÿ (Capital ÿ WACC)
The return on capital employed has been included in the key figure Real hype
typology as a representative of the return key figures. For other ways about ROCE
of measuring profitability, see page 405, see page 452 specifically on
ROCE. From the point of view of supply chain management, the
levers for influencing ROCE can be found both in the numerator and
in the denominator of the key figure. Similar to EVA, supply chain
management influences the result from ordinary business activities
(EBIT) through inventory depreciation, scrap and rework rates, material
prices, depreciation and freight costs. In relation to the capital
employed, effects on the cash-to-cash cycle, inventory management
or logistical tangible assets (such as the company’s own vehicle fleet
or outsourcing of the vehicle fleet) are possible via supply chain
management.
EBIT ×100
ROCE =
Capital employed
In field IV.2 of the key figure typology of a supply chain, the content Assess financial
of the payment and sizes for productivity and profitability can be processes
found . First, the billing rate is characterized in more detail.
The invoicing rate is an indicator for the productivity of the financial productivity of
flows. It measures the percentage of issued and sent customer cash flows
invoices. However, the invoicing rate does not provide any information
about the receipt of customer payments. It should therefore be
supplemented with the cash-to-cash cycle if possible.
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Invoiced customer invoices 100ÿ
Billing rate (%) =
total customer invoices
material costs and The manufacturing costs of companies consist in particular of direct material and material
Compare overhead costs as well as direct and production overhead costs. They can be read in the
production costs income statement directly under sales. The cost-effectiveness of the use of goods is
measured with the aid of the material intensity .
For example, this can be disproportionately high compared to the production costs.
Material cost 100 ÿ

Material Intensity (%) =
manufacturing costs
E.3.3.4.3 Quality and service metrics

The last field of Finally, field IV.3 is also the twelfth and last area of the
matrix Key figure matrix of a supply chain filled with life. This is where the two dimensions of
payment as well as quality and service indicators meet . In this regard, three KPIs are
to be assessed in more detail below: supply chain disputes, cost-charge-back ratio and
inventory reserve (cf. the definition blocks below).
resolve disputes Translated into German, the term disputes can be equated with “doubtful or dubious
claims” that have a long remaining term: If errors occur in the supply chain towards the
customer, disputes can arise. The default risk of disputes is greater than 0% and less than
100%. An example of this is packaging damage. If a customer bills for 10,000 euros, but
the customer only transfers 8,000 euros due to potential packaging damage, the
manufacturer will have disputes of 2,000 euros. It must then be clarified whether this claim
towards the customer cannot actually be collected. In this case, a value adjustment must
be made for the original receivable, which directly affects EBIT.
Supply chain disputes 100ÿ

Supply Chain Disputes (%) =
total disputes
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E.3
The key figure cost-charge-back-ratio corresponds directly to the Automatic
supply chain disputes. It can be determined in the input for suppliers Compensation for
and in the output for customers. On the basis of a supplier rating qualitative defects
system (see p. 189), a cost charge back procedure is partly anchored

in corporate practice. The power constellation in the network of
partners decides on the possible uses of the method. Cost charge
back means when logistical errors are initially defined with the supplier
and penalty points are awarded. Monetary amounts are to be
attributed to these errors on the basis of process costs. For the supply
chain management, such a problem can be a deficient labeling. If this
error occurs, the agreed amount of money will be withheld directly
from the next incoming supplier invoice. As a result, disputes no
longer arise in the first place (see above). However, the customer is
usually responsible for providing evidence of a logistical error.
Withheld invoice amounts 100 ÿ
Cost - Charge - Back - Ratio (%) =

Total value of supplier invoices
An inventory reserve (value adjustment on inventories) is made due Gross Inventory vs.
to the immovability of inventories. This may be due to poor entry or Net Inventory
exit control. In an example of marketability characterized on p. 303,

the gross portfolio of a location is ten million euros. However,
inventories there either do not turn over at all (obsolete) or only to a
limited extent (excess) per period. A value adjustment of two million
euros is made for these inventories. Consequently, a net stock of
eight million euros is calculated.
The devaluation of slow moving inventories has a direct negative Interdependencies
impact on a company's operating profit (EBIT). Therefore, stock to the marketability
shortages should be kept as low as possible. If the sale of excess

and obsolete goods is impossible, the ultimate consequence may be
the scrapping of these item numbers. In order to cushion the effect in
the direction of EBIT, the commercial prudence principle prescribes
the formation of value adjustments. The following figure “Inventory
reserve” reflects the amount of this value adjustment due to
impracticability.
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Gross Inventory
ÿ Value adjustment (inventory reserve)
= Net Inventory
E.3.3.5 KPI typology at a glance

KPI at a glance The typology described above for the classification of selected key
figures of a supply chain management is two-dimensional:
ÿ A first perspective shows how the key figures relate to value creation . The three
primary logistic segments input (procurement), throughput (storage, order
picking and production) and output (distribution) are directly related to an
increase in value explicitly taken into account (Order-to-Payment-S).
ÿ The second dimension includes three different types of supply chain indicators .
They are made up of generic measured values (structural indicators),
productivity and profitability key figures as well as quality and service-oriented
parameters
together.
Modifications From these two levels of observation , twelve different fields of

are possible observation result in a matrix for supply chain typification. Figure
E.10 below summarizes the individual key figures described in detail
above in a clear manner. In sum are
85 key figures of modern value chains are listed here. It goes without
saying that this approach does not claim to be complete. Depending
on the industry or specific problem, it may be necessary to modify
this typing. This applies both to the selection of the key figures used
and to their respective definitions.
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E.3
Indicators of the KPI typology of a supply chain Figure E.10
input throughput output payments

ÿÿÿÿÿÿÿÿÿÿÿ
- Procurement - Storage - Distribution - Finances

- Provision
- Manufacturing
purchased parts item numbers number of customers SC cost
purchasing volume Packaging Unit. Deliveries discount rate
order items Stored parts Warehouses discount structure
number of suppliers Storage processes Order volume purchase commitment
price index Order volume Storage levels liquidity

volume structure Planned parts Turnover per customer cash flow
Maverick buying Orders received Own transport q. working capital

Turnover frequency Order Fulfillment Cash to Cash Cycle
Range lead time EVA
A Storage cost rate Envelope Finished ROCE
area usage gr.

Share of storage area
Stock quota
Picking pos.
automation group
area percentage
Vertical
integration Upside Prod. Flexib.
recycling rate
shipments daily Stock movements order processing billing rate
acceptance time Space utilization Shipments material intensity
WEK per day Storage bin costs Utilization Level

acceptance costs Stock movement c. Shipping
WEK costs Picking costs commission.
B
incoming orders
stock accounts
Machine use
Processing costs
Scheduling costs
Service Level Excess/Obsolete Service Level SC disputes
Rejection Q. Storage loss Rejection Q. Cost Charge Back
late rate Service level (internal) late rate inventory reserve
C rejection q.
Delay Rate Consumption
Deviation
scrap/rework
failure/repair
Legend: A = Generic indicators (structure indicators)

B = Productivity and profitability indicators
C = Quality and service indicators
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E.3.4 Selected forms of visualization of the
KPI management
synergistic With this section, the ideas of key figure management within modern
increase potential supply chains are rounded off. The typification option discussed
above for supply chain management serves to classify individual
variables in terms of content in a higher-level system of indicators.
This opens up synergetic potential in the supply chain: The
individual key figures are condensed into twelve fields in the key
figure matrix. Overall, they gain in structural significance compared to
the isolated statement of individual indicators.
Graphic display The key figure system under discussion receives an additional boost
options in transparency by visualizing selected variables . In this context,
the value driver tree and then the key figure radar are discussed in
the following sections
described. The selection criteria for these two graphical representation
forms of key figure management are their pragmatism and their
scientific claim. For a discussion of other forms of visualization of key
figure management, please refer to the relevant literature (cf. Botthof/
Hölzl 2008; Deyhle 2003, p. 94ff.). For example, the aids actual target
diagram, key figure form, grid or crosshairs are discussed there.
E.3.4.1 Value Driver Tree

basic idea and The idea of generating value driver trees comes from the DuPont
Construction scheme, which was developed at the time to determine the return on
investment (ROI). For a detailed discussion of the ROI cf.
p. 407. The creation of value driver trees is conceivable both
generically and functionally related. In addition to supply chain
management, driver trees can also be set up for production or sales.
The construction of value driver trees is also suitable when it comes
to depicting shareholder value. See Deyhle 2003, pp. 101ff for the
representation options for value driver trees.
root node as As part of the development of modern value driver trees, the basic
top metric idea was copied from the ROI scheme to link key figures within an
sphere of activity analytically or logically with one another. In the
process, individual key figures are compressed in a tree to a peak
value (“root node”) . The single ones
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E.3
Metrics in this mesh affect the root node directly
or indirectly, they "drive" its value. Value driver trees are usually derived
from a combination of a success line and a balance sheet line.
The effects of changed input parameters (key figures) on the root node Value driver trees
can be simulated with IT support. Some consulting companies have and IT
developed special software solutions for this.

As an example, reference is made here to the “Business Planning and
Simulation” tool from SAP , which enables the simulation of value driver
trees with the “Business Warehouse – Business Planning Simulation
(BW-BPS)” tool .
A closer look at value driver trees reveals the top variables EBIT, Alternative root
shareholder value, economic value added, return on capital employed nodes at a glance
and discounted (free) cash flow as possible root nodes . In contrast to

the traditional ROI tree, purely monistic indicators are no longer included
in the calculation of the root nodes. Rather, “non-financials” (qualitative
indicators) can also be taken into account as influencing variables in
value driver trees. Examples of this are the “non-financials” customer
loyalty, image, technology, innovation, employees and quality.
The creation of value driver trees is often linked to considerations of Performance

performance measurement (performance management) and the measurement systems
balanced scorecard (see p. 494). This fact is not particularly surprising.
Performance measurement concepts try to include non-monetary
variables in their representation. In other words, the Value Driver Tree is
a tool in which the contribution of qualitative indicators to the creation or
destruction of financial outcomes (“values”) is visualized.
Two examples for generating value driver trees are used below . The Exemplary
first case is kept generic. It refers to the purely mathematical determination creation of value
driver trees
of an Economic Value Added (EVA). The second example is specifically
tailored to supply chain management. It simulates possible impact levers
of the value chain on their root node Return on Capital Employed (ROCE).
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E.3.4.1.1 Value driver tree via node EVA
EVA as peak The value driver tree for calculating the root node Economic Value
value Added is shown in Figure E.11 (cf. Deyhle 2004, p.
101; Speckbacher 2005, p. 9). Except for percentages, the
following figures are in millions of euros. In total, the peak Economic
Value Added (EVA) is 1.2 million euros. With the help of this
monetary value driver tree, the condition
come from EVA visualized. The transition to the root node is broken
down into five different work levels:
“That you ÿ Working level 1/working level 2: The root node Economic Value Added totals 1.2
choose the million euros. This result is calculated by subtracting the cost of capital (capital
safest path, who charge) from the net operating result after taxes (NOPAT). There are two primary
can deny that? But strands for calculating EVA: The upper range (NOPAT) results from values from the
you are only groping profit and loss account. The lower branch (capital charge) relates to the balance
blindly on the most sheet.
paved path.” (F.
v. Schiller)
EVA = NOPAT - Capital Charge

EVA 4.0 - 2.8
ÿ
EVA 1.2
ÿ
Legend :All figures in millions of euros (except percentages)
NOPAT about ÿ Working level 3 (upper line): The size NOPAT is calculated by subtracting (income)
Calculate taxes from a NOPBT (Net Operating Profit before Tax), the net operating result
Success Sizes before taxes. In the value driver tree characterized as an example, the NOÿPAT in
the upper branch amounts to 4.0 million euros.
NOPAT = NOPBT - Tax

NOPAT 6.1-2.1
ÿ
NOPAT 4.0 ÿ
Balance sheet ÿ Working level 3 (lower line): When determining capital costs (capital charge) in the
figures lead to capital lower line, a reference must be made between net assets and the weighted average
batch cost of capital. The net assets are derived from the total invested capital. Capital
costs are incurred in the context of making a profit. These are reflected in the
weighted average cost of capital, the weighted equity and
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E.3
borrowing cost rate. The net assets (25.8) were multiplied by the
WACC of 11.0% and divided by 100. The capital costs total 2.8
million euros.
Net Assets WACC

ÿ
(%)
Capital charge =
100
25.8 ÿ11.0 (%)

Capital charge =
100
Capital Charge = 2.8

Legend : All figures in millions of euros (except percentages)
ÿ Working level 4 (upper line): As described, the figures of the upper net operating income
branch of this value driver tree come from the income statement. result after control
In this regard, the calculation of the size NOPBT (Net Operating seriously
Profit before Tax) should be emphasized on the fourth working

level . It amounts to 6.1 million euros. Net operating income before
tax consists of gross profit (Gross Profit/33.8), general selling and
administration expenses (Selling and Administration/ÿ29.2), other
expenses and income (Other/1.5) and adjustments ( Adjustment/
0,0) together.
ÿ Adjustment NOPBT 33.8ÿ ÿ 29.2 1.5 0.0ÿ ÿ ÿ

NOPBT = Gross Profit Selling/Adm. Other
ÿ
ÿ
NOPBT 6.1
ÿ Working level 4 (lower line): In the lower line of the value driver departure of the Net
tree, the composition of the net assets requires a more detailed Assets
explanation. The net assets add up to 25.8 million euros. They are
made up of fixed assets (fixed assets/3.9), including investments
in affiliated companies, and working capital (21.9).
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ÿ Capital
Net Assets = Fixed Assets/Affiliated Working
Net assets 3.9
ÿ ÿ21.9
Net assets 25.8 ÿ
Final consideration of ÿ Working level 5 (upper strand): Finally, the fifth working level is to
the success factors be identified. Analogously to the previous presentation, the upper
branch of the profit and loss account is described first. The gross
profit (gross profit/33.8) results from offsetting sales (sales/260.0)
and production costs of sales (cost of sales/ÿ226.2). According to
their semantics, the selling and general administrative expenses
(Selling and Administration /-29.2) are fed from the selling
expenses (Selling/-28.1) and the administrative expenses
(General/-1.1). Furthermore, the other expenses (Other/1.5)
require closer examination. They add up from research and
development expenses (Research and Development/0.0) and
other operating income (Change in Provision/1.5).
Gross Profit = Sales Cost ofÿ Sales
Big Profit = 260.0 + (-226.2)
Gross Profit 33.8 ÿ
ÿ
Selling/Administration Selling Administration ÿ
ÿ
Sales/Administration (-28.1) (-1.1) ÿ
ÿ
Sales/Administration (-29.2)
Other R & D Changeÿ in Provision Other ÿ

ÿ
Other 0.0ÿ 1.5

ÿ
Other 1.5ÿ
Significant ÿ Working level 5 (lower line): The balance sheet item Fixed Assets
potential to and Affiliated (fixed assets and investments in affiliated companies/
affect Supply 3.9) is calculated from those two variables, with Fixed Assets having
chain processes a value of 3.9 and Investments in affiliated companies is 0.0. The
working capital (21.9), on the other hand, consists of stocks
(inventories/12.8), receivables (receivables/31.2), liabilities
(liabilities/-22.0) and advance payments (prepayments/-0.1). )
together.
450

E.3
Fixed Assets/Affiliated = Fixed Assets Affiliated ÿ
Fixed Assets/Affiliated = 3.9 0.0 ÿ
ÿ
Fixed Assets/Affiliated 3.9 Working Capital
ÿ
ÿ working capital
Inventory. receiver Liabilities Prepayment. Other ÿ 12.8 31.2 (-22.0) (-0.1)
ÿ ÿ
ÿÿÿ ÿ
ÿ
Working capital 21.9 Legend : All figures
in millions of euros (except percentages)
The value driver tree via the Economic Value Added (see Figure interpretation of
E.11) is an operative tool for management in general and for Results
controlling in particular. This representation clarifies the mathematical
occurrence of EVA. It also enables a "non-businessman" to quickly
grasp business issues. If the Economic Value Added presents itself
as a positive absolute number, it can be seen at a glance that the
organization has created an increase in value (and vice versa). Based
on the decomposition of the value driver tree, the calculation of this
financial result can be read off quickly.
However, this stringent and strictly mathematical-logical representation limits of this

of the value driver tree via the root node EVA also has its limits (cf. Depiction
Speckbacher et al. 2004, p. 6). For example, there is hardly any
consideration of immaterial values. An example of this is a possible
activation of research and development services, which cannot be
found in this tree.
Furthermore, the display only takes place at a certain point in time. point in time
It is a static view with reference to the past. It says nothing about the and cash out
development potential of a company. For a meaningful competitive Danger
comparison, however, it would be very helpful to also know the future

prospects of an organization. Finally, the value driver tree does not
show whether there is a cash-out syndrome: the extent to which
operationally necessary investments were omitted in order to artificially
improve EVA ("balance sheet cosmetics").
451

E
Figure E.11 Value driver tree via the Economic Value Added
Legend: All figures in millions of euros [M€]; except percentages.

Sales
Gross Profit 260.0
+
33.8 Cost of Sales
-226.2
NOPBT
+
6.1 Selling Exp.
NOPAT -28.1
ÿ
Admin./Sales -29.2 +
4.0 Admin./Gen. -1,1
Tax
2.1
Other R&D
1.5 0.0
EVA +
ÿ
1.2 Adjustment 0.0 Change Prov.

1.5
fixed assets
Net assets 3.9
Assets/Affiliate.
25.8 +
3.9 Affiliated 0.0
Capital charge 2.8 x
WACC Inventories
+
11.0% 12.8
Receivables
31.2
Work. Chapter +
21.9 Liabilities
-22.0
Prepayments -0.1
level 1 Level 2 Level 3 level 4 level 5
E.3.4.1.2 Value driver tree via the ROCE node

Explicit After a generic value driver tree was previously described via the root
consideration of node EVA, this section contains the identification of a supply chain-
logistical influencing factors
specific approach. Figure E.12 shows the following content in a clear
ren
form. A significant difference to the calculation via EVA is immediately
apparent: The generally applicable value driver tree via EVA is an
exclusively quantitative representation (purely arithmetical
determination). In contrast to this, qualitative influencing factors
(“soft determinants”) also find their way into the supply chain-affine
tree via the root node ROCE .
452

E.3
The fifth level of the value driver tree shown on p. 458 in particular Soft facts in the
shows this connection. Analogously to the root node Economic Value supply chain
Added (EVA), the various working levels of the value driver tree are
characterized below, now related to the key figure Return on Capital
Employed (ROCE) .
ÿ Working level 1/working level 2: As a result, the root node return on capital employed root node
(ROCE) is 13.63%. This value is calculated by dividing the operating result (EBIT, ROCE
EUR 30.0 million) by the capital employed (EUR 220.0 million). As with the discussion
about EVA, two strands of calculation emerge. The upper branch via EBIT is based
on the offsetting of expenses and income from the income statement. The bottom
line (capital employed) contains the assets and capital items required for the
business from the balance sheet.
EBIT 100
ÿ
ROCE =
capital employed
30.0 ÿ100
ROCE =
220.0
ROCE = 13.63%
ÿ Working level 3 (upper branch): First of all, the upper branch of Establish P&L
the driver tree is concisely identified. Earnings before interest reference
and taxes can be easily read from the income statement . They
are determined by subtracting the fixed costs (fixed costs/120.0)
from the contribution margin I (contribution margin/150.0). The
operating result is therefore 30.0 million euros.
EBIT = Contribution Margin - Fixed Costs

EBIT 150.0 - 120.0
ÿ
EBIT 30.0
ÿ
453

E
Fixed Assets and ÿ Working level 3 (lower line): The capital employed consists of the fixed assets
Net working (fixed assets/130.0) and the net working capital (90.0). The calculation of these
capital two values comes from the balance sheet.
ÿ
Capital Employed = Fixed Assets Net Working Capital
Capital Employed 130.0 90.0

ÿ
ÿ
ÿ
Capital Employed 220.0
Calculate ÿ Working level 4 (upper line): On this fourth working level for determining the
contribution margins return on capital employed, the aggregation of the contribution margin I
(Contribution Margin/150.0) needs to be explained.
This is calculated by subtracting variable costs (Variable Costs/110.0)
from sales (Sales/260.0).
Contribution Margin = Sales - Variable Costs

ÿ
Contribution Margin 260.0 - 110.0
ÿ
Contribution Margin 150.0
Breakdown of ÿ Working level 4 (lower column): The fixed assets (fixed assets /130.0 million
accounting euros) of the lower balance sheet column are calculated from intangible assets
influencing factors (intangibles/35.0), tangible assets (property, plant, equipment/70, 0) and financial
investments (long-term investments/25.0). On this branch of the value driver
tree, the composition of the net working capital still requires closer examination.
The net working capital adds up to 90.0 million euros. Its components are stocks
(inventories/80.0), receivables (receivables/30.0) and interest-free liabilities
(liabilities/-20.0).
Fixed Assets = Intangibles ÿProp.,Plant,Equipm. long-term

ÿ inventory
Fixed assets 35.0 70.0 25.0 Fixedÿassets
ÿ
ÿ
130.0 Net
ÿ
working capital Inventories
Receivables Liabilities Net working capital 80.0 30.0 (ÿ 20.0) ÿ ÿ

ÿ
ÿ
ÿÿ
ÿ
Net working capital 90.0 Legend: All figures in
millions of euros (except percentages)
454

E.3
ÿ Working level 5 (upper strand): Finally, the fifth working level of this value driver Qualitative supplies
tree receives special attention. The influencing factors listed there represent a chain analysis
mixture of quantitative and qualitative performance drivers. For the management
of a supply chain, selected factors for the turnover (sales) must first be worked out
in this context. The first factor influencing sales is seen in the quality and service-
oriented key figures (quality/services) delivery service level, rejection rate and
delay rate. These three indicators have already been described in detail in the
basic characterization of the key figure typology of the supply chain. The next field,
which has the potential to influence sales, is called "Customer". This includes
indicators such as customer satisfaction, customer loyalty, customer acquisition
rate, new customer-existing customer ratio, cross-selling share, market penetration,
market share, market volume and customer contribution margin.
Finally, the influencing determinant "innovation" is calculated from

the innovation acceptance by customers, new product-old product
relation, flop rate, patented inventions per period and implemented
suggestions for improvement per employee. As interesting as
these soft factors are for supply chain management, it is difficult to
force them into a "cost corset". However, this problem does not
arise for the classic influencing factors variable costs (variable
costs/110.0) and fixed costs (fixed costs/120.0). These are
determined from the personnel costs and the production costs, the
latter including the material prices to be understood.
are.
Sales = Quality/Services Customer Innovation ÿ ÿ
ÿ
ÿ
Variable costs personal manufacturing
Fixed cost personal manufacturing
ÿ ÿ
ÿ Working level 5 (lower line): First, the determinants of the fixed assets (fixed assets/ Break down balance
130.0 million euros) are identified in detail, which go directly into the calculation of sheet numbers
the capital employed (the denominator of ROCE). Fixed assets are made up of
intangibles, property, plants, equipment and long-term investments. With regard to
intangible assets (intangibles/35.0), a potential influence on reputation is seen.
Last but not least, the goodwill of companies stands or falls with their image (this
can be polished up with “Sustainability”, for example). The recruitment of opinion
leaders is also of interest. In a supply chain management, the tangible assets
455

E
(Property, Plant, Equipment/70.0) affected by outsourcing

activities. This includes fleet management (vehicle fleet), sale and
buy back and sale and lease back of logistical assets, facility
management (buildings) and materials handling equipment. Finally,
the influencing factors on the net working capital are to be
described in more detail. This consists of inventories, receivables
and liabilities. The excess and obsolete ratio initially affects the
first component, inventories (inventories/80.0). Slow-moving
stocks tend to put a strain on net working capital. Possibilities for
reducing slow movers lie in the entry and exit control as well as
the reduced minimum purchase quantities. Furthermore, the
throughput time (cycle time) determines a stock level. Optimization
reserves in this regard are based on processing times, idle times,
set-up times, storage times or downtimes. The Forecast Accuracy
field also influences the inventory level. This value driver shows
the extent to which these are "difficult" customers who frequently
change their original orders.
Serious fluctuations in customer orders often result in trouble-
shooting activities for logistics. Finally, the key performance
indicators cash-to-cash-cycle, disputes and cost-charge-back affect
the receivables (receivables/30.0). For a detailed discussion, see
the key figure typology of the supply chain on page 442.
Intangibles = Reputation Prop., Plant, Equipm. outsourcing

ÿ
(offshoring)
ÿ
Inventories Exc./Obs. Cycle T. Sales Acc. custom tank ÿ ÿ ÿ
ÿ
Receivables Cash - Cycle Disputes Cost - Charge - Back ÿ ÿ
"Restricted The value driver tree described above via the root node Return on
area scandal, Capital Employed (ROCE) is closely related to supply chain
Rosi
management (see Figure E.12). This applies in particular to the fifth
scandal..." (Spider working level. On the one hand, there are quantifiable variables such
Murphy Band)
as personnel costs and production costs. On the other hand,
qualitative indicators of a logistics chain can also be assigned to this
area. The visualization of these logistical levers in a value driver tree
is an interesting basis for initiating communication processes: The
value driver tree serves as a basis for discussion.
Taking soft With the help of these described influencing factors of supply chain
factors into account management on the return on a company, a comparison is made with
456

E.3
the generic tree of EVA, a big step forward: EVA is calculated
exclusively from quantitative values, which come from the secondary
sources profit and loss account and balance sheet. As a result, the
calculation of the economic value added root node described above
is strictly financial and based on the past . The approach, on the
other hand, ignores soft influencing potentials.
The value driver tree fills this gap via the return on capital employed: Derivation of
Its special charm lies in the combination of qualitative and causal
quantitative indicators. It is now also possible, for example, to cover relationships on the
root node
special attributes of supply chain relationship management and to
simulate such effects on the key figure (see p. 22). In addition to the
material, financial and information levels, this also covers the social
level of a supply chain.
However, a problem with determining the value using ROCE arises "It's a thin line
if these descriptive factors are subject to a “compulsory quantification” between love and
so to speak. For a "financier" these influencing factors of supply chain hate…”

(the Pretenders)
management are certainly interesting. A controller also sees that the
accuracy of the sales forecast and the ordering behavior of customers
have a significant influence on inventories and other supply chain key
figures. Ultimately, however, he will want to know how large these
effects are so that he can plan for the potential impact on the income
statement and balance sheet. However, the quantification of these
soft factors is not easy, partly it is subjective (image, customer
satisfaction, design).
457

E
Figure E.12 Value driver tree about the return on capital employed
Quality/Services
Sales + customers
260.0
innovation
against Margin ÿ
150.0
staff
Variable costs
+
EBIT 110.0
ÿ
Manufacturing
30.0
staff
Fixed costs
+
120.0
Manufacturing
ROCE
13.63%
:
Intangibles
reputation
35.0
assets EPP
+ outsourcing
130.0 70.0
LT Investment
Excess/Obsolete
25.0
capital employer +
220.0
cycle time
inventories
+
80.0
Forecast Accur.
NetWork. cap 90.0 Liabilities
+
-20.0
Cash-to-Cash-C.
Receivables
+
30.0
disputes
Cost Charge B
level 1 Level 2 Level 3 level 4 level 5
Legend: All figures in millions of euros [M€]; except percentages.
E.3.4.2 Indicator radar

"Spiderman The key figure radar is another visualization alternative for key figure
is having me management in a supply chain (cf. Deyhle 2003, p. 94f.).
for dinner at It is synonymously referred to as a "spider image" . In a key figure
night..." (the Cure)
radar, there is a graphical representation of the deviations from target
values to actual values for selected indicators. In order not to
overwhelm the viewer with information, according to Deyhle (see
Deyhle 2003, p. 95), no more than eight parameters are included in
such a “spider picture”.
458

E.3
The other considerations relate to a key figure radar that is specifically balanced
geared towards a value chain. Its development is due to the Draw spider
requirement of the greatest possible balance . The identified pictures
indicators should cover different goals in the supply chain at the
same time (costs, time, quality, agility, service).
In this context, the following eight key performance indicators are
integrated into the radar, although these key figures can of course
differ in individual cases, depending on the industry and the
competitive situation:
ÿ Customer-related delivery service level (qualitative, quantitative and Factors

temporal performance measurement in the direction of the customer). influencing a supply chain
ÿ Freight costs (including order processing costs). ÿ Turn Rate
(inventory indicator).
ÿ Cash-to-cash cycle (to determine opportunity costs). ÿ Scrap rate (as a

production logistics quality value). ÿ Price index (the interface to
purchasing). ÿ Throughput time (measured from
receipt of order to delivery of

tion).
ÿ Inbound delivery service level (the equivalent of the delivery service level addressed
to customers, for evaluating supplier performance).
Figure E.13 makes it clear that in the "spider picture" the selected scaling of
performance variables of a supply chain can each achieve points radars
from "one" to "five". The following assessment applies :
ÿ 1 point: very badly fulfilled

ÿ 2 points: poorly fulfilled
ÿ 3 points: satisfactorily fulfilled ÿ 4

points: well fulfilled
ÿ 5 points: fulfilled very well
While the solid line in the radar visualizes the plan values, the dashed
line stands for the actual values. The following interpretations are
derived for the eight indicators:
ÿ Customer-oriented service level: A plan – for example the budget – shows the service levels up
requirement to achieve a very well fulfilled customer-side delivery service level course
(5 points). In the Actual, the targeted goal was achieved, plan and actual are
congruent.
459

E
Negative freight ÿ Freight costs: The currently achieved values for the freight costs are higher than
cost variance the planned figures. A good fulfillment of freight costs (4 points) was required in
the radar. The actual figures only show a target achievement of 3 points
(“satisfactorily fulfilled”).
serious ÿ Turn rate: The company under review has a significant inventory problem. While
Turn rate 4 points are required in the planning, the actual figures show a very poor
problems fulfillment (1 point).
plan fulfillment in ÿ Cash-to-cash cycle: In contrast to the sobering figures regarding the turn rate,
liquidity cycle this company has managed to match the actual and target values with regard
to the cash-to-cash cycle ( 4 points each).
scrap rates too ÿ Reject rate: The reject rate is a reflection of any production logistic difficulties. A
high very low scrap rate is required in the planning (5 points represent very good
plan fulfillment). In the Actual, however, the bar was torn.
The radar signals a reject rate of 4 points (well done).

goal achieved ÿ Price index: The price index indicator shows congruence between planned and
actual values with 4 points.
More than fulfilled ÿ Throughput time: A positive deviation can be determined for the throughput time
indicator: 4 points (well fulfilled) were planned, 5 points (very well fulfilled) were
actually achieved.
prepare suppliers ÿ Supplier-oriented service level: Finally, this value driver measures a negative
problems deviation. There are obviously greater supplier difficulties than originally
assumed. Instead of the targeted 4 points from the budget, only 3 points are
achieved in the actual.
Easy to understand The advantage of a key figure radar lies in its simplification of
complex issues. The source of the fire within the supply chain can
also be recognized immediately by the "non-specialist". With regard
to the eight performance indicators of a supply chain selected here,
inventory problems are particularly evident.
Poor statement But all that glitters is not gold. In the radar, positive and negative
deviations between plan figures and actual figures are shown
graphically. However, the viewer does not receive any information
regarding the absolute and relative variances. A subdivision of the
scale from one point to five points does not meet this requirement.
Connected with this is the problem of subjectivity. The tool only
offers a scaling of for each indicator
460

E.3
"very well fulfilled" (5 points) to "very poorly fulfilled" (1 point).
However, the classification of the key figures in this scheme depends
on the assessor.
Finally, there are structural breaks in the radar. This difficulty can scale fractions
have a serious impact on rounding up or rounding down. For example, falsify the
the jump from 4 points (“well fulfilled”) to 3 points (“satisfactorily Results
fulfilled”) is particularly large if the planning amounted to 4.4 points,
but the actual figures only show 2.6 points. Rounding down and
rounding up, the radar suggests a discrepancy of 1.0 point, when the
actual range of negative deviation is 1.8 points.
Indicator radar of a supply chain Figure E13
Delivery service level (outbound)

Delivery Service Level 5
5 freight charges
(Entry) 4
4 5
3 4
3
2 2
3
1 1 2
1
continuous
turns
time
rate
5 2 1 1 2 3 4 5
43
1 1
2 1
2
2
3 3
3
4
price index 4 4 cash to
5
5 5
cash cycle
scrap rate
Legend: plan values

ÿ
ÿÿÿÿÿÿÿ actual values
461

E
E.3.5 Limits of key figure management in a supply
chain
Questions remain The reflections on a possible key figure typology of a value
chain would be incomplete if, in addition to the possibilities
shown, some limits of key figure management were not
shown (cf. on these dangers in particular Siegwart 2009, p.
143ff. and p. 494 of this publication).
quantification of ÿ Inadequacy of indicators for non-quantifiable information: Non-

qualitative factors quantifiable or only conditionally operationalizable facts, such as
ren the "knowledge of employees", are partly forced into a number
costume.
point in time ÿ Static inventory: Key figures are always only determined at a
Consideration specific point in time (instantaneous). A period of time is not
considered. However, at least a kind of quasi-dynamization can be
achieved by collecting the same key figures again at a later point
in time.
"What interests ÿ Determination of key figures via secondary sources: Many
me my indicators have their roots in the income statement and the balance
chatter from sheet. A number of values are already outdated when they are
yesterday.” (K. published, since there is usually some time between the creation
Adenauer) of an annual report and its publication.
sinking in ÿ Numerology: Generating key figures is not an art in itself. However,

sea of numbers the selection of the "right" (target-oriented) sizes is sometimes
extremely difficult. In addition, the collection of key figures initially
causes costs. A closer examination is required as to whether these
costs will later be amortized: “Is the informational value of key
figures in relation to the costs required?”.
extension to ÿ Danger of isolated application: The isolated consideration of

performance selected indicators can lead to incorrect assessments and
measurement systems interpretations of the overall situation of a company. A point of
criticism of classic key figure management, which essentially led
to the development of performance measurement.
suggested solutions are ÿ Difficulties in interpreting: Key figures always only show the “Where!” . However,
missing they do not provide any automatism for the "how?".
As a result, key figures do not allow immediate recommendations
for action.
462
Controlling tools in supply chain management

E.4
E.4 Controlling tools in supply chain
management
Selected controlling tools for a supply chain are presented in this supply chain
section . First, a characterization of the hard (soft) analysis takes performance
place. For this purpose, the example of the purchase of the LCD
panel from View AG described in Section E.2.2 is taken up and
continued (cf. p. 396). The use of the tools target costing, activity-
based costing, economic value added, working capital management
and performance measurement for modern supply chain management
is then to be demonstrated.
The instruments discussed below , such as target costing and Modern control
activity-based costing, are partly derived from strategic cost ling instruments
management. In addition, the economic value added, probably the and their
most important representative of value increase concepts, is examined transferability to the
for its transferability to supply chain management. supply chain
Furthermore, working capital management is currently experiencing
a renaissance due to the emergence of the cash-to-cash cycle.
Finally, the discussion about the Balanced Scorecard and Strategy
Map completes the bridging between strategic and operational supply
chain performance. First, however, the hard (soft) analysis must be
presented. With their help, the effectiveness of supply chain activities
can be shown in a consistent form.
E.4.1 Hard (Soft) Analysis
E.4.1.1 Characterization
Hard (soft) analysis is one of the controlling methods developed by Origin and
Anglo-American companies in the 1990s (primarily ITT and Motorola). general
In this country, the hard (soft) analysis is so far little known. The information
instrument has only been used in Germany for a few years, primarily
in the automotive industry and its suppliers.
For example, the company Continental Automotive Systems uses
hard (soft) analysis (cf. Werner 1999b and Werner 1999d).
463

E
What is a hard A hard (soft) analysis opens up the possibility of presenting the
(soft) analysis? effectiveness of corporate activities. It shows explanations for
deviations . Essential components of the income statement are
reconciled from one period to the next.
A declaration of deviation is made selectively for a financial year per
quarter and cumulatively for the entire year. Hard (soft) analysis is
so named because positive deviations within this reconciliation
represent a hard spot . Conversely, negative deviations describe a
(soft) spot. These discrepancies are usually given in brackets. The
following combinations of deviation analyzes are conceivable:
ÿ Actual figures versus actual figures (e.g. actual 2019 compared

with Actual 2020).
ÿ Actual figures versus planned figures (such as the comparison of Actual

2020 with Budget 2020).
ÿ Plan figures versus plan figures (e.g. comparing budget

2020 with forecast 2020).
components of The reconciliation in the hard (soft) analysis usually refers to three
analysis selected variables of the profit and loss account:
ÿ Sales _
ÿ EBIT (operating profit)
ÿ Net Income After Tax
Synonymous Due to its fixation on the three essential components of an income

designation: P-3- statement, the hard (soft) analysis is synonymously referred to as
analysis P-3 analysis (position 3 analysis). In most cases, a form is used to
carry them out.
E.4.1.2 Supply chain management example

forms as The example of a hard (soft) analysis in supply chain management
Base continues the cost tracking of material prices, freight costs and
inventories (see p. 396). However, other items in the income
statement are also reconciled. These relate to wages, depreciation,
research and development, marketing and administration. Three
different forms were designed for cost tracking. They show possible
effects of the change of supplier (from Italy to Taiwan) for the
464

E.4
LCD panel cover from the television manufacturer View AG. These
effects on the result of View AG are offset in a hard (soft) analysis.
The management would like to know from its controlling whether the
change of supplier makes economic sense overall . To do this, the
controller uses hard (soft) analysis.
The increases or decreases in material prices and freight costs Offsetting
affect 100% the EBIT in the income statement. opposing effects
tion. Stocks are kept on the balance sheet. They affect the operating
result in the income statement only indirectly. In this example, 10%
interest is calculated on the effects on the operating profit via the
WACC. The case assumes that the stocks of LCD panels delivered
from Italy are taken to a consignment warehouse on the factory
premises and that no stock of LCD panels is therefore owned by View
AG . Therefore, after a change of supplier – and the associated
abandonment of the consignment warehouse – the entire stock from
Chart III (see p. 402) is included in the hard (soft) analysis after
interest is calculated by 10%. It is also assumed that the management
of the consignment warehouse cost View AG 20,000 euros annually.
Due to the liquidation of the consignment warehouse, this value is
included in the analysis as a hard spot, distributed evenly over the
year (per quarter 5,000 euros; cf. Figure E.14).
ÿ Periods: The figures for sales, EBIT and net income are given for periods of the P3ÿ
each quarter and for the entire 2020 financial year. analysis
ÿ Basic planning: This section contains the basic planning. It relates Budget as initial
to the 2020 budget. The sales figures are taken from Chart II (cf. p. planning
400, cost tracking of freight costs). The operating result and the
annual surplus come from the income statement of View AG. For the
full year 2020, the figures for sales are €24,000 thousand, operating
profit €3,200 thousand and net income after tax €1,600 thousand.
ÿ Components: These are from the cost tracking forms Contents of the
Pay for the material price variance, the freight cost, and the reconciliation
read inventories. The inventories are calculated based on the
10% interest on earnings. For example, the material price deviation
in the first quarter of 2020 results in a hard spot of €95 thousand for
the operating profit. Taxes and interest reduce the effect on the
annual surplus to 48 T€. In addition, effects from the abandonment
of the consignment warehouse are deducted from the “Other” item.
The hard spots amount to €5 thousand per quarter (related to EBIT)
and €3 thousand (net income after tax). The stock effect gives for that
465

E
a (soft) spot of €29 thousand for the operating profit in the first quarter,
which is also shown in the “Other” item. Since, for the sake of
simplification, no other effects regarding the EBIT are assumed in this
item, the sum of the inventory effect and the effects of the abandonment
of the consignment warehouse must be formed.
This resulted in a (soft) spot of €24 thousand for the first quarter.
No zero-sum ÿ Operating Income: The Operating Income variable is now calculated.
game The effects of cost tracking of material prices, freight costs and
inventories are determined in a hard (soft) analysis with additional
components. In principle, all variables relevant to success from the
income statement can be included. In order to maintain clarity, only a
few possible effects are calculated here. For the first quarter, in addition
to the three figures mentioned above, there are, for example, soft spots
due to higher wages (50 T€), increased depreciation (30 T€) and
higher administrative expenses (10 T€). In total, these effects result in
a soft spot of €99 thousand for the operating result in the first quarter.
Revised figures ÿ Change: Finally, this hard (soft) analysis transitions from Budget 2020
to Actual/Forecast 2020. The following results can be read clearly:
BUD 2020 YE Act/Fc 2020 YE Hard/(Soft)
Sales 24,000 25,000 1,000
operating profit 3,200 2,856 (344)

Net income after tax 1,600 1,468 (132)
Legend: YE = Year End, Bud = Budget, Act = Actual, Fc = Forecast All figures in
thousands of euros (T€).
E.4.1.3 Critical appraisal

Very clear tool Hard (soft) analysis impresses with its pragmatism. An advantage of
the form is its universal use. Not only insiders quickly survey the
content. The effectiveness of measures on the income statement of
companies is visualized at a glance. The hard (soft) analysis also
proves to be a didactic aid. The complete financial year is divided
into quarters. The tool reveals the cause (the why) and timing (the
when) of an impact on earnings.
466

E.4
However, simplifying the hard (soft) analysis also reveals its Quite simply
disadvantages. The instrument extends to three selected knitted, but very
variables of the income statement (sales, operating profit, net pragmatic
income after tax). Balance sheet variables are left out, which
reduces the meaningfulness of the hard (soft) analysis. Also,
the selection of components in the reconciliation is subjective.
This results in a risk of manipulation: If the controller wants to
substantiate a preconceived result, he will largely exclude
opposing effects from the analysis. Finally, the hard (soft)
analysis reveals that a poor result was achieved. However, it
does not provide any automatism for improvement.
Hard (soft) analysis Figure E.14
Hard (soft) analysis
View AG (LCD panel purchase from Taiwan), currency: thousand euros (T€)
hard (soft)
1st quarter 2nd Quarter 3rd Quarter 4th quarter full year
components of 2020 2020 2020 of 2020 2020
SONSONSONSONSON
BUD 2020 6000 800 400 6000 800 400 6000 800 400 6000 800 400 24000 3200 1600
material prices ÿ 95 48 ÿ 69 35 ÿ 78 39 ÿ 80 40 ÿ 322 162
Wages/salaries ÿ (50) (27) ÿ

(50) (27) ÿ
(50) (27) ÿ
(50) (27) ÿ
(200) (108)
AfA ÿ
(30) (13) ÿ
(30) (13) ÿ
(30) (13) ÿ
(30) (13) ÿ
(120) (52)
R&D ÿ ÿ ÿ ÿ ÿ ÿ ÿ
(40) (27) ÿ
(89) (40) ÿ
(129) (97)
freight charges ÿ
(80) (40) ÿ
(56) (28) ÿ
(71) (36) ÿ
(76) (38) ÿ
(283) (142)
marketing ÿ ÿ ÿ ÿ 25 13 ÿ 60 33 ÿ 95 46 ÿ 180 72
Administration ÿ
(10) (7) ÿ
(10) (7) ÿ
(10) (7) ÿ
(10) (7) ÿ
(40) (28)
Other (23) (24) (12) 1026 (21) (10) 497 (16) (8) (500) (13) (6) 1000 (74) (36)
Operating
income (23) (99) (51) 1026 (73) (37) 497 (79) (46) (500) (93) (45) 1000 (344) (229)
Interest charges ÿ - 28 - ÿ 12 ÿ ÿ 19 ÿ ÿ 18 ÿ ÿ 77
Steer ÿ ÿ 6ÿ ÿ 4 ÿ ÿ 5ÿ ÿ 5 ÿ ÿ 20
Change (23) (99) (17) 1026 (73) (21) 497 (79) (22) (500) (93) (22) 1000 (344) (132)
ACT 2020 5977 701 383 7026 727 379 6497 721 378 5500 707 378 25000 2856 1468
Legend: S = Sales, O = Operating Profit, N = Net Income After Tax Negative numbers
are shown in brackets.
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E.4.2 Target Costing
"Anyone who has The first scientific publications on target costing (target cost
been carried to the management) come from Japanese authors in the late 70s. Target
goal must not believe costing found its way into Anglo-American countries in the mid-1980s.
that they will reach it
The German-language specialist literature has been addressing the
have.” (M. v.
topic since the late 1980s. The central question is no longer: "What
Ebnerÿ
will a product cost?" Target costing is more concerned with the
Eschenbach)
question: "What can a product cost?". Target costing is designed in
the form of full cost accounting. The main focus of the cost influence
is not in the actual market cycle (introduction, growth, maturity,
degeneration). Rather, the greatest opportunity for cost kneading
extends to the early stages of product creation.
"No one is Fussy, Target costing (cf. Behrendsen 2017; Brenk 2015; Joos-Sachse
I'm a Target..." (J 2006; Kremin-Buch 2012; Schulte-Henke 2012; Seidenschwarz
Jackson) 2011) means mostly market-focused cost management. It consists
of target cost planning, measures to influence costs as early as
possible and cost-oriented coordination of processes. The historical
predecessor of target costing is design-to-cost (cf. term block EI).
This approach runs through the following work steps:
Design to Cost: (1) Target cost determination: First, an interdisciplinary team is

method formed. The target costs for the entire project are derived from
market analyzes and the client's requirements. As with target
costing, the total product costs must be broken down at the level
of individual components and parts, with the individual
specifications being summarized in a target cost catalogue.
This is followed by the technical and non-technical identification
of cost drivers. Technical cost drivers are entire products or
product components. Since they have a direct influence on the
life cycle costs, they are easy to recognize. In contrast, a non-
technical cost driver represents a lack of product description.
(2) Cost-effective design: A team takes care of the provision of

various tools in design-to-cost. This includes construction
guidelines, production catalogs and material price tables. The
life cycle costs of alternative development
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E.4
possibilities calculated. The variant with the comparatively lowest
costs is to be selected.
(3) Cost control: The target costs of the individual product components
and parts are constantly monitored. Measures must be developed
for the problem areas identified in the course of deviation
analyzes in order to exploit cost reduction potential.
Design to cost Concept block EI
Design-to-cost (cf. Blokdyk 2018; Domin/ Maskow 1985) is used in the USA in particular when
processing large-scale projects in the state sector. One of the differences compared to target
costing is that the starting signal for design-to-cost comes from the customer and a joint
approach between the customer and the contractor is an indispensable prerequisite. In addition,
target cost management, in contrast to design-to-cost, does not require a catalog of requirements
that is directly defined and specified with the customer. Furthermore, design-to-cost means a
constant process of coordination and adjustment between client and contractor and is essentially
geared towards B2A activities. However, the starting point is identical to target costing, because
here too it is about specifying costs that should not be exceeded if possible. Well-known
examples of the use of design-to-cost are the developments of military aircraft. In Europe,
design-to-cost has already been used by Rolls-Royce, Aerospatiale and Messerschmitt-Bölkow-
Blohm .
A target costing process consists of two basic parts. phases of the target
First, the total target costs are determined in order to then break costing process
down product-related target costs.
E.4.2.2 Determination of target costs via market-into-company

The market-into-company variant is ideal for determining the total market into
target costs (cf. Joos-Sachse 2006, p. 75ff.; Kremin-Buch 2012, p. Company as
43ff.). The determination of the target costs is based on the the most common variant
subtraction method. First of all, the target sales price for a new
product must be determined by marketing (target pricing). This can
be done, for example, through market research, supported by a
conjoint analysis (see p. 139). Based on the return on sales specified
by management, the target profit for the product (Target Profit) of
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derivation of subtracted from sales. The result represents the maximum allowed
Allowable costs costs for the target profit (allowable costs). If necessary, general
administration costs (overheads) are to be shown separately in order
to differentiate between direct and overhead costs. The specialist
departments then calculate the standard costs incurred without
innovations (drifting costs). Only then does the kneading of the
costs begin, which closes the gap between the allowable costs and
the drifting costs (see Figure E.15).
Figure E.15 Determination of the total target costs
Sales Overheads = allowable costs

– target profit –
drifting costs Knead
Knead
target costs
possibilities of The kneading of the costs refers to products, processes or

cost kneading cooperations. In the following, some options for reducing costs are
characterized in bullet points.
Product pricing ÿ Product-related cost reductions: They are derived, for example, from value
engineering, in which competitive services are resolved at part level in order
to copy the knowledge of the competitor (cf. term block E.II). It is also
possible to renegotiate purchase prices. Finally, further possibilities for
improvement go back to product standardization (series concept, multiple
use parts).
combination with ÿ Process-related cost reductions: Activity-based costing is particularly useful

process cost accounting when it comes to identifying potential for optimization in general administrative
tion areas. This makes it possible to identify the cost drivers in the administrative
secÿ
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E.4
to reveal. For example, outsourcing activities that are performed
infrequently or are labor-intensive. ÿ Cooperation-
related cost reductions: In particular, the integration of upstream interface maÿ
value-added partners promises success. nagement
Among other things, complete modules can be obtained from
system suppliers. However, cost reduction potentials can also
be derived from horizontal cooperation by forming strategic
alliances (cost sharing of development expenses).
Value Engineering and Value Analysis Block E.II
Value engineering describes value creation. The procedure serves to

identify cost-critical factors in the early phases of product development.
Value engineering is primarily used in the out-of-company process. The
activities of value analysis (the value analysis), on the other hand, relate
to products that are already in their construction stage or are on a market.
The method is used in particular
used to determine out-of-standard costs. In both methods, (competing)
products are broken down into their individual parts and cost factors
(functions, components, parts) are identified.
Ideally, the target costs are equated with the allowable costs. If this They don't
is not possible due to the intense competition , it makes sense to always match
define a corridor between allowable costs and drifting costs. The Target costs den
Allowable costs
target costs are initially located roughly in the middle of this border
zone. How close the target costs ultimately come to the allowable
costs when kneading costs depends on the competitive dynamics. If
the target costs correspond to the allowable costs, the cost
specifications in the company can be adopted 1:1 as cost targets.
E.4.2.3 Decomposition of product-related target costs

After the target costs for a product as a whole have been determined, Recognizing and
this block of costs must be broken down to the level of functions, deriving
product features
components or parts. The product features are subdivided into
objective and subjective components.
ÿ Objective features: These include characteristics (hard factors).

In a car, for example, these are all-wheel drive, airbags, anti-theft
devices and side impact protection.
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ÿ Subjective characteristics: The soft factors are referred to as
benefits . They are customer-specific and result from the perception
and assessment by a customer (design, image).
instruments of The function cost matrix and the value control chart are particularly
decomposition useful for decomposing the product-related target costs , which will
become clear in the further explanations.
E.4.2.4 An overview of other target costing methods

In addition to the market-into-company technique described above,
other methods of target cost management are available with out-of-
company, into-and-out-of-company, out-of-competitor and out-of-
standard costs .
Derive target costs ÿ Out-of-Company: Here the target costs are not derived from the market, but on the basis
internally of development and production conditions, the process and technology standards and
the existing wealth of experience of the employees. With this method, cost information
from previous products is extrapolated according to the requirements of the new service
in order to then decide on the project acceptance. The procedure is fast (suitable for
short-term tenders) and is a good basis for calculating innovations. Due to the lack of
market orientation, however, the target prices must be constantly checked with regard
to their enforceability on the market. The concept is particularly suitable for first-to-
market, which must be equipped with the appropriate financial strength (problem: risk of
a flop).
hybrid method ÿ Into-and-out-of-company: This method represents a compromise solution in which the
market-into-company and out-of-company approaches described above are combined.
Into-and-out-of-company is theoretically desirable, since market and resource orientation
are taken into account. However, due to the complexity of determining target costs, an
extension of the time-to-market is to be expected (low practical relevance). ÿ Out-of-
competitor: In the out-of-competitor variant, customer requirements are not derived from
customer claims. Instead, a competing product should
Competitive be selected as a starting point (value analysis). The following procedure is conceivable:
performance Either a comparable product is offered at a lower price, or a comparable price has to be
as a basis for calculation offset by better product properties. Since the drifting costs of the competition are not
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E.4
are known, they can at best be estimated. In addition, this variant
is oriented towards the past (the competition is not overtaken, in
the best case you catch up with them).
ÿ Out-of-standard costs: Out-of-standard costs are probably the standard cost
furthest removed from the actual idea of target costing. Like out-of- versus optimal
company, this approach is primarily inward-looking and does not Costs
pursue any direct market orientation. Here, drifting costs are first
determined in order to compare them with planned costs (optimal
costs) . The cost plasticine results from the difference.
An example of the market-into-company variant is described below using "In a small one
the product “TV show” (cf. Usadel 2002). First of all, the management You have to play a role
determines the functions of the “TV show” product to be included. In the be a great
given example, the following (main) functions are identified: quota/market artist to be
share, support for advertising, contribution to branding, entertainment, seen.” (A.
education and promotion. The previously determined functions are then Strindberg)
included
weighted with the help of a customer survey. This results in the following
picture:
Features of the TV show
1) Quota/market share 11%

2) Promotional Support 10%
3) Contribution to branding 16%
4) entertainment 28%
5) education 32%
6) PhD 3%
total 100%
In the next step, the costs allowed by the market (allowable costs) are definition of
determined. In addition, the standard product costs (drifting costs) and the components
need for cost reductions must be determined. After the total target costs
have been determined, the complete “TV show” cost block is broken down
into its components. Each component is assigned its percentage of the
cost of the overall product . The cost shares of the product standard costs
are taken from previous cost calculations
men. The components "moderator" and "co-moderator" are
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not pursued further in order not to achieve any trade-offs (without a
good presenter, the entire TV show flops).
Components of the TV show cost shares
K1 protagonists 2%
K2 Guests 18%
K3 Content/Authors 26%
K4 Actions 6%
K5 live actions 14%
K6 single player 12%
K7 tape 19%
K8 Studio/Technical 3%
(K9) (moderator) ÿ
(K10) (coÿmoderator) ÿ
total 100%
Evaluate Then the already identified functions of the "TV show" are to be
functions and compared with the components (functions-components-matrix). The
components weighting is carried out in consultation with the responsible company
first... departments on the basis of a subjective assessment. This list shows
the weight of individual components with which the sub-functions are
implemented. For example, 14% of the “guests” cover the “entertainment”
function (cf. Usadel 2002, p. 41ff.).
functions
market
share
rate / Advertising branding Entertainment Education promotion
components
K1 protagonists 27% 27% 25% 25% 26% 22%

K2 guests 23% 15% 10% 14% 15% 25%
K3 content/authors 18% 7% 7% 11% 7% 3%

K4 actions 11% 20% 22% 21% 19% 14%
K5 Live Actions 11% 20% 19% 18% 23% 18%
K6 single player 7% 7% 3% 7% 10% 7%

K7 tape ÿ 4% 14% 4% - 11%
K8 studio/technology 3% - ÿ ÿ ÿ ÿ
total 100% 100% 100% 100% 100% 100%
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E.4
The values of the function-component matrix are linked to the function meanings. The
...then function
result is the weighted function-component matrix. The calculation is explained using ons and compoÿ
the example of “protagonists” (K1) and “branding”: 0.25 x 0.16 = 0.04 (4.0%).
nents
functions
market
share
rate / Advertising branding Entertainment Education promotion benefit
share
components
weighting 11% 10% 16% 28% 32% 3% 100%
K1 protagonists 3.0% 2.7% 4.0% 7.0% 8.3% 0.7% 25.7%

K2 guests 2.5% 1.5% 1.6% 4.0% 4.8% 0.8% 15.2%
K3 content/authors 2.0% 0.7% 1.1% 3.0% 2.2% 0.1% 9.1%
K4 actions 1.2% 2.0% 3.5% 5.9% 6.0% 0.4% 19.0%
K5 Live Actions 1.2% 2.0% 3.0% 5.0% 7.4% 0.5% 19.1%
K6 single player 0.8% 0.7% 0.5% 2.0% 3.2% 0.2% 7.4%
K7 tape ÿ 0.4% 2.2% 1.2% - 0.3% 4.1%
K8 studio/technology 0.3% ÿ ÿ ÿ ÿ ÿ 0.3%
In the last step, the ratio of benefit to cost Calculate target

partly determines the target cost indices . For example, K1 is cost indices
calculated by dividing 25.7% to 2.0% (12.8). A target cost index
“equal to 1” is desirable, then the use of resources corresponds to
the customer benefit. A target cost index "less than 1" means that the
product component is "too expensive". Conversely, an index "greater
than 1" reflects "too simple" production (cf. Usadel 2002, p. 43).
components of the TV Costs- benefit target

show Portion share cost index
K1 protagonists 2% 25.7% 12.8

K2 guests 18% 15.2% 0.8
K3 content/authors 26% 9.1% 0.4
K4 actions 6% 19.0% 3.2
K5 Live Actions 14% 19.1% 1.4
K6 single player 12% 7.4% 0.6

K7 tape 19% 4.1% 0.2
K8 studio/technology 3% 0.3% 0.1
total 100% 100% ÿ
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visualization of the The results of the target cost indices for the individual product
target cost indices components can be visualized in a target cost control diagram (see
Figure E.16). After carrying out an analysis, measures for cost
optimization are then initiated. In the given example, there is a specific
cost reduction requirement for components three and seven in
particular (they are far too expensive).
On the other hand, components one and four are designed “too
simply” in terms of customer benefit. They indicate a functional
improvement (cf. Usadel 2002, p. 43).
Figure E.16 Target Cost Control Chart
share of costs
45 degree line =
in %
Optimal target cost index
“Too expensive”
K3
K7 K2
K5 "Too simple"
15
K6
K4
K8 K1
Benefit share in
15 %
increase of ÿ One advantage of target costing is the need to uncover weaknesses

transparency in the development process. Target costs are difficult to meet. This
creates the need to identify costly processes within the supply
chain. Solutions with lower costs are sought. However, the quality
must not suffer from the kneading of the product costs (latent trade-
off risk).
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E.4
ÿ If the variant market-into-company is used, supplier, customer and Inclusion of
competitor attributes are equally taken into account in supply chain market
management. The essential market determinants are covered,
the risk of developing outside the market is minimized.
ÿ According to the 80-20 rule, the greatest opportunity for cost Focus on R&D
reduction is in the early phases: 80% of the costs are determined
in the development cycle. Only 20% of the costs are disposable in
the market cycle (when the product is already on the market).
Target costing has its strengths in these early phases.
ÿ However, including the relevant costs is a problem in target costing. Derivation of
Equipped as full cost accounting, costs not directly related to the allocation keys
product are assigned to the product units according to charging for overhead costs
principles. The non-product overheads (administrative, material
and manufacturing overheads) are allocated to the product units in
relation to the individual costs, or the manufacturing costs. This
results in an unjustified proportionalization ("watering can principle").
ÿ Another problem is the evaluation of the benefits of products. Particularly subjectivity

soft criteria (“design, image) are subject to pronounced subjectivity
in their evaluation.
ÿ Kneading stops as soon as the Target Costs correspond to the How far does the
Allowable Costs . Conversely, if the bar for allowable costs and kneading go?
target costs is set too high, a project will not even be started, which
will catapult you out of the market in advance.
ÿ A further disadvantage can arise if there is a lack of acceptance Low

by the employees, in that the numbers are given top-down by the countercurrent
management. Then the setting of the target values seems arbitrary
and not very comprehensible for the workforce.
E.4.3 Activity-Based Costing

Miller and Vollmann provided the impetus for the development of "Once we start
activity-based costing in their legendary article "The hidden factory" (cf. calculating the
Miller and Vollmann 1985). They recognized the problem: the indirect cost, the cost
areas of a company were hidden from the cost calculation. However, begins." (HD
they did not provide the solution. This was done by Cooper and Thoreau)
Kaplan (cf. Kaplan/ Anderson 2007). Based on the considerations of
Miller and Vollmann, they developed Activity Based Costing (ABC).
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From activity to Activity-based costing originally related to individual activities. Over
process the course of time, ABC approached activity-based costing, in that
these activities are now grouped into secondary and main processes.
For example, the "goods receipt" can represent a main process. This
is subdivided into the sub-processes “Incoming goods inspection”,
“Customs” and “Receipt of goods”. Finally, incoming goods inspection
activities represent measuring, weighing and counting.
Objectives of the process Activity-based costing (cf. Balzer/ Zirkler 2007; Grüning 2010; Kaplan/
cost accounting Anderson 2007; Rauhut 2010; Remer 2005) aims to increase cost
transparency in indirect areas. For this purpose, the administrative
activities are broken up in activity-based costing.
The Fraunhofer Institute for Labor Economics and Organization (IAO)
in Stuttgart has calculated for the supply chain that an (administrative)
procurement process consumes an average of between 80 and 130
euros (cf. Werner 2013a, p. 31).
triad study However, activity-based costing is not particularly widespread in
supply chain management. Based on the "Triad Study", in which
more than 300 companies from all sectors and worldwide took part, it
was determined that only 30% of the companies surveyed determine
their value-added costs on the basis of activity-based costing.
Many of these competitors (more than 20%) do not calculate their
costs separately in the supply chains. You show these under general,
selling or administrative costs (cf. Werner 2014, p. 31).
Activity-based The benefits of activity-based costing in the supply chain result from
costing in the the breakdown of main processes at the level of individual activities.
chemical industry This enabled a Japanese chemical company to significantly reduce
its throughput times in production: Out
original 11 days became 4 days. The industry average is 18 days.
Weak points in the logistics process (storage, packaging, picking)
were systematically eliminated (cf. Werner 2014, p. 13).
work steps Activity-based costing comprises four work steps: process

identification through activity analysis, selection of parameters,
determination of planned process quantities and process costs, and
determination of process cost rates. These phases of activity-based
costing are explained in more detail below.
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E.4
1. Process identification through activity analysis
The entire activity process for the provision of services is broken up. Physical Main and ancillary
and value sub-processes are a chain of homogeneous activities. They are processes
assigned to the main processes at cost center level. A sub-process ends with
a work result. For example, the sub-processes "storage" and "removal" are
included under the main process "warehousing".
2. Selection of dimensional sizes
After the sub-processes of a cost center have been identified, the volume is cost drivers
divided into variable (performance quantity-related) and fixed (performance recognize
quantity-neutral) components. Significant influencing factors (cost drivers) are

determined for all variable components of a cost center . Cost drivers are
parameters for quantifying repetitive activities. A quantity structure is set up for
them, which is not necessary for the costs that are independent of the volume
of service.
3. Determination of planned process quantities and process costs
The characteristics of the measurement variables are to be fixed for the proportional
entire performance quantity-induced processes. They serve as the basis for Offsetting the
cost planning. The quantification of the activities is based on them. neutral costs
The planned process quantities are to be derived from the performance

requirements of the bottleneck areas. Cost types are specified from each
process with the help of technical and cost accounting analyses. Planned
process quantities serve as calculation bases. In the indirect areas, personnel
costs often dominate on a cost center. To make work easier, other types of
costs (rent, electricity, office supplies, further training) are distributed to the
cost center in proportion to the personnel costs ("flexible").
4. Determination of process cost rates
The costs for their one-time use are determined for all performance quantity- Determine process
induced activities. To do this, the process costs must be divided by the planned cost rates
process quantities (process cost rates).

When the costs are passed on in the internal service areas, the service
quantity-neutral processes and the costs they cause are not taken into account.
A permanent specification and control of costs in the indirect areas are related
to cost centers or to the overall process. For individual cost centers
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the cost center manager is responsible, and the process owner is responsible for
overall processes.

Canteen The use of activity-based costing is illustrated by an example. This relates to the
outsourcing? possible outsourcing of a company restaurant: A supplier to the pharmaceutical
industry currently operates its own company restaurant (a "canteen").
Management is toying with the idea of handing over the entire management of the
canteen, or at least parts of it, to a third party. Controlling determines the make
alternative with the help of activity-based costing. With regard to determining the
costs of buy alternatives, purchasing initiates a tender in which catering companies
can participate.
clarify activities The controller follows the ideal-typical work steps for determining process cost
rates (cf. the four main steps on the front page). For example, he conducts
interviews to analyze activities in the "company restaurant" cost center. Controlling
defines the following sub-processes in this regard: providing ingredients,
preparing food, serving food, checkout process, collecting trays, rinsing process
and general administration.
numbers for one Figure E.17 shows these seven sub-processes. The following information relates
Collect catering to the selective reporting month of March 2020. The parameters for each sub-
process are then defined and quantified. For example, the metric "number of
menus" stands for the sub-process "preparing food". Figure E.17 shows that a
total of 20,000 dishes are prepared in March 2020. Costs are allocated to the sub-
processes based on man-years. The cost center manager distributes the total
number of heads to the activities. For example, the considered activity “preparing
the meals” binds 4.0 people (in man-years). Of the 9.0 man-years in total, 2.0 man-
years are accounted for by administrative activities.
Fixed and variable The controller takes the next information for determining the process cost rates
separate costs from the monthly financial statements for March 2020. The cost center generates
a total of 72,000 euros in personnel costs. These are to be divided into
components that are neutral in terms of output quantity and components that are
induced by output quantity. The administrative activities are defined as being
independent of the volume of services (EUR 16,000 for 2.0 people). The remaining
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E.4
A small amount of 56,000 euros represent performance-related costs (7.0 heads).
In the next step, the controller determines the process costs for all Power quantity
induced processes
other power-quantity-induced activities. A total of 56,000 euros are to be distributed
over six direct activities. For the activity "preparing food" (sub-process 2), the process
costs of 32,000 euros caused by the activity volume are calculated as follows:
ÿ
Total man-year costs per sub-process
Process costs (lmi) =
total man-years
72,000 4.0
ÿ
process costs (lmi) = = 32,000 9.0
Analogously to this procedure, the performance quantity-neutral sub-processes are Proportionalization of
evaluated. The respective performance quantity-induced process costs are to be the performance
apportioned proportionally to the performance quantity-neutral activities. For sub-process quantity-neutral sub-processes
2 (“preparing food”), the service-neutral process costs amount to 9,143 euros, for example.
ÿ
Total costs lmn man-years per sub-process
Process costs (lmn) =
(total man-years ÿ man-years administration)
16,000 4.0
ÿ
process costs (lmn) = = 9,143 7.0
The total process costs of the activity "preparing food" are therefore 41,143 euros "Prepare food" as
(32,000 euros + 9,143 euros). In order to calculate the process cost rates for an activity, the primary
cost drivers
the service volume-related as well as the total process costs are to be divided by the
associated quantities. For the activity "preparing food", this results in 1.60 euros per
execution and time unit, induced by the service volume.
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E
lmi ÿ process costs per sub-process
Process cost rate (lmi) =
Amount per sub-process
32,000
Process cost rate (lmi) = = 1.60
20,000
All process The total process cost rates per activity are determined accordingly ,
compare cost rates in that the total process costs per sub-process are divided by the
amount per activity. The activity "preparing food", for example, ties
up 2.05 euros per time unit. Figure E.17 shows the process costs and
the process cost rates for all activities of the company restaurant cost
center.
derive As a result , it can be stated that the second activity "preparing
interpretations meals" has a particularly high impact on the costs in the company
restaurant. The total process cost rate for this activity is 2.05 euros.
The first activity (“provision of the ingredients”) is also very costly, it
includes a total process cost rate of 1.44 euros. On closer inspection,
these high values for both activities are not surprising: the process
cost rates per activity tend to increase with their personnel intensity.
Likewise, for the activity "Provide ingredients", it is not the man-years
that cause the bad result, but the small amount that tips the scales.
As a rule of thumb it can be stated: The less frequently an activity is
carried out and the more labour-intensive it is, the higher the process
cost rate.
Force outsourcing? Conversely, the "flushing process" - with a total process cost rate of
0.12 euros per time interval - proves to be comparatively cheap.
At first glance, it makes little sense to want to initiate cost improvement
potential in this activity. In order to decide whether to outsource the
company restaurant, the available figures from in-house production
must be compared with the offers from the service provider. Of
course, in this regard, mere cost factors can be "overridden" by
strategic reasons.
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E.4
Activity-Based Costing Figure E.17
sub-process measure size litigation costs PZK rate
Contents Base quantity MJ lmi lmn Total lmi Total
provide
1 pallets 5,000 0.7 5,600 1,600 7,200 1:12 1.44
ingredients
2 prepare
menus 20,000 4.0 32,000 9,143 41,143 1.60 2.05
meals
hand Dispensed
3 20,000 0.5 4,000 1.143 5.143 0.20 0.25
out food meals
cashier
4 Customers 20,000 0.5 4,000 1.143 5.143 0.20 0.25
occurrence
collect
5 trays 20,000 0.3 2,400 686 3,086 0.12 0.15
trays
6 rinsing Dishes 80,000 1.0 8,000 2,285 10,285 0.10 0.12

process
7 General ÿ
2.0 16,000 ÿ ÿ
Administration
ÿ 9.0 56,000 72,000
Legend: PZK = process costs ÿ
All numbers selective
ÿ ÿ
MJ = man-years lmi = performance ÿ
Act. 03/(2020)
ÿ ÿ
quantity-induced lmn = performance quantity-neutral

ÿ
As mentioned, the management of the company restaurant can be basis for

outsourced en bloc. On the other hand, perhaps only individual Decision
activities are affected by outsourcing. In this example, the activities making
“preparing food” and “providing ingredients” seem particularly
threatened by outsourcing. In fact, they cause comparatively high
legal costs. However, this does not automatically mean that an
actor specializing in external management (a "catering company")
necessarily offers these services at lower prices. As a result, there is
no automatism for outsourcing activities with high process cost rates.
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Benefits of the ÿ Traditional methods of cost accounting focus on the direct area. Cross-cost
rens center activities, the billing of internal services and the costs for new
developments are hardly taken into account.
Activity-based costing covers these areas.

combination with ÿ Another advantage of activity-based costing is that it supports target
target costing costing: designed as a full cost-oriented instrument, target costing
includes not only the individual costs but also the overheads. By
combining activity-based costing with target cost management,
overhead costs no longer remain hidden. Activity-based costing
breaks up the indirect area and consequently helps target costing
with "cost kneading" (support function).
Risk of ÿ Activity-based costing, however, has the inherent problem of

proportional offsetting proportionalizing fixed and overhead costs. It is a full cost account.
Original fixed and variable costs are mixed. This means that the
service quantity-neutral costs are calculated in relation to the
service quantity-induced values (proportionalization). In relation
to the “Catering” example above, the problem with this approach
becomes clear. The lmi sub-process “preparing food” requires 4.0
man-years of personnel. The following lmi activity “serving food”
requires only 0.5 man-years. The performance quantity-induced
costs are determined "to the best of our knowledge and
belief" (distribution of 56,000 euros). Of the total costs (72,000
euros), 16,000 euros are still untouched. These represent the
personnel costs of the two administrative employees. Completely
unfounded in terms of content, their costs are charged in the same
ratio (“proportionally”) to the lmi activities. Based on the 4.0 man-
years for “food preparation” and the 0.5 man-years for “serving
food”, this means that the two administrative heads would perform
eight times more administrative work for “food preparation” than
for that "Distribution of the food".
Add logistic ÿ A closer look at the example above shows that activity-based costing
material costs relates exclusively to personnel costs . This approach seems
to justified for indirect areas (Treasury, legal department), since the
proportion of personnel costs in these cost centers is sometimes
over 90%. Other types of costs (energy, insurance, rent) are
negligible compared to the personnel costs. In logistics, the
determination of
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E.4
Process cost rates above personnel costs should be treated with
caution, however. There are also high material costs: investments and
depreciation on buildings, handling equipment and storage equipment.
ÿ A further problem arises from the fact that all activities in activity-based Everything will be over
costing are individually evaluated, although there are often sheared a comb
interdependencies between the contents. All activities are also
considered to be of equal importance: However, there are mostly core
activities without which a complete process would come to a standstill.
ÿ A solution to the proportionalization problem is sought through a alternative conÿ

combination of the marginal cost calculation with the gradual fixed recipes
cost recovery calculation according to Agthe (cf. Aghte 1959) and
according to Mellerowicz (cf. Mellerowicz 1977). Through this
interaction, there is an adjustment to divergent problems, which
increases cost transparency.
ÿ Likewise, the (relative) individual cost accounting according to Riebel (cf. Approach without
Riebel 1994) as a substitute for activity-based costing. Certainly, the proportional
cost differentiation in activity-based costing does not have the same offsetting
stringency as that in unit costing. However, the marginal costing, the
gradual fixed cost recovery calculation and the (relative) individual
costing are more labor intensive in their application than the process
costing.
E.4.4 Economic Value Added

Another tool of the financial supply chain is Economic Value Added (EVA, cf. Bach "Who only to the
2012; Behler 2019; Gundel 2011; Hostettler 2002; Hostettler/ Stern 2007; Kaminski Cost thinks
2006; Weber et al. 2017). EVA (cf. also p. 448) was developed in the early 1990s will never earth
by the American consulting company Stern Stewart & Co. (cf. Stern et al. 2004) plow." (D
and is the basis for related concepts such as economic profit, added value, Market Ferguson)
Value Added or Cash Value Added.
E.4.4.1 Characterization The
Economic Value Added is a key figure that measures the operating surplus . EVA concept for
is used in value-enhancing corporate management and is aggregated from increase in value
variables in the profit and loss account and the balance sheet. The basic formula
for calculating the economic value added is (cf. term block E.III):
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Block E.III Basic formula of Economic Value Added
EVA = NOPAT – (Capital x c*)
Legend:
EVA = Economic Value Added
NOPAT = Net Operating Profit After Tax
Capital = tied assets c*
= total cost of capital
sizes of success ÿ Net Operating Income after Income Tax (NOPAT) is taken from the
Profit and Loss Account. The value is calculated from the operating
result of a company. The basis for its calculation is the EBIT
(operating profit). All tax reductions are added and tax increases
are deducted from the tax expense in the income statement.
How is ÿ The capital component depends on investment decisions and

success achieved? represents the operating assets. The capital is required to achieve
a NOPAT. The focus is on the question: "Which items are
operationally necessary and enable the generation of an operational
result?".
Little available ÿ The total cost of capital “c*” is based on financing decisions. It is
the sum of the weighted cost of debt and equity at real market
values. It is often equated with the “Weighted Average Cost of
Capital” (WACC).
subtraction The calculation formula for EVA means that multiplying Capital by the cost of
method capital (c*) gives the financing cost of working capital. The financing costs are
subtracted from the operating profit. The result is the Economic Value Added.
"Eva flies If the key figure EVA assumes a positive value, the operating result exceeds the
away, dreams total financing costs of the operating assets. A negative economic value added
the world far means that the financing costs were not covered by the net operating result after
away..." (the Nightwish)
tax. From the point of view of investors, a value destruction took place. The
shareholders could have invested their capital in another company with a similar
risk profile and at a higher interest rate.
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E.4
The areas of application of EVA extend to company valuation, an areas of application
increase in the total return of shareholders (shareholder value) and
its use as a company incentive system. One possibility of EVA as an
instrument of value-enhancing company management was described
above. The shareholder value can be interpreted as a purely
financial variable or as a maxim for action.
ÿ Understood as a purely financial variable, the shareholder value Negative image

means a monetary orientation towards the economic productivity caused by the financial crisis:
purpose. The increase in the assets of the shareholders is pursued. grasshoppers

The shareholder value reflects the market value of the equity
(shareholder approach). This way of looking at things is sometimes
heavily discussed and criticized, and not only in Germany.
ÿ A shareholder value interpreted as a maxim for action means a interest groups of
pluralistic, socially oriented goal orientation. This perspective a company
describes the stakeholder approach. A stakeholder is a member of mens
a group. He has a social interest in the continued existence of the
company. Stakeholders are employees, customers, suppliers, the
state, creditors and also shareholders.
If the Economic Value Added is used as a company incentive Performance

system , there is a direct reference to the result of action aimed for increase
by the stock investor. In the case of managers in particular, the
remuneration system is derived from components for calculating
EVA: for example from the share price and the return on equity. In
these cases, the economic value added can be influenced by the
company management. The incentive for the management consists
in the fact that the generation of a high financial result leads directly
to an increase in their own remuneration (pricipal-agent theorem).

Supply chain management contributes to the promotion of value EVA in the supply
creation. The value-enhancing activities are reflected in the income Chain
statement. The assets needed to achieve it (machines, inventories)
come from the supply chain. The following example shows the
correlation between economic value added and supply chain
management .
A supplier company manufactures brake systems for the automotive initial position
industry. The company achieved an EBIT (operating profit) of €113.2
thousand in the 2020 financial year. To calculate EVA, the
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Organization first determine the NOPAT size . To do this, it offsets the operating
result with selected components of the profit and loss account (cf. example block e.1).
example block e.1 Calculation of Net Operating Profit After Tax
(1) Operating profit 113.2

+ (2) Compensation goodwill 1.5
+ (3) Income from joint ventures 2.0
ÿ (4) Fees for parent company services (9.2)
+ (5) Interest from leasing 7.7
+ (6) Interest from pensions 3.7
ÿ (7) Income taxes (46.8)
= (8) Net income after taxes 72.1
All figures relate to the financial statements for the 2020 financial year (in T€)
From NOPAT to The automotive supplier generated a net operating result after income taxes of €72.1
capital thousand in the 2020 financial year. Next, the company calculates the capital that
was used to achieve the EBIT (see example block e.2).
example block e.2 Calculation of Capital
(1) Assets 779.9

ÿ (2) Cash and cash equivalents (21.6)
ÿ (3) Current liabilities (233.4)
ÿ (4) Leases of equipment 84.6
= (5) Capital 609.5
Adding value In this example, the assets required for the business could be covered by the
through positive operational activities. The Economic Value Added is positive, amounting to €11.05
identification number thousand. Example block e.3 shows this fact in a clear form. In the example, a capital
cost rate of 10% was used.
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E.4
Calculation of Economic Value Added example block e.3
Economic Value Added = NOPAT -(Capital Cost of Capital) 11.05ÿ 72.1-(609.5 0.1)
ÿ ÿ

Factors from the profit and loss account and the balance sheet are What brings EVA?
included in the operating surplus. The operating result is not

calculated in isolation because the calculation also takes into account
the capital required to achieve it. Another advantage of economic
value added is the broad area of application of the indicator. EVA is
used as an instrument for company evaluation, in shareholder value
and as a company incentive system. A number of organizations now
use EVA to reward their executives, because a differentiation is made
between components that can be influenced (NOPAT and capital)
and components that are hardly available (cost of capital). If
executives are compensated proportionately via a common key
figure, this means that they are following a strategic direction. Finally,
investors can see whether they have invested their capital sensibly.
Problems with EVA arise from the fact that investments feed directly Lack of
on EVA (cash-out syndrome): For example, if executives whose comparability
remuneration derives in part from EVA are about to retire, they may
postpone investments because this will would reduce their own bonus
(cash-out syndrome). Furthermore, the above advantage of the
joint remuneration of executives via a top key figure also suffices to
the disadvantage of "free riding": Managers who have only partially
contributed to the increase in EVA benefit from an increase in value
just as much as "top executives". Finally, an absolute key figure is
calculated using EVA. Modern controlling approaches, such as Better
Budgeting and Beyond Budgeting, on the other hand, vehemently
demand that relative targets be taken into account.
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E.4.5 Working capital management
liquidity killer Various studies show that on average up to 30% more liquidity is tied
up in current assets than is necessary (cf. Wäscher 2005, p. 118).
Companies also make insufficient use of their scope for internal
financing . In particular, current assets (such as receivables and
inventories) tie up capital (cf. Heesen/ Moser 2017; Meyer 2012;
Weber/ König 2012).
meaning of An instrument that has a direct effect on the financial situation is
working capital working capital management. It extends in particular to inventories,
management customer receivables and payables to suppliers. Working capital
management is designed to help reduce tied-up capital and release
liquidity. In addition to the possibility of increasing available capital in
the short term through successful working capital management, there
is an improved negotiating position with external investors.
calculation bases Working capital is calculated from current assets less all non-interest-
create bearing liabilities (cf. Klepzig 2010, p. 31). These current assets
include assets that can be converted back into cash within a year.
These include cash, bank, inventories, trade receivables and other
receivables and current assets. The non-interest-bearing liabilities
include trade payables, current provisions and other non-interest-
bearing liabilities (cf. Weber/ König 2012, p. 33).
disputes and Accordingly, assets that cannot be liquidated within one year are not
excess and considered working capital. Claims (disputes) with a term of more
Obsolete are not than 365 days should be cited here as an example.
working capital The same applies to excess and obsolete inventories if they have
a stock range of more than 365 days.
measurement of The primary goal of working capital management is to optimize the
liquidity over balance sheet items receivables, inventories and liabilities. The
cash to cash liquidity cycle (cash-to-cash cycle) is optimized for this purpose.
cycles This measures the period of time between outgoing payment and
incoming payment. The working capital thus extends to the
management of receivables, inventories and liabilities (cf. Heesen/
Moser 2017; Meyer 2012, p. 91; Ulbrich et al. 2008, p. 25).
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E.4
ÿ As part of receivables management , working capital management Rapid receipt of
pursues the goal of minimizing trade receivables and increasing payment
receivables turnover.
ÿ When optimizing inventories, an increase in inventory turnover is curse of over-
targeted. Here, the latent conflict of objectives between shortage standing
costs and inventory costs must be explored. In order to find the
balance for the "right" inventory level, range monitoring can be of
great service (see p. 306).
ÿ Liability management has the task of increasing trade payables by Position of
deferring payment terms and periods in order to reduce working power crucial
capital.
Working capital management is also used as an instrument to increase internal Milk cash cows
financing power . A reduction in working capital releases liquid funds, which
lead to an increase in the value of the company. According to a study by Horváth
& Partners, more than three quarters of the participants see working capital
management as an instrument for generating liquidity, increasing capital efficiency
and generally increasing value (cf.
Hofmann et al. 2007, p. 155f.). Within supply chains, however, working capital
management should not merely lead to a shift in the cost of capital, but to a
sustainable improvement in liquidity (cf.
Heesen/ Moser 2017, p. 51).
E.4.5.2 Particular importance of the cash-to-cash cycle

The cash-to-cash cycle (“liquidity cycle”) is probably the most important measurement over the
representative of working capital management. This enables a holistic and company

dynamic view of the effectiveness of measures along the entire value chain. boundaries
According to his basic formula, the cash-to-cash cycle time is calculated from the
sum of customer days (Days Sales Outstanding) and days on hand. The creditor
days (Days Payables Outstanding) are subtracted from this.
A cash-to-cash cycle serves as a benchmark for the tied-up capital (cf. Losbichler/ determinants of
Rothböck 2008, p. 55). The release of liquidity from current assets is derived identification number
from its reduction. The increase in cash and cash equivalents contributes to
increasing the value of the company.
A negative cash-to-cash cycle means that an organization is the
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Receives receivables from customers before the liabilities to suppliers
are settled (interest-free loan). The three reference values of the
cash-to-cash cycle are derived from the corresponding management
processes:
ÿ Days Payables Outstanding (DSO) are attributable to receivables

management and measure the time between customer order and
customer payment (“orderÿtoÿcash process”).
ÿ Inventory management is calculated using the range of storage
[Days On Hand (DOH)]. The "Forecast-to-Fulfillment Process"
describes the relevant activities of forecasting, production, storage
and delivery.
ÿ Finally, the “procure-to-pay process” is integrated into liability
management (Days Payables Outstanding [DPO]). It includes the
time between purchase and payment (cf. Eitelwein/ Wohlthat 2005,
p. 421f.; Weber/ König 2012, p. 112).
Positive and The liquidity cycle therefore has the three levers listed above . The
negative impacts shorter the average inventory and collection period, the more positive
these effects are on the cash-to-cash cycle. In addition, an increase
in the average liability period improves the cash-to-cash cycle time.

interdependencies The contribution of supply chain management to the optimization of
between working capital in general and to the improvement of the cash-to-cash
calculation bases cycle in particular is based on activities in purchasing, production
logistics and sales. This interaction is characterized by the example
of the phantom company Pharma AG .
Distribution: One of the primary tasks of sales staff at Pharma AG is to make
interface in direction customer payments as quickly as possible.
customer
Rapid incoming payments lead to a reduction in opportunity costs,
since the money received earns interest. Country-specific customs
and the payment behavior of the customers influence the setting of
the payment deadlines (cf. Eitelwein/ Wohlthat 2005, p. 419; Weber
et al. 2007, p. 112). Pharma AG will want to use its position of power
in the supply chain to receive payments as quickly as possible. But
the creditworthiness of the customer also plays a role. In this regard,
for example, the average
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E.4
delayed payment by a business partner or the number of reminders
per period. Other levers of Pharma AG are the definition of credit
lines (limitation of the risk of bad debts), electronic invoicing,
accelerated processing of complaints and the improved dunning
process.
Production logistics finds itself in a latent conflict of objectives. Vabanque game of
On the one hand, the reduction in the range of storage is required. logistics
On the other hand, the level of delivery service must not suffer from
this inventory reduction. Shortening the days on hand usually means
less delivery flexibility (cf. Eitelwein/ Wohlthat 2005, p. 419; Weber et
al. 2007, p. 111f.). Pharma AG can use the justÿinÿsequence principle
to reduce stocks. This philosophy seems particularly promising in
connection with Kanban control. Further optimization potentials are
opened up by implementing a supplier logistics center. Pharma AG
combines this sub-form of consignment for suitable item numbers
with Vendor Managed Inventory. A marketability analysis is also
carried out in order to sell slow-moving items on the Internet. Finally,
the dispatchers at Pharma AG use range monitoring to check the
inventory turnover for each article.
In addition, the buyers at Pharma AG will try to delay the payment to Exploit purchasing
the supplier. Up to this point in time, a supplier of Pharma AG grants potential
a quasi interest-free loan. Pharma AG can be compensated for early
payment of invoice amounts by drawing cash discounts (cf. Eitelwein/
Wohlthat 2005, p. 419; Heesen/ Moser 2017, p.53; Weber et al. 2007,
p.
112; Weber/ Koenig 2012). Other adjustment screws of the supplier
management of the Pharma AG are electronic invoicing (reduction of
incorrect transfers, better use of discounts), choice of the payment
type and use of purchasing cards.
E.4.5.4 Critical Appraisal

Working capital is calculated from balance sheet items. Consequently, Static calculation
the key figure represents a snapshot that is derived from historical basis
values. The cash-to-cash cycle brings at least a quasi-dynamic effect
to this actually static working capital: It guarantees an improved
insight into the liquidity situation. The Cash-to-Cash-Cycle-Time aims
at a holistic view of the performance of value-added partners by
simultaneously
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and customer activities (cf. Eitelwein/ Wohlthat 2005, p.
417; Weber et al. 2007, p. 110).
Lagging key In addition, the cash-to-cash cycle is generally interesting for key
figure comparisons figure comparisons . However, these benchmarks lag across
industry boundaries, in that the range of inventories in particular
varies greatly between the companies. It depends on the vertical
integration. Dell has a stock range of a few days. For Dell , this results
in an exorbitantly high annual inventory turnover, which represents a
solid basis for an excellent cash-to-cash cycle. In chemistry, on the
other hand, different rules apply. Long throughput times (caused, for
example, by extreme preheating and setup times) and complex
processes lead to long covering intervals. This affects the range of
storage, which for chemical manufacturers is sometimes more than
200 days per year. Of course, these extreme days on hand have a
direct (and negative) impact on the cash-to-cash cycle. Consequently,
a key figure comparison in the direction of the liquidity cycle between
Dell and the chemical company makes little sense.
Other countries However, country-specific rules also limit the meaningfulness of

other manners… comparisons of working capital in supply chains (international
benchmarks). These include payment behavior, payment practices,
accounting regulations and tax aspects.
E.4.6 Supply Chain Performance and Scorecard
To limit traditional Traditional key figure systems hardly meet the demands of a
dynamic and turbulent competitive environment. They lack a focus on
indicator system the future, since they calculate themselves primarily from figures from
me the past. Likewise, classic key figure systems neglect “soft” factors
(such as customer satisfaction), they are essentially monetary.
Furthermore, they lack a real strategic reference, as well as the
derivation of causal relationships. Finally, these classic key figure
systems suffer from an excessive degree of aggregation, in that lower
organizational levels are hardly appreciated.
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E.4
To overcome these deficits of classic indicator systems , performance Performance
measurement concepts were developed in the 1990s . These drivers of modern supply
chains
measure the effectiveness of certain performance levels of an
organization. Performance levels represent processes, business units,
functional areas or employees. Modern performance measurement
systems focus equally on three dimensions of corporate performance:
effectiveness, efficiency and agility (see Figure E.18; Gleich 2011, p.
17 ; Kleindienst 2017; Moeller 2018).
Dimensions of company performance Figure E.18
efficiency
ÿ ÿ ÿ
performance
ÿ ÿ ÿ
agility
effectiveness
Within this three-dimensional space (“success corridor”), the Three dimensions of
individual performance levels (e.g. production processes within modern performance

Measurements
value chains) are evaluated. The long-term measurement of
effectiveness is directed externally in performance measurement
systems and is aimed at the supply chain strategy being pursued. In
the case of supply chain efficiency, which is designed more for the
short term , the cost-effectiveness of the internal use of resources is evaluated. Finally stands at the
Agility measurement the adaptability (possibility of change) of reactive
service bundles of a supply chain on the test bench (cf.
Gladen 2014, p. 59; Immediately 2011, p. 33ff.).
The value contribution in supply chains manifests itself within the Tangible and
performance measurement systems equally in financial assets intangible assets
(inventory, freight costs) and intangible evaluation standards (delivery

service level, throughput time, sales forecast accuracy). The focus of
these approaches is the simultaneous measurement of the relevant
key factors in a value chain (costs, time, quality, flexibility, service,
innovation, sustainability, information).
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Hard value drivers Within the performance systems of a supply chain, a distinction is
of a supply chain made between quantitative and qualitative value drivers at the
performance levels . Quantitative value drivers can be budgeted for.
They are used to evaluate processes within modern value chains, to
compare design alternatives (e.g. make-or-buy) and to derive
business consequences. Differentiated according to formative
competitive factors, the following quantifiable value drivers can be
distinguished in supply chains (cf. Werner 2011a, p. 599):
ÿ Cost-related value drivers: These include, for example, total supply chain costs,
storage, system, control, handling, distribution, error and transaction costs.
ÿ Qualitative value drivers: Examples of qualitative measurement of success in

supply chains are service level, readiness to deliver, delay rate, ability to
deliver and delivery reliability.
ÿ Temporal value drivers: Due to increased customer requirements and the

shortening of life cycles, the key variable time is becoming increasingly
important in supply chains. Related parameters in performance measurement
systems are delivery time, throughput time or time-to-market. With the advent
of postponement strategies, competitive advantages have recently emerged
from deliberate slowness in value creation networks.
ÿ Flexibility-related value drivers: Assessing the ability to change is fundamentally

difficult in performance measurement systems. Nevertheless, the target
variables set-up processes per time interval and upside production flexibility
are suitable for such a measurement in supply chains.
supply chain A young field of performance measurement systems in value chains

relationship is the qualitative measurement of success. These “soft” value
management drivers are an integral part of supply chain relationship management
(see p. 22 of this publication). The object of investigation is no longer
the flow of material, information and money, but rather social
interdependence. The assessment covers factors such as trust,
connectedness, communication and transparency.
Design options are derived from personnel exchanges (resident
engineering, cf. p. 137), information transfer (shared databases) or
supplier meetings (cf. Werner 2011a, p. 600).
Performance In recent years, there has been a consistent further development of
Management performance measurement approaches. These became an integral
part of performance management systems. By-
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E.4
formance management is the overriding frame of reference in which
the “measurement” of the effectiveness of individual performance
levels is integrated. Performance management systems can be
subdivided into the following levels (cf. in a similar form Erdmann
2013, p. 89):
ÿ Phase 1 (framework): First, the basic goals of the performance

levels must be identified. These focus on the market (customer
requests, resource availability).
ÿ Phase 2 (design): The target components (“overall objectives”) are
then defined between the individual members of a value chain.
These are, for example, specifications for the degree of capacity
utilization of individual production sites.
ÿ Phase 3 (Managing): In the next step, the exchange processes
between the service levels are derived. For this purpose, respective
"sub-goals" are determined for the resources to be used. In this
context, continuous efficiency improvement processes are to be
initiated.
ÿ Phase 4 (Measurement): Now the overall goals and sub-goals of a

supply chain are measured using suitable key figures.
ÿ Phase 5 (Control). Finally, continuous performance monitoring and
control are required in the supply chain.
As has become clear above, the performance assessment takes relation between
place in the fourth work step of performance management: performance
Performance measurement is one of the five defining building blocks management and
of a performance management system (see Figure E.19). Different Performance
forms of performance measurement concepts crystallized over Measurement
time . In this regard, the Balanced Scorecard is certainly the most

well-known representative.
The preparation of the balanced scorecard is largely based on the performance

performance pyramid. This was developed about two years before Pyramid in the
the scorecard (cf. Lynch/ Cross 1995). This performance measurement supply chain
concept focuses on the interests of customers, shareholders and
employees. The strategic goals of a company are derived from the
vision. The foundation of the pyramid is external effectiveness and
internal efficiency. activities are manifested in
Causal relationships (blocks of success): Punctual deliveries to
customers (workplace level) increase customer satisfaction
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(main business process level). As a result, the higher-level business unit gains market share (cause-effect chain). Non-financial targets (non-financials) are converted into financial variables (financials) in the performance
pyramid . For example, quality improvements lead to reduced scrap and rework rates, which serves to improve the operating result (EBIT).
Figure E.19 Performance Management in Supply Chains
Performance management (process)
Framework design Managing Measurement Control
ÿÿÿ
Performance Measurement (Concepts)
quantum performance
performance balance
performance measurements ...
Pyramid score card
measurements matrix
ÿ ÿ ÿ ÿ
Key Performance Indicators

ÿ ÿ ÿ ÿ
Business Performance Indicators
Process Performance Indicator
From performance The balanced scorecard is primarily used to design performance measurement systems (cf. Horváth et al. 2004; Kaplan/ Norton 1997; Kaplan/Norton 2006; Preißner 2011). It contains a balance of various attributes of a
Measurement to supply chain:
score card
ÿ Strategic KPIs and operational KPIs

ÿ Monetary variables and nonÿmonetary variables
ÿ Long-term positions and short-term positions ÿ Cost drivers

and performance drivers ÿ Hard factors and
soft factors
ÿ Internal processes and external processes
ÿ Past performance and future performance
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E.4
Key figures are visualized on a report sheet (scorecard). The focus "Don't turn this
is on the vision (internal view, attractive image of an achievable way, don't turn
reality: "Where do we want to go?") and the mission (external view, that way - get the
memorable description of the purpose: "What are we doing, and will balance
we achieve the vision?") of a company. They are specified by top right..." (Depeche Mode)
management. The vision and the mission are to be implemented

through strategies and activities, whereby this transformation is
usually derived from four generic perspectives: financial perspective,
customer perspective, internal process perspective and learning and
development perspective (innovation perspective, potential
perspective). In order not to overload the Balanced Scorecard, no
more than five to seven key figures should be formed for each dimension.
The financial perspective reflects the impact of activities on a "How do we want to
company's profitability, financial position, capital position and results position ourselves from
the point of view of investors?"
of operations. It contains monetary metrics (such as inventory
turnover, freight costs and overall supply chain costs). A dynamic of
the Balanced Scorecard is expressed by the fact that changing
business strategies are taken into account in the financial perspective.
The key figures used are aligned within the company and in the
network. The linking of the remaining three perspectives with this
financial view is characteristic of a Balanced Scorecard: In a cause-
effect chain (causality), the financial success results from the results
of customer, internal process and learning and development
perspective.
Possible key figures from the customer perspective are customer "How do we
satisfaction, customer acquisition, customer loyalty and market share. increase our
effectiveness
An organization identifies segments in which it would like to operate
in the market?"
in the future. Based on Porter's value chain, the customer perspective
can be expanded to the market perspective . This results in the
possibility of explicitly considering supplier and customer attributes.
The goals of the financial and customer perspective are derived from "With which ones
the company processes . For this purpose, critical projects are processes must
localized and core competencies are developed. The entire value we excel?”
chain is covered: from the customer order to payment (“order to
payment”). Improving the key parameters of the competition (costs,
time, quality, service, agility, sustainability, information) serves as a
possible strategic frame of reference.
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"How can we keep The fourth perspective is based on the infrastructure of a supply chain.
improving?" This dimension is a platform for the remaining three persons
spotting. Possible indicators of the learning and development
perspective are employee satisfaction, employee loyalty and the
number of implemented suggestions for improvement per period.
These parameters can be influenced by initiating continuous
improvement processes as well as training and further education
measures.
wild growth under These four dimensions are mostly the components of a generic
avoid the scorecard. Further scorecards (“sub-scorecards”) can be set up below
scorecards this generally applicable report sheet. For example, it is possible to
create special scorecards for the areas of purchasing and engineering.
However, care must be taken to ensure that these "second-level report
sheets" are coordinated with each other and with the generic scorecard,
so that there is no "uncontrolled growth" of scorecards within a
company.
E.4.6.2 Alternative supply chain scorecards under discussion

Scorecard of As mentioned above, the creation of Balanced Scorecards is not only
supply chain possible in a generic way. Scorecards can also be generated for
operational functional areas, locations or profit centers. The further
explanations relate to the special design of modern network
cooperation. In this regard, five alternative supply chain scorecards
are discussed:
ÿ Supply chain scorecard according to Brewer/ Speh ÿ
Supply chain scorecard according to Stölzle/ Heusler/ Karrer ÿ
Supply chain scorecard according to Weber/ Bacher/ Groll ÿ
Supply chain scorecard according to Richert ÿ
Supply chain scorecard according to Werner
E.4.6.2.1 Brewer/ Speh approach

performance The core of the supply chain scorecard according to Brewer and Speh
Framework (cf. Brewer/ Speh 2000) is based on the four known perspectives of
the generic scorecard according to Kaplan and Norton (cf. Kaplan/
Norton 1997). From this, Brewer and Speh derive an approach that
they call Supply Chain Management Performance Framework (cf.
Brewer/ Speh 2000, p. 75ff.). Figure E.20 visualizes these thoughts in a clearer wa
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E.4
Way. The contents of this frame of reference are described below
(cf. Brewer/ Speh 2000, p. 86).
ÿ Financial Benefits : To preserve financial benefits, Brewer and Speh identify financials
efforts to increase profitability, cash flow, revenue and return on investment
(measuring return via ROA). However, the suggestion of wanting to measure
the increase in the cash surplus using the cash-to-cash cycle key figure only
makes sense to a limited extent, since a large number of other influencing
factors also have an effect on the cash flow: for example provisions,
depreciation, value adjustments or capitalization of personal contributions.
ÿ (End) Customer Benefits : The customer perspective of this suction effect of

Balanced Scorecard is aimed at the ultimate end consumer. end user
As a possible goal of this dimension, Brewer and Speh work out
the added value for customers, which they measure using the key
figure "Customer Valuation Ratio". However, the authors do not
disclose the definition of this variable. Other goals in this dimension
include, for example, improving product and service quality,
reducing waiting times and increasing flexibility.
ÿ Supply Chain Goals (“General Supply Chain Goals”): In order to maintain the process guidance
general supply chain goals, Brewer/ Speh refer to the internal process
perspective of the generic Balanced Scorecard. In this regard, the authors
cite a reduction in scrap rates, pushing throughput times, increasing flexibility
and reducing material costs as target determinants.
ÿ Supply Chain Improvement (“Supply Chain Improvement”): The learning and "Continuous
development perspective of the generic scorecard according to Kaplan and improvement is
Norton provides the strategic superstructure for specifying this dimension. better than
According to Brewer and Speh , supply chain management efforts should postponed
primarily focus on process innovation, interface management, information perfection." (M.
flow and competitive analysis. Twain)
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Figure E.20 Supply Chain Scorecard according to Brewer/ Speh
end customer
SC Goals SC Improvements
Financial
"Give me Hope, The indicator management in the supply chain scorecard according
Joanna..." (E. to Brewer and Speh is based on the “Hope” philosophy (cf. Brewer /
Grant) Speh 2001, p. 50ff.). The bold wish for "Hope" stands for
"Harmonized", "Optimal", "Parsimonious" and "Economical".
Avoid trade-offs ÿ Harmonized: The indicators of the supply chain scorecard according to
Brewer/ Speh are based on harmonization. The protagonists understand
this to mean an interaction process between the indicators. Should
conflicting goals arise, these must be disclosed and dealt with proactively.
Even if it is not explicitly mentioned, Brewer and Speh strive to avoid
trade-offs in their selection of indicators : An improvement in productivity
and profitability indicators at any price should be rejected if, for example,
they lead to a deterioration in quality indicators
leads.
No space for ÿ Optimal: According to Brewer and Speh, a mixture of optimal performance
extremism parameters protects against extremism. For example, a disproportionately high
level of employee sick leave rouses management.
This claim follows seamlessly from the desire for harmonization.
Economical use ÿ Parsimonious: The demand for thrift refers to a low correlation between selected
of key figures key performance indicators in order to avoid pleonasms. If, for example, ROCE
is already measured in the financial perspective, there is no need to additionally
integrate ROA into this financial perspective.
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E.4
ÿ Economical: Finally, a key figure is economical if the costs of collecting the data do not amortization of
overcompensate for the benefit of this variable (latent risk of dyssynergia). data collection
costs
E.4.6.2.2 Stölzle/ Heusler/ Karrer approach
Another alternative to the discussion about supply chain scorecards Regulatory process as
a superstructure
is the concept according to Stölzle et al. (cf. Stölzle/ Heusler/ Karrer
2001, p. 75ff.). The frame of reference for this approach can be
found in the considerations of Cooper et al. (cf. Cooper/ Lambert/
Pagh 1997, p. 1ff.). The authors refer to a regulatory process in
modern supply chains, which are inherently “dynamic, complex and
opaque”.
The perspectives of the scorecard according to Stölzle/ Heusler/ Explicit supplier

Karrer largely correspond to those of Kaplan and Norton . Stoelzle integration
et al. expand this well-known perspective with a supplier dimension,
so that not only attributes of the output (customer perspective) but
also those of the input (supplier perspective) are covered. See also
Werner 2000a and Werner 2000b for this modification of the Supply
Chain Scorecard . Figure E.21 (cf. Stölzle/ Heusler/ Karrer 2001, p.
81) reflects these considerations.
Supply Chain Scorecard according to Stölzle/ Heusler/ Karrer Figure E.21
Supply chain vision and strategy
finance
Delivery Consumer
processes Learning/Developing
supply chain processes
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combined To develop their scorecard , Stölzle/ Heusler/ Karrer advocate a
Countercurrent combined bottom-up and top-down approach. According to the
process authors, potential bottleneck factors in the supply chain processes must
be worked out bottom-up. Visions and strategies are approved top-down
in the scorecard. This combined top-down-bottom-up approach allows
for a pragmatic review of the results. This also reduces acceptance
problems in line organizations. To measure performance, the authors
propose the combined use of both selective and interface indicators.
Examples of this are the cash-to-cash cycle or the "supply chain cycle
time": the comparison between throughput time and value-added time.
E.4.6.2.3 Weber/ Bacher/ Groll approach
Similarities and The Supply Chain Scorecard according to Weber et al exudes charm .
differences too (cf. Weber/ Wallenburg 2010, p. 245ff.). Like Kaplan and Norton 's
Kaplan/ Norton generic scorecard , the approach takes four perspectives into account.
In terms of content, the financial dimension and the (internal) process
view largely correspond to the considerations of Kaplan/ Norton, whereby
according to Weber et al. the focus is on supply chain management activities (cf.
Figure E.22).
new thoughts What is really new about the concept are the perspectives “intensity of
with pronounced cooperation” and “quality of cooperation”. In terms of content and
supply chain structure, Weber/ Bacher/ Groll modify the well-known framework based
relevance
on Kaplan and Norton. The individual KPIs in the perspectives are
equipped with a pronounced supply chain affinity. At its core, the Weber
et al. internal and external measured values alike. By considering a
cooperation intensity and a cooperation quality , the customer as
well as the learning and development perspective according to Kaplan
and Norton are omitted . However, their core statements are subsumed
under these two cooperation dimensions.
Below are the fundamental statements by Weber/ Bacher/ Groll on the

intensity and quality of cooperation (cf. Weber/ Wallenburg 2010, p.
245ff.).
hard factors ÿ Intensity of cooperation: The intensity of cooperation is used to represent hard factors
in order to measure the degree of external cooperation in the partner network. An
example of this is the goal “Improve data exchange between partners”, which
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E.4
the KPI "Quality and quantity of exchanged data records" is
measured.
ÿ Quality of cooperation: The counterpart to the intensity of soft factors

cooperation is the quality of cooperation. This reflects the soft
factors of a supply chain. This frame of reference is dedicated to
identifying satisfaction indices or potential for conflict.
Supply Chain Scorecard according to Weber/ Bacher/ Groll Figure E.22
finance
vision and
cooperation quality processes
strategy
cooperation
intensity
According to Weber et al. (cf. Weber/ Wallenburg 2010, p. 247) it is Customer perspective is
not necessary to use an explicit customer dimension when creating omitted
a supply chain scorecard. You justify this statement by referring to

the end customer. And only an end producer in a supply chain would
have direct contact with ultimate end users.
In addition, a learning and development dimension could be Also learning and

dispensed with. This would only have an individual reference in an Develop is not
organization and no direct connection to the other actors in the supply chain.
considered
In principle, the integration of the two cooperation perspectives in a respect of

supply chain scorecard is very welcome, since its content meets the balance
requirements of cross-company network management. However, the
objection may be raised as to whether the boundary between hard
(intensity of cooperation) and soft (quality of cooperation) factors
should really always be clearly drawn. Hard and soft indicators within
a "cooperation dimension" with each other
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however, combining them could lead to an overload of strategic goals
and measurement indicators within one perspective.
E.4.6.2.4 Richert 's approach
approach after The next supply chain scorecard discussed here goes back to Richert
Richert (cf. Richert 2006). Overall, the concept is based on five pillars, four of
which are well known: The considerations on the financial, customer,
(internal) process as well as learning and development perspective are
largely based on the elaborations of Kaplan and Norton (see figure
E.23). Richert describes the fifth piece of the mosaic as a “cooperation
perspective” (cf. Richert 2006, p. 87f.).
extension to The author (cf. Richert 2006, p. 89) justifies the expansion of the generic
cooperation scorecard to include the cooperation perspective with the consideration
aspects of structural, social and technical factors there.
Constant exploration ÿ Structural features: According to Richert (cf. Richert 2006, p. 89) , supply chain
management is in the latent field of tension between flexibility (e.g. covering
“unusual” customer requests) and stability (to give the actors involved the feeling
of conveying security). The structural attributes of a supply chain are aimed at
fundamental decisions, such as the selection of partners or the identification of
the "right" processes.
Creating and ÿ Social characteristics: In relation to the social content of a supply chain, Richert
maintaining trust (cf. Richert 2006, p. 89) emphasizes the “trust” in the network of partners. In this
regard, the author orients himself to the explanations of Brewer/ Speh (cf. Brewer/
Speh 2001, p. 50). If the trust placed in us is abused by a partner, this can lead
to threatening competitive situations (e.g. the illegal disclosure of sensitive
information).
Hard features of ÿ Technical features: Finally, the cooperation dimension includes technical factors.
cooperation The author understands this to mean the organizational structure and the process
in interface management. An example of this is an EDI connection that secures
the demand for standardization within a supply chain (see also the structural
features of the cooperation perspective).
Ultimate user Richert justifies the demarcation of the cooperation perspective from
the customer perspective by relating the latter exclusively to the
“ultimate end customer” (Richert 2006, p. 86). He measures the
performance in the cooperation dimension, for example, using the key figure "squee
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E.4
Time“: The period of time (in days) that elapses until a new partner is
fully integrated into the supply chain.
Supply Chain Scorecard according to Richert Figure E.23
processes
cooperation finance Consumer
Delivery
E.4.6.2.5 Werner 's approach
In the following explanations, an independent balanced scorecard for self-reliant
supply chain management is developed (cf. Werner 2011a). The supply chain
Approach
contents are partly based on the author's considerations for generating
a supply chain scorecard from the year 2000 (cf. Werner 2000a and
Werner 2000b). Due to the dynamics surrounding supply chain
management in general and the supply chain scorecard in particular,
the approach created a few years ago will be revised below (cf.
Werner 2011a). These modifications relate both to the perspectives
to be taken into account and to the performance indicators to be used
there.
The Balanced Scorecard proposed here for supply chain management perspectives of
consists of five perspectives . In principle , three dimensions of the supply chain

score card
generic scorecard according to Kaplan and Norton are adopted: the
financial, the customer and the (internal)
process perspective. However, their content is specially tailored to
the management of supply chains. The supplier and integration
perspectives offer an extended frame of reference.
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"An investment in Compared to the generic scorecard according to Kaplan and Norton,
knowledge still the supply chain scorecard presented here does not have a separate
pays the best learning and development perspective. On the one hand, the
interest." strategic goals of the learning and development dimension ultimately
(B Franklin) encompass the entire company. Their content can be easily assigned
to the five perspectives of the supply chain scorecard mentioned
(whereby the focus is on a reference to the process dimension). On
the other hand, there is only a reference to the individual organization
with regard to the strategic orientation of the learning and development perspectiv
Other actors in a supply chain (suppliers, customers, competitors,
trading partners, service providers) are largely excluded from the
considerations of the manufacturer’s learning and development
perspective (cf. also Weber/ Wallenburg 2010, p. 227f.).
Characterization of A more detailed characterization of the five dimensions of this Supply
the dimensions Chain Scorecard follows below. The majority of the key performance
indicators discussed below can be found in the KPI typology of
supply chain management (see p. 403). For each perspective, the
metrics are mapped to strategic goals. Figure E.30 presents the
Supply Chain Scorecard in a concise manner.
E.4.6.3 Supply Chain Scorecard Perspectives
E.4.6.3.1 Financial perspective

interactions to The goals of the financial view of a supply chain scorecard interact
financial view strongly with the other four dimensions of the concept. The success
(or failure) of the further perspectives is measured in the financial
perspective. The monetary indicators cover a comprehensive range
of financial targets in the supply chain. In this context, the outstanding
target corridors of success, liquidity, profitability, value, inventory and
costs are examined in more detail below (cf. Gunasekaran et al. 2001,
p. 86; Ueberall 2006, p. 74; Werner 2007b, p .72). Figure E.24 shows
the strategic goals of the financial perspective – with the assignment
of possible performance indicators. The envisaged financial positions
are divided into the two primary strategic target areas "Securing/
increasing" (success, liquidity, profitability and value) and
"Reducing" (inventory and supply chain costs).
income statement ÿ Success: The achievement (or failure) of financial success can be seen in the income
statement. Possible key figures for measuring success are the key data of the profit
and loss account:
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E.4
Revenue/ sales growth (sales revenue), gross profit (gross profit), operating result
(EBIT) or net income for the year (net income).
ÿ Liquidity: Another strategic financial goal of the Supply Chain Scorecard secure financial
is to ensure liquidity in order to be able to meet the payment obligations flows
of third parties at any time. The excess funds (cash flow) and the cash-
to-cash cycle are taken into account as KPIs .
ÿ Profitability: In general, profitability describes the return flow of capital employed. For sizes of success
example, the integration of ROCE into the financial perspective is a good idea for supply score card
chain management.
As already described in detail (see p. 452), ROCE is calculated by
dividing EBIT by capital employed. As an alternative to the return on
capital employed, ROA (return on assets), ROS (return on sales),
ROTC (return on total capital) and ROI (return on investment) can be
included in the scorecard. Whatever size is chosen, one of these return
indicators should be included in the supply chain scorecard.
ÿ Value: Concepts for increasing value are now being intensively discussed in modern shareholder value
business studies. your consideration as a frame
tion is also important for supply chain management. The most well-
known representative of value increase parameters, the Economic
Value Added (EVA), is included in this scorecard. For the discussion
of the Economic Value Added indicator, see page 485.
ÿ Inventory: In the KPI typology for supply chain management, the two “kings” stand out Show capital
among the inventory targets: range of the warehouse and inventory turnover (cf. p. 419). commitment
One of the two indicators should be included in the financial perspective of the scorecard
to measure capital commitment. For imputed offsetting on the EBIT, interest is to be
added to inventory effects via the weighted average cost of capital.
ÿ Costs: The inventory costs described above can also be summarized supply chain
under this point (depending on the importance of the inventory assets Costs
for a company). Otherwise, for example, transport costs and total
supply chain costs fall into this category of the financial perspective.
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Figure E.24 Financial perspective strategic goals and KPI
Strategic Goals Possible key figures
finance Fuse/boost
ÿ Success sales growth, gross profit,

EBIT, profit for the year
ÿ Liquidity Cash flow, cash to cash cycle
ÿ Profitability ROCE, ROA, ROS, ROTC, ROI
ÿ Value Economic Value Added (EVA)
lowering
ÿ Inventory Stock range, turn rate
ÿ Supply Chain Costs Transport Costs, Total Supply

chain costs
E.4.6.3.2 Customer Perspective

B2B vs. B2C The customer perspective of scorecards mostly aims at the ultimate end
user (business-to-customer). If companies gear their business towards
the end consumer, the explicit consideration of a customer dimension for
the supply chain scorecard is essential (e.g. in retail). However, the creation
of a supply chain scorecard with its own customer dimension is also obvious
for institutional processing (business-to-business) :
suction effect of ÿ In general, customization activates the pull effect on the end user.
end user Then the ultimate end customer pulls the products themselves
from those manufacturers who are positioned in the value chain
close to their origin (raw material suppliers): A manufacturer of
cable harnesses, for example, bases its manufacturing process on
the various wishes of ultimate car buyers (price , reliability, security,
image, exclusivity). Depending on the target group of the car
manufacturer (OEM), the cable harness manufacturer can tailor its
products to the end customer. With a gratification of the desires of
the end-
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E.4
the supplier almost automatically covers the requirements of the
automotive industry.
ÿ If, on the other hand, the requirements for standardization dominate Separate regulations
in a supply chain, the manufacturers involved in a supply chain apply to capital goods
aim to satisfy the wishes of the directly subsequent value-added game rules
stages. In the capital goods sector, for example, a producer of
tinplate cans orients itself to the specifications and requirements
of the immediately following delivery stage. This can be a producer
of canned soup who fills his soup into tin cans. Satisfying the
wishes of the ultimate end user plays only a subordinate role in
this case.
Some elements of this dimension are similar to those of the Kaplan/ Peculiarities of
Norton generic scorecard . However, they are geared specifically to supply chain
the demands of supply chain management. Figure E.25 shows
strategic goals and suggested indicators for measuring them. The
primary strategic target areas from the customer perspective are
“satisfaction and service” (customer loyalty and customer satisfaction
as well as customer complaints), “acquisition” (gaining new customers
and market share), “planning reliability” (order fulfilment, sales
forecast accuracy) and “learning/development”. (innovation)
ÿ Customer loyalty: In order to increase customer loyalty, market Prevent churn

partners are now using very sophisticated tools (such as pay-back of “important”
card systems). Since research revealed that over 90% of customers customers
leave without complaining, customer loyalty has become more
important. This fact weighs all the more heavily because it is on
average four to five times more expensive to win new customers
than to keep existing ones. The strategic goal of customer
satisfaction correlates highly with customer loyalty. However,
determining this key figure in stationary end customer business
(B2C at the point of sale) is extremely difficult. In a B2B segment,
on the other hand, customer feedback is comparatively easy to
obtain. Outgoing delivery service levels, rejection rates or delay
rates can be measured directly there.
ÿ Customer complaints: Another goal from the customer perspective Intensify CRM
is to reduce the number of complaints. This indicator is also closely

related to customer satisfaction. It can be measured in the B2B
segment via the outbound delivery service level (and its sub-
indicators rejection rate and delay rate) . But even in the end
customer business, the after-sales area has, in times
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of customer relationship management, via KPIs that support this
requirement (such as complaints per product and time unit).
customer acquisition ÿ Customer acquisition: Customer acquisition is measured using the

ratio of new customers to sales. In stationary retail, for example,
payment with
by credit card.
Share of Market ÿ Market share: Basically, the market share is measured in absolute
terms (a company compares itself with all competitors in the market)
or in relative terms (a company measures itself against the top dog
in the market). Turnover, number of customers, sales volumes or
licensing serve as possible reference values for determining market
share.
Note lead ÿ Order Fulfillment: The Order Fulfillment Time measures the period
times of time in hours (days/weeks) that is required for the sequence of
activities for the complete processing of customer orders (cf.
Key figure typology p. 433). With an optimization of the order
fulfillment time, the satisfaction of these buyers usually also increases.
The customer, ÿ Sales Forecast Accuracy: Fluctuations in sales forecasts mean that
the unknown being planned demand does not match actual orders. This measurement
is called Forecast Accuracy . Frequent changes in the sales
forecasts complicate the day-to-day business of a dispatcher. But
logistics only works in the back office. Sales is in the front office
and is the direct interface to the customer. Logistics is therefore
dependent on sales contributing to the "discipline" of its customers.
The customer should become “more predictable”. To this end, sales
can use a bonus system: If the customer demonstrably improves
his retrieval behavior, sales could reward him directly with a graded
price reduction.
"Innovation is ÿ Innovation: The degree of innovation of a range is defined by the

no guarantee proportion of new products to established items. If there is a
against failure, separate learning and development perspective (this is also called
but failure is “innovation perspective” or “potential perspective”), the innovation
guaranteed without rate in this dimension of the scorecard could
innovation." (SR to be kert Alternatively, the degree of innovation can be measured
Munz) in this customer dimension.
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E.4
Strategic goals and KPIs from the customer perspective Figure E.25
customer satisfaction and service

ÿ Customer loyalty/ÿsatisfaction customer loyalty index,
Customer Satisfaction Index
ÿ Customer complaint
Outgoing service level
Acquisition ÿ
Revenue share new customers
Acquisition of new customers
ÿ Market share Relative market share, absolute
market share
planning security
Order Fulfillment Time
ÿ Order Fulfillment ÿ
Sales Forecast Accuracy Forecast Accuracy
Learning/Developing
ÿ Innovation new product rate
E.4.6.3.3 Process Perspective

The processes of a supply chain are derived from the formative key strategic
variables of the competition (cf. Werner 2000a, p. 9; Werner 2000b, p. square
14): Supply chain processes are primarily based on the optimization of

the strategic triangle. As is well known, this consists of the determinants
cost, time and quality. Additional strategic goals of this process view are
flexibility and learning and development.
As part of the further explanations, the process characteristics are Analysis of

integrated under the competitive factors mentioned. First of all, the key factors of
competition
process perspective - with special consideration of the competitive factor
costs - has to be characterized. Related strategic objectives are
“capacity utilization” and “productivity”. With regard to the key indicator
time , the supply chain processes are measured via access times (time-
to-market for product developments) and throughput times. Based on
their semantics alone, the strategic goals of product/process quality and
the
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Order processing quality to be assigned to the competitive factor of quality .
The strategic triangle of an analysis of costs, time and quality can be
widened into a square if there is an additional focus on flexibility (flexibility
to increase production). A few years ago, an expansion to the strategic
pentagon took place, in which knowledge represents an additional key
size of the market.
In the jargon of a scorecard, knowledge here is understood as continuous
learning and development (see Figure E.26).
reduce fixed costs ÿ Capacity utilization: Increased capacity utilization falls under the main area of costs
as a strategic goal . In principle, this key figure is measured via the planned
employment (effective production hours to estimated operational readiness).
increase ÿ Productivity: Examples of labor productivity within the process perspective are the
productivities indicators warehouse movements per employee and picking processes per
employee . An improvement in productivity tends to result in a reduction in process
costs.
"In my race ÿ Access time/throughput time: Within the process perspective, access times and
against time I can't throughput times are particularly important. The time-to-market stands for the period
stop..." (J. Rule) of time that elapses from the generation of an idea to the market access of products
and services. Particular requirements for the supply chain management in this
respect are in the entry control. The total throughput time is measured in the key
figure classification from the incoming order to the delivery of the goods. In a value
chain, however, it not only refers to products, but also to all indirect logistical
activities and actors that contribute to the delivery of a supply chain result. An
example from supply chain controlling is the planning of logistics budgets.
measurement over ÿ Product/process quality: The evaluation of the product and process quality of the
PPM supply chain management takes place in the direct area via the key figures scrap
(scrap) and rework (rework). The degree of target attainment is measured using
“parts per million” (PPM). A "PPM of five hundred" means that there are five hundred
product defects out of 1,000,000 products manufactured.
Processes ÿ Order processing quality: Assessing quality as a competitive

more tightly organized factor for supply chain processes is not only important in the direct
ren area. This quality can also be achieved over the long term in the
indirect segment. An example of this is the order processing
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E.4
quality, which is derived from an order processing time and the order
processing reliability .
ÿ Flexibility to increase production: Upside production flexibility serves as a "Nothing is

performance indicator for evaluating this strategic goal . as constant as
As part of the key figure typology of a supply chain, it was defined as
the period of time that elapses in days to satisfy an unplanned surge change." (Heraclitus)
in demand (according to SCOR of 20%, see p. 81). Possibilities for
internal capacity expansion are also in to involve decision-making,
such as externally aligned outsourcing solutions.
ÿ Continuous improvement: The demand for continuous improvement And the turtle
essentially stems from Kaizen management (cf. p. 110 of this she's coming
publication). This strategic objective is subordinate to the demand for further than the
constant learning and development. Figuratively speaking, a turtle is rabbit...
not particularly fast. However, it tends to get very old, which means
that it covers a considerable distance in the long run. But always
according to a policy of “small steps”.
This guiding principle can also be inherent in supply chain
management, whereby the performance measurement for continuous
improvement takes place, for example, via implemented suggestions
for improvement per employee and year or the rate of training/ further
education per employee .
ÿ Employee satisfaction: This strategic goal of the process perspective Customer
also relates to the learning and development perspective. Satisfaction Index
Employee satisfaction does not only extend to the direct area
(production). Rather, it is relevant for all persons involved in supply
chain activities.
Fluctuation, sick leave and absenteeism, for example, serve as
measured variables . However, these key performance indicators
should be treated with caution: Even if they should improve within a
company, this does not necessarily mean increased employee
satisfaction. Perhaps the fear of losing one's job is more likely to
reduce sick leave than to actually increase employee satisfaction.
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Figure E.26 Strategic goals and KPI of the process perspective
processes costs
ÿ Capacity utilization capacity utilization rate,

machine usage intensity
did
ÿ Productivity Stock movements per employee,

picking processes per employee
Time
ÿ Access time/ throughput time Time to market, total cycle

time
Quality
Scrap/Rework Index, parts per
ÿ Product/ process quality
million (PPM)
ÿ Order processing quality order processing time,
Order processing reliability
flexibility
ÿ Production flexibility Upside production flexibility
Learning/Developing
ÿ Continuous improvement suggestions for improvement

Training rate/further
education rate
ÿ Employee satisfaction Absenteeism rate/terminations
per month
E.4.6.3.4 Supplier Perspective

Integrate supplier Important performance parameters of modern supply chains are supplier cooperations.
view into Approaches such as Vendor Managed Inventory, supplier logistics centers or supplier
scorecards parks reflect this fact.
Without a close supplier-manufacturer relationship, these concepts could not be used
successfully. The integration of suppliers
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E.4
ten is of lasting importance for supply chains. It is therefore surprising
that Kaplan/ Norton in their (albeit generic)
Scorecard dispense with the explicit measurement of supplier
performance. The customer attributes, on the other hand, are known to
be taken into account in a separate perspective. This throws the
Balanced Scorecard a little out of balance.
According to Stölzle et al. (Stölzle/ Heusler/ Karrer 2001, p. 81) the Reasons for
explicit consideration of a supplier view for the supply chain scorecard explicitly
is advisable due to the following arguments : considering
suppliers
ÿ Improved consideration of the common goals of manufacturers and suppliers (heterogeneity
of the environment).
ÿ Clear stakeholder orientation (the supplier is one of the

most significant stakeholders in shareholder value).
ÿ Increased transparency in the causal relationships: Suppliers initiate

internal processes.
ÿ Common organizational separation of procurement and sales in

corporate practice. This idea is particularly important for the
implementation of company incentive systems.
An alternative to creating a separate supplier dimension within supply "Don't sweat it,
chain scorecards is to create the market perspective (cf. Ueberall get it back to you -
2006, p. 74; Werner 2000a; Werner 2000b). Customer and supplier
attributes are equally included in this market dimension. However, when overkill..." (Motörhead)
developing a market perspective, there is a latent danger of an “overkill”

of key figures: the wealth of information may go beyond this perspective.
Compared to the other dimensions, the market perspective weighs too
heavily.
The claim to "Balanced" is in jeopardy. Therefore, the propagated
supply chain scorecard receives a separate supplier perspective.
The goals of the supplier dimension are named below and included Goals of the
key figures (see Figure E.27). The targeted strategic goals are assigned supplier view
to the generic terms availability of goods (quality/service), satisfaction
(supplier satisfaction) and costs (productivity of goods receipt and goods
receipt control costs).
ÿ Quality/Service: Ensuring (or increasing) supplier reliability relates to qualitative, service levels
quantitative and temporal aspects measure
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Deviations of incoming shipments (delivery service level). With the
rejection rate and the delay rate , two sub-indicators of the delivery
service level are available for a supplier rating.
New interfaces ÿ Supplier satisfaction: The goal of the highest possible supplier
gobble up money satisfaction represents the counterpart for customer satisfaction.
In order to reduce transaction costs, incoming satisfaction indices
must also be determined. With an increase in supplier satisfaction ,
the durability of a relationship between supplier and manufacturer
(supplier loyalty) should be strengthened. Integrating new suppliers
into the manufacturing processes would lead to frictional losses at
the interfaces. For example, the certification and auditing of new
suppliers consume a lot of money.
reduce ÿ Productivity of incoming goods: With the help of increased productivity in
process costs incoming goods, process costs will be reduced. Possible indicators are
shipments per day or goods acceptance time per shipment.
profitability ÿ Incoming goods inspection costs: The determination of the productivity key
indicator figures listed above can be extended to measuring profitability by evaluating
the productivity. An example of this is the incoming goods inspection costs per
day.
Figure E.27 Strategic goals and KPIs from the supplier perspective
Supplier goods availability

ÿ Quality/ Service Delivery service level, rejection
rate, default rate
satisfaction
supplier satisfaction
ÿ Supplier satisfaction
dex
Costs
ÿ Productivity goods Shipments per day, goods
corridor
acceptance time per shipment
ÿ Incoming goods inspections Incoming goods inspection costs
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E.4
E.4.6.3.5 Integration Perspective
An integration perspective of the supply chain scorecard evaluates The money is
the performance of internal and external interfaces. Figuratively in the interface
speaking, the foundation for the complete network of relationships in
a supply chain is laid within the integration dimension. Such decisions
are based, for example, on the choice of the actors involved, the
selected processes and the size of the entire network (cf. Richert
2006, p. 89).
With regard to the network structure, it should be noted that the "Tension is
partnerships within a supply chain represent grown structures with a chewing gum
specific culture, philosophy and politics. The actors find themselves for the
in a latent field of tension between interaction and interdependence, brain." (A. Hitchcock)
cooperation and competition, autonomy and dependency as well as
standardization and customization. Imposing supply chain
management “bell-like” over those involved is doomed to failure at an
early stage. On the contrary, the specific requirements of the actors
should be taken into account in the entire network: Supply chain
management is individually tailored to the companies involved.
In the Supply Chain Scorecard, integration perspectives accommodate Consider aspects

technology and collaboration requirements (see Figure E.28). Based of cooperation
on the considerations of Weber et al. (cf. Weber/ Wallenburg 2010, p.
235f.), the attributes of technology can be described as hard factors
(intensity of cooperation) . The requirements for a collaboration, on
the other hand, tend to correspond to soft factors (quality of
cooperation). In terms of technology , modern supply chains are
geared towards optimizing data transfer and infrastructure. The
strategic goals of organization/trust and cooperation are subsumed
under the collaboration . These relationships are described in more
detail below.
ÿ Data transfer: The indicator Digital Links measured according to Richert (cf. use systems
Richert 2006, p. 90) the number of shared systems in relation to the total together
number of systems. Improving this rate reduces the need for time-
consuming reconciliation meetings within a supply chain.
ÿ Infrastructure. While the data transfer via the digital links is to be evaluated, logistical assets
the measurement of the infrastructure is derived from the fleet links . The
last indicator stands for the ratio of jointly used trucks to the total number
of trucks. For example is
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This key figure is of some importance in a “Multiple User
Warehouse”. A high rate of fleet links indicates a pronounced cost
sharing when using logistical assets.
are in common ÿ Organisation/trust: Legally independent partners usually cooperate
we strong: in a supply chain – from the source of supply to the point of
"You must be consumption. Each actor involved will initially pursue the
eleven friends!" (S. optimization of their own goals (sub-optimal solution).
Herberger) If value-added partnerships result in optimal solutions from which
all partners ultimately benefit, there is a real "win-win situation".
Ultimately, a poor basis of trust can lead to the dissolution of entire
supply chains. Weber/ Bacher/ Groll (cf. Weber/ Wallenburg 2010,
p. 240) propose the joint clarification of visions and principles in
the partner network to promote trust. The longer the supplier-
customer liaison lasts, the closer this relationship of trust should
be. Likewise, rigid organizational structures within the value chain
must be softened. Resident Engineering is ideal for this. This
means the temporary secondment of employees from the supplier
company to the customer's development team (see p. 137).
Squeeze-in-time ÿ Cooperation: The strategic cooperation goal correlates with the

as a possible above demand for organization and trust. If the players in a supply
indicator chain succeed in creating an "adequate" basis for cooperation,
trust does not arise automatically, but at least the achievement of
this goal is promoted. A measure of the degree of cooperation in
value chains is the number of shared data sets. This key figure
can be used to measure the degree of collaboration. Shared data
sets lead to compatibilities in modern value chains. The risk of
redundancies is reduced. For example, a vendor-managed
inventory can hardly do without shared data sets. However, the
sheer quantity of the information exchanged says nothing about its
quality. Consequently, this KPI can be extended to the number of
shared good records .
The cooperation of the supply chain actors can also be measured

with the squeeze-in-time . This indicator evaluates the period of
time that elapses until a partner is fully integrated into the supply
chain. However, it is questionable when “complete integration” will
be completed (problems with measuring the indicator).
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E.4
Strategic goals and KPI of the integration perspective Figure E.28
inteÿ Technology
gratification ÿ Data transfer ÿ digital left

Fleet links
Infrastructure
collaboration
Confidence index, duration of
ÿ Organization/ trust
Cooperation, employee
exchange index
ÿ Cooperation number shared

Records, squeeze-in-time
E.4.6.3.6 Supply chain scorecard overview

The presented scorecard of a supply chain management consists of Scorecard of
five different perspectives (see Figure E.29). Supply chain
overview
The financial, customer and process dimensions largely correspond to
the considerations of the generic scorecard, but from the special
perspective of a supply chain. The recommendation to consider an
explicit learning and development perspective is not followed. On
the one hand, the strategic goals of a learning and development
perspective can be anchored in other dimensions of the scorecard. On
the other hand, the learning and development perspective is aimed at
a single company and not at a complete network.
A further modification of the well-known scorecard with its four suppliers and
dimensions takes place by considering a separate supplier Highlight
structures separately
perspective. In this, overarching services of a supply chain in the
direction of suppliers are to be presented (cf. in particular the
explanations on p. 508). Finally, the integration dimension represents
another innovation compared to a balanced scorecard according to
Kaplan/ Norton . In it, cooperative (internal and external) requirements
for the technology and the degree of collaboration of the supply chain
actors are to be evaluated.
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Figure E.29 Supply Chain Scorecard according to Werner
Supply chain vision and strategy
finance
Delivery Customers
processes integration
Unite goals and Based on the relationships described above, the five perspectives of
key figures the supply chain scorecard are assigned different strategic goals. In
order not to create a "disorganized juxtaposition" of attributes in a
respective dimension of the supply chain scorecard, these strategic
goals are assigned taking into account generic terms . In addition,
the strategic goals are accompanied by key figures that serve to
measure performance.
These key indicators relate both to one's own organization and to the
activities of entire networks. Figure E.30 visualizes this situation. The
scorecard shown there represents the combination of the previously
isolated perspectives.
Build causal The explanations on the supply chain scorecard are expanded in the
chains context of the description of a special strategy map for modern value
chains (cf. section E.4.6.4). In order to round off the thoughts on the
balanced scorecard in modern logistics systems for the time being, a
possible causal chain of supply chain management is shown below.
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E.4
Strategic goals and metrics of the Supply Chain Scorecard Figure E.30
finance finance
Success Sales, gross profit, EBIT, net income

liquidity Cash flow, cash to cash cycle
profitability ROCE, ROA, ROS, ROTC, ROI
increase in value Economic Value Added (EVA)
Duration Stock range, turn rate
supply chain costs Transport costs, supply chain costs
Customers Customers
customer loyalty/ÿsatisfaction customer loyalty index

customer complaint Customer satisfaction index, level of service
new customer acquisition Revenue share new customers
market share Relative Market Share, Absolute Market Share
Order Fulfillment Order Fulfillment Time
Sales Forecast Accuracy Forecast Accuracy

innovation new product rate
processes processes
capacity utilization Degree of capacity utilization and intensity of use

productivity Stock movements per employee, picks per employee
Access Time/Throughput Time Time to market, total cycle time
product/process quality Scrap/rework rate, parts per million
Order Fulfillment Quality Order processing time and reliability
production flexibility Upside production flexibility
continuous improvement Suggestions for improvement, training rate
employee satisfaction Absences/dismissals, training for each employee
Delivery Delivery
quality/service Service level, rejection rate, delay rate
Supplier Satisfaction Supplier Satisfaction Index
Goods receipt productivity Shipments per day, goods acceptance time per shipment
Incoming goods inspections Incoming goods inspection costs
integration integration
data transfer digital left
infrastructure Fleet links
organization/trust trust index, duration of cooperation,

cooperation Shared datasets, squeeze-in-time
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integration as The cause-effect relationship of a balanced scorecard described
platform of here is based on the five perspectives of the supply chain scorecard
score card presented above. A cause leads to an effect.
The original effect in turn becomes the cause of the next effect.
However, the causal relationships of the Balanced Scorecard are not
strictly mathematical, but rather logically linked.
This makes it possible to trace the financial success (or failure) of a
company. In the following, causal linkages within a supply chain are
identified as an example from the bottom up. The all-encompassing
integration perspective is primarily about improving the strategic
goals of technology and collaboration. For example, data sets are
increasingly being used jointly in the partner network. It is also
conceivable to increase the number of digital links and fleet links.
suppliers and Based on these forced interactions in the relationship network of a

processes supply chain with the suppliers , the manufacturer has improved
availability of goods and potential cost reductions (e.g. caused by
improvements in profitability, such as lower “costs per pick”). This
results in positive effects in terms of product and process quality,
throughput time and production flexibility (process view). In addition,
the supplier can partially pass on its cost advantage to the
manufacturer.
origin of An improvement in internal processes across various competitive
recognize financial factors is accompanied by the possibility of acquiring new customers :
results For example, because the timing of internal processes is improved
and a promise made to the customer regarding the delivery date must
be kept (available -to-Promise). The acquisition of additional customers
tends to improve the return on sales (ROS) in the financial
perspective. Figure E.31 clearly illustrates these relationships.
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E.4
Causal chain of a supply chain scorecard Figure E.31
ROSE
finance
acquisition
Customers
Product-/ production
Through- Process-
Process- ons-
duration costs
quality flexibility
processes
goods availability Costs
Delivery
Technology collaboration
integration
E.4.6.4 From Scorecard to Strategy Map

“Having trouble with your strategy? Then map it." Kaplan and Norton Having trouble
pointedly titled an article that appeared in the Harvard Business with your
Review in 2000 (cf. Kaplan/ Norton 2000, p. 167ff.). strategy?
The two protagonists of the Balanced Scorecard tested this approach
in a large number of projects. They found that a requirement originally
set in the scorecard had not been adequately met: the purpose of the
balanced scorecard was to make the strategic direction of the
company clear to employees. However, this objective has not been
achieved satisfactorily. The transformation of organizational goals to
the employee level suffered seepage losses. To make up for this
deficit, it was Kaplan and Norton themselves who added a strategy
map to a balanced scorecard.
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E.4.6.4.1 General implications of the strategy map
Alexander the Using the example of "Mobil North American Marketing and Refining",
Great: "333 at Kaplan and Norton describe the possible uses of strategy maps (cf.
Isso's brawl..."
Kaplan/ Norton 2000, p. 167ff.). Strategy maps are corporate battle
plans . Like the Balanced Scorecard, the Strategy Map is created top-
down. The strategy map is primarily used to describe different goals,
tasks and assessment criteria. This battle plan is intended to “obviously”
explain the company’s strategic direction to its own employees. In doing
so, the Strategy Map uses – even more than the Balanced Scorecard –
the visualization of logical connections in causal linkages.
gene.
Modifications to Kaplan and Norton revised their original thoughts on the strategy map
the map in the following years (cf. Kaplan/ Norton 2001a; Kaplan/ Norton 2001b;
Kaplan/ Norton 2004a; Kaplan/ Norton 2004b). However, the well-known
four perspectives of the Balanced Scorecard are retained (finance,
customers, processes, and learning and development). In some cases,
Kaplan and Norton bundle excerpts from well-known management
theories within the strategy map: considerations of the shareholder value
approach according to Rappaport (cf. Rappaport 1999) can be found
there as well as Porter ’s market-based view (cf. Porter 2006) . ; Porter 2013; Porter
The formative contents of the four perspectives of a generic strategy
map are discussed below (cf. in particular Kaplan/ Norton 2004a;
Spinnrock 2006).
Strategic implications ÿ Financial perspective: The initial considerations by Kaplan/ Norton (cf.
of the financial Kaplan/ Norton 1997, p. 46ff.) in the direction of the financial perspective were based on
perspective life cycle representations. Later, monetary indicators increasingly replaced this life cycle
reference (cf. Kaplan/ Norton 2004a, p. 32ff.). The strategy map contains the goals of
“improving the cost structure”, “increasing the use of assets”, “expanding sales
opportunities” and “increasing customer value”. These indicators pursue a long-term
“increase in shareholder value” via a profitability strategy and a growth strategy. The
profitability strategy is very reminiscent of Porter's “cost leadership”. Analogously, the
growth strategy is borrowed from Michael E. Porter's "differentiation strategy" (cf. Porter
2006; Porter 2013; Porter 2014).
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E.4
ÿ Customer perspective: In the customer dimension, there are three segments within the "Quality means that
strategy map, in which various strategic performance indicators are concentrated (cf. the customer
Kaplan/ Norton 2004a, p. 34ff. and p. 294ff.). These strategy categories – including their comes back,
possible performance indicators – are “product/service properties” (price, quality, not the goods."
availability, selection, functionality), “customer relationship” (service, partnership) and (H. Tietz)
“brand” (image). Ultimately, these heterogeneous performance drivers directly support
the increase in the customer value contribution.
ÿ Internal processes: In their strategy map, Robert S. Kaplan and David P. Norton (cf. more pronounced
Kaplan/ Norton 2004a, p. 38ff.) relate the internal processes to “production and supply chain
logistics” (procurement, production, sales, risk management ), "Customer frame of reference
management" (customer selection, acquisition, customer loyalty, growth),
"Innovations" (market opportunities, R & D portfolio, development, market launch) and
"Statutory regulations" (environment, occupational safety, health, employment ,
Company). The value contribution of the customer listed above is determined indirectly
via the internal processes. In the first contributions (cf. Kaplan/ Norton 2001a, p. 82), the
authors sought a close connection to Porter's value chain model (cf. Porter 2013; Porter
2014). Later, this reference becomes increasingly blurred (cf. Kaplan/ Norton 2004a, p.
29).
ÿ Learning and development: Finally, the learning and development perspective (cf. Kaplan/ Constant learning
Norton 2004a, p. 45ff.) of a strategy map according to Kaplan and Norton includes the and development
reference framework “human capital” (skills, further training, knowledge), “information
capital” (systems, databases, networks) and "organizational capital" (culture,
leadership, alignment, teamwork). This dimension contains immaterial values that are
significant on the way to becoming a "learning organization". Over time, an emphasis on
the need for “change” emerged for the learning and development perspective (cf. Kaplan/
Norton 2004a, p. 47).
The structure of strategy maps (cf. Spinnrock 2006, p. 23f.) follows Structure of the
the “top-down principle”, as briefly described above. Starting from the strategy map
financial dimension, the individual target hierarchies are broken down
to the level of intangible values (intangible assets). A strategic battle
plan is usually created deductively. Based on an overarching, logical
whole – for example, the sustainable increase in shareholder value
– the strategy map aims at something special: the subordinate
strategic implementation.
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common Balanced Scorecard and Strategy Map do not represent alternative,
condition and but complementary concepts of corporate management. Both
Support financially
approaches cooperate directly with each other. Corporate activities
are operationalized in the scorecard using key figures.
Her main concern is to focus the entire organization on selected
visions and strategies. A strategy map, on the other hand, is
qualitatively oriented. It tries to follow a consistent path of strategic
description, which is expressed in the communication of a strategy to
the employees and in the behavior of the management itself (cf.
Kaplan/Norton 2004a, p. 5f. ) . The possibility of visualization in the
strategy map is important.
E.4.6.4.2 Supply chain strategy map

Supply chain map After the strategy map was initially described in its generic type, the
following considerations are aimed at the specific use of the strategy
map in the supply chain. In this context, the contents of a logistical
strategy map are included in the five perspectives of the supply
chain scorecard derived above:
ÿ Finance
ÿ Customers
ÿ Processes
ÿ Suppliers
ÿ Integration
Strategic starting The considerations below are graphically represented in Figure E.32.
position Bold arrows symbolize the primary strategic thrust.
Dashed arrows represent secondary strategic objectives. The
foundation of the complete strategy map is the integration perspective
(cf. Horváth/ Gaiser/ Vogelsang 2006, p. 153; Kaplan/ Norton 2004a, p.47).
Internal and ÿ Integration perspective: The strategic overarching goals of the

external interfaces integration perspective are “collaboration”, “technology” and
“organisation”. Soft supply chain attributes are mapped to the
Collaboration field . The network of actors is based on connectivity,
trust, employee satisfaction and employee development. The first
two goals are shaped internally and externally.
Employee satisfaction relates to their own company. A second
main objective is the technology . Its characteristics
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E.4
are surrounded by the "hard" performance variables digital links
and fleet links. Consequently, the contents of the technical
reference framework are based on a standardized system
landscape between the supply chain actors and the shared use of
logistical assets. Ultimately, the requirements for the organization
of a supply chain aim for a "pleasant atmosphere" in the network
of relationships in the supply chain. This includes the criteria of
corporate culture, policy, philosophy and management style.
ÿ Supplier perspective: This second dimension of a supply chain Necessity of
strategy map is based on the three basic goals “degree of delivery sustainable
service”, “costs/prices” and “transfer”. The incoming service level supplier connection
is to be measured using qualitative, quantitative and temporal
indicators (rejection rate, delay rate, product availability). In the
course of supplier integration, the costs/prices continue to be of
particular interest from the point of view of the manufacturer. On
the one hand, there is potential for reducing costs by optimizing
supplier connections (increasing productivity in incoming goods,
reducing incoming goods inspections). On the other hand,
opportunities for improvement can be controlled via the key figures
rebate, cash discount, prices and cash-to-cash cycle. The third
sector of the supplier dimension contains the strategic goals of the
transfer. The Vendor Managed Inventory and Cross Docking
approaches are listed as representative of supplier integration. For
example, supplier connections - in the combined sense of Vendor
Managed Inventory and Cross Docking - can be measured in
relation to the supplier interfaces as a whole.
ÿ Processes: Improved supplier relationships have a positive effect Strategic
on internal processes. The latter are based on the competition implications of
factors cost, time, quality and flexibility. In addition to these the process view
variables, legal standards must be included in the process view.
The effects of internal supply chain processes on the cost
structure are derived from key figures for increasing capacity
(degree of capacity utilization, intensity of machine use) and
productivity/economy (warehouse movements per employee,
picking per employee). Temporal goals in supply chains are
demanded for throughput time and time-to-market.
Value chains are characterized by a differentiated handling of time.
It's not just about the one-sided acceleration of activities. Rather,
the possibilities for conscious deceleration are explored
(postponement). The quality segment includes the objectives
scrap/rework, customer value (the application-related quality
concept states that the
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demand for quality is met with the satisfaction of the customer)
and order processing quality. The latter also refers to the indirect
area, which is characterized by high overhead costs. The logistical
adaptability and changeability of companies is fulfilled by increased
flexibility . The Upside Production Flexibility measures the time
span in days to react to unplanned surges in demand (according
to SCOR of 20%). The concluding considerations of the process
perspective are based on legal norms. Examples of this are
environmental protection regulations, regulations on occupational
safety and protecting the health of employees.
Products, ÿ Customers: The performance of manufacturers is evaluated by

relationships current and potential market partners. With special consideration
and of the customer perspective, the three core areas product, customer
acquisitions relationship and acquisition crystallize in the strategy map.
as possible primary strategiesPossible requirements regarding a product consist of the features
price, quality, availability and compatibility. The product term is not
to be interpreted narrowly (physically). It also includes services. An
improvement in customer relationships is seen in the criteria of
forecast accuracy (in the B2B segment for planning customer
requirements), service (e.g. after-sales activities), order fulfillment
(time period for logistical processing of a customer order) and
customer satisfaction. The iron goal of acquiring new customers
is evaluated using the indicators market share and new customer
acquisition (the ratio of new customers to total customers).
EVA as root ÿ Finances: In the financial perspective of a supply chain management

node: top strategy map, there are finally two basic orientation options. The
metric first way is through cost leadership. In order to capture these,
improvements in the cost structure or assets are necessary. Based
on Michael E.
Porter (cf. Porter 2006; Porter 2013; Porter 2014), the counterpart
to cost leadership is differentiation. Pursuing the differentiation
strategy is primarily based on revenue growth or increasing
customer value. However, Porter's claim to a strict "black or white"
is not maintained. As is well known, Porter warned against falling
into a “stuck-in-the-middle dilemma” (cf. p. 101). Rather, in the
propagated strategy map, an organization can strive for primary
differentiation, for example, but at the same time aim for a
(secondary) optimization of its logistical assets. This claim seems
justified in times of hybrid competitive strategies such as mass
customization. In
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E.4
Ultimately, all of the implications of this strategy map support an
improvement in Economic Value Added (EVA).
The strategic supply chain direction for the targeted improvement
in economic value added can be found in the strategy map “at a
glance”. The bold and dashed arrows symbolize this battle plan.
With the help of the strategy map, how the financial result came
about becomes clear (see below).
For the example from Figure E.32 on the strategy map in supply example one
chain management, the core strategies of the integration perspective supply chain
are aimed at optimizing collaboration and technology (both bold battle plan
arrows). A secondary strategic thrust is aimed at the organization. In
the supplier dimension , technical and integrative structural
elements are geared towards transfer. For example, a system
landscape between the actors must first be created in order to initiate
inventory management in the sense of Vendor Managed Inventory
on this basis. At the same time, the improvement of the incoming
service level is pursued via an intensified manufacturer-supplier
integration. In the supplier dimension, for example, cost improvement
and price reduction are derived as secondary goals.
The strategic primary strategy in the processes is based on the "Simplicity is the
competitive factor quality. Bold arrows symbolize that the qualitative highest level of
process content results from the incoming delivery service level and perfection." (L. da
Vinci)
improved cooperation with suppliers. For example, a vendor-managed
inventory supports customer benefits by ensuring that goods are
always available (continuous replenishment). The reduction of the
throughput time proves to be a secondary strategic objective of the
process dimension. An acceleration of the cycle times results from
an increase in the incoming delivery service level: There are fewer
shipment rejections or fewer goods delays.
Within the framework of the customer dimension , striving to Customer

optimize customer relationships stands out. In principle, customer relationships dominate
satisfaction improves through high-quality processes.
The strategic secondary goal for product optimization is derived from
optimized cost structures from the process perspective: Higher
capacity utilization and productivity of the process management
enable a more favorable sales price.
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E
Primary Thick arrows in the battle plan show that this manufacturer primarily
differentiation and follows the differentiation strategy in its financial orientation. In
secondary cost kneading
particular, an increase in the value of customers is sought through
optimized customer relationships. The organization's vision is to
sustainably increase Economic Value Added (EVA).
Secondarily, this objective is underpinned by the streamlined cost
structure: improved capacity utilization of internal processes.
This example is presented in Figure E.32 in a concise manner.
E.4.6.4.3 Combination of Scorecard and Strategy Map

To integrate It has already become clear above that Balanced Scorecard and
Scorecard and Strategy Map represent a congenial symbiosis . These are not two
Map alternative or even competing approaches to strategic leadership.
Rather, the Balanced Scorecard and Strategy Map are only particularly
strong in combination. Investigations support this thesis (cf. Horváth/
Gaiser/ Vogelsang 2006, p. 153; Kaplan/ Norton 2004a, p. 47).
Example Figure E.33 shows the combined representation of Balanced Scorecard
"chocolate bar" and Strategy Map. The following example refers to a manufacturer of
"chocolate bars". It extends the work of Kaplan and Norton (cf. Kaplan/
Norton 2004, p. 45ff.) and Horváth et al. (cf. Horváth/ Gaiser/ Vogelsang
2006, p. 151ff.). However, the considerations were modified to the five
perspectives of a supply chain scorecard and supply chain strategy
map propagated in this document.
adorns
"Would you know The strategy map and balanced scorecard are displayed side by side.
my name, if I saw The strategy map is used for visualization (qualitative observation
you in heaven..." level). Strategically defined goals are quantified with the help of the
(E Clapton) Balanced Scorecard . Even an employee who is not directly involved in
the creation of the scorecard can thus recognize the strategic thrust “at
a glance”. However, the combination with the Balanced Scorecard
does not create another "strategy paper on cloud nine". Rather, a
dedicated performance measurement of targeted target segments
takes place. In other words, key performance indicators for measuring
your performance (balanced scorecard) are derived almost automatically
from the definition of strategic target corridors (strategy map).
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E.4
Strategy map in the supply chain Figure E.32
EVA
cost leadership differentiation
Costs- assets Sales volume- Customers-

structure worthwhile growth value
finance
product customer acquisition

- Price draw - Market share
- Quality - Forecast Accuracy ÿ Acquisition of new
- Availability - Service customers
- Compatibility ÿ Order Fulfillment
- Satisfaction
Customers
Costs Time Quality flexibility legal

norms
ÿ Capacity ÿ Lead time ÿ scrap/ - Upside down
utilization ÿ Time to rework Production - Environment-
- Productivity/ protection
Market ÿ Customer Value flexibility
economy ÿ working siÿ
- Postponement ÿ Order
safety
processing
- Health
quality
processes
costs/prices service level

- Productivity/ - rejection
economy ÿ Default rate transfer
ÿ Material prices ÿ Availability of goods
ÿ Rebate/discount - Vendor Managed
Inventory
- Cash-to-cash cycle
ÿ Cross docking
Delivery
collaboration Technology organization
- Connectivity - Digital links - Culture, politics and
- Trust - Fleet links philosophy
- Employee satisfaction - Management style
integration
Legend: Bold arrows symbolize the primary strategic thrust
533

E
bottom-up Below is a concise identification of the example "chocolate bar
Labelling manufacturer". Figure E.33 illustrates this relationship. In the
integration perspective of the strategy map, the two primary
strategies “optimize infrastructure” and “strengthen sales competence”
deserve special attention. An improved infrastructure in the strategy
map results from the development of support systems. Within the
Balanced Scorecard, this strategic objective is measured using the
indicator “Availability of information systems” (target value: 100%). A
strengthening of the sales competence manifests itself in the training
and further education of sales representatives. The rating "training/
further education per employee and year" can be found in the
scorecard (target value: 5).
suppliers and In the supplier view of the strategy map, efforts in the direction of
dovetail processes “service level” and “collaboration” result from the forced sales
competence. They are evaluated within the scorecard using the
indicators "delivery service level" (target value: 95%) and "digital
links" (30%). Based on optimized supplier integration, the chocolate
bar manufacturer relies on "new sales channels" within the process
view (measured by the ratio of new sales channels to previous sales
channels in the Balanced Scorecard). The process perspective also
shows the objective of “increased use of CRM systems”. The
intensified management of customer relationships is evaluated in the
Balanced Scorecard using the key figure “AvailableÿtoÿPromise”: If
the chocolate bar manufacturer makes a promise to retailers regarding
a targeted delivery date, this promise must be kept (target value:
100%).
Goals of the customer Within the customer dimension , the strategy map shows the overall
perspective
goal of “rolling out chocolate bars worldwide”. This concern is
supported by the "stronger brand" and the "acquisition of new
customers" (measured using the indicator "new customers to existing
customers", target value 20%). The effort to intensify the
internationalization of the chocolate bar manufacturer is measured in
the scorecard of the KPI "share of sales abroad" (at least 75%). The
strengthened brand is measured precisely by that "brand value" (400 million euros
EVA as financial Finally, the objective for improving the economic value added within
ultimate goal
the strategy map can be found in the financial dimension .
The increase in value targeted in the strategy map is valued at 50
million euros in the scorecard. An optimized cost structure (measured
via the cost of capital) and an increase in sales
534

E.4
yield (assessed via the return on sales) support the chocolate bar
manufacturer's efforts to improve the Economic Value Added. In the
Balanced Scorecard, the benchmark for the ROS (profit to sales) is
15%. The target value for the cost of capital is 150 million euros.
Interlocking of scorecard and strategy map in the supply chain Figure E.33
Strategy map balanced score card
Goals KPI Target action
increase in value EVA €50 million

EVA
Costs- Sales volume- Return on sales ROS 15%

structure yield
finance
cost structure Capital costs €150 million
internationalization revenue share

ÿ
Roll out ÿ
75%
chocolate bars worldwide tion Abroad
New strengthen brand Brand value €400 million

strengthen brand Customers
customer new/existing
New customers 20%
Customers
New available to
Make greater sales CRM 100%
promise
use of CRM systems
ways
New VTW/
distribution channels
process previous 15%
(VTW)
VTW
service level delivery service

Service- collaborators 95%
Degree
Degree tion
collaboration Digital 30%

supplier Left
Under- Availability
Optimize Strengthen
develop support informational 100%
sales system
infrastructure system
skills
training and training /

integration training of further education 5 ÿ
Field service MA gene per MA
535

E
E.4.6.5 Critical Appraisal
Strengths of the As part of this critical appraisal, the strengths of the scorecard are
scorecard first discussed. Next are the weaknesses of the approach
(cf. Werner 2000e, p. 455ff.).
visualization ÿ The scorecard is a didactic tool. Through its visualization (strategy

map) it creates the basis for discussions and communication
processes in supply chain management. Not only the insider quickly
recognizes the core content of the scorecard.
Are we doing ÿ There is a compulsion for the people involved to deal with the vision,
everything right? the strategies and the measures in supply chain management. This
encourages critical thinking about the status quo .
integration of ÿ The causality of the Balanced Scorecard allows you to trace the causes
finance of your financial success or failure within the value chain . For
example, a three-point increase in inventory turnover may be primarily
due to the introduction of Kanban.
External and ÿ Due to the simultaneous consideration of market and internal process
internal perspectives , the market-based view and the resource-based view
consideration equally merge in supply chain management . The disadvantages of a
isolated application of the two management approaches are
undermined.
resolution of ÿ The Balanced Scorecard not only shows the current or the targeted
fog position (the where) in the supply chain. The concept also describes
the how, the concrete path to this position. Vision and mission are
broken down to the level of strategic goals. These goals are then to
be implemented through activities. In other words: At
When the Balanced Scorecard is set up, the scope for interpretation
is limited by transforming a vision – which initially doesn’t seem very
clear – into concrete company-specific measures.
weaknesses of However, these potential advantages of the supply chain scorecard

score card
are offset by some disadvantages (in supply chain management).
These weaknesses are listed below:
Were the correct ÿ The selection of key figures per perspective and the determination of
sizes selected? the specific characteristics of each measured variable are subjective,
they fall like manna from heaven.
536
E.5
comprehension questions
ÿ In the Balanced Scorecard, scale breaks occur due to rounding up or down . In the Distortions
logistics chain, the reduction in the rework rate can amount to 14.6%. This value is from structural
usually rounded up to 15.0% and thus equated to a rounded rework rate of 15.4%. fractions
Although there is a range of 0.8% between the figures. This results in structural
divergences (see p. 359).
ÿ Setting the bar in the perspectives is fraught with problems, especially for soft factors . Intangibility
Examples of this are the key figures image, satisfaction and design. Closely related to and lack of
this is the difficulty of specifying key figures for innovation performance, which are comparability
hardly comparable within the company or in the network.
ÿ The generic scorecard from Kaplan and Norton focuses on functional and internal Functional
aspects and is therefore only conditionally suitable for real network management. This interior design
shortcoming can be remedied by formulating explicit cooperation goals (underpinned
by the derivation of modified perspectives).
ÿ When setting up the scorecard, vision, mission, strategies and characteristics are Sometimes it
specified top-down by management. The employees are responsible for implementing backfires...
the targeted specifications. You must identify with the contents of the supply chain
scorecard and understand the benchmarks. A lack of employee integration and the
setting of unreal goals lead to a loss of motivation among the workforce.
E.5 Questions of understanding
ÿ What are the tasks of supply chain controlling? ÿ Describe supply chain
controlling as a control loop. ÿ Justify the need to reduce inventory due to
business perspective.
ÿ Define the inventory turnover rate. In doing so, go into the distinction between gross
and net inventory. ÿ Characterize cost tracking for material prices.
ÿ Name five key figures of the supply chain.
ÿ Discuss value driver trees about ROCE and EVA.
ÿ Describe the hard (soft) analysis using an example.
537

E
ÿ Make a critical appraisal of the hard (soft) analysis. ÿ Identify the
target costing process (supported by a sample
game).
ÿ How is the target cost index calculated in target costing?

ÿ Show differences and similarities between value engineering and
value analysis. ÿ What are the
focal points of activity-based costing in supply chain management?
When answering, go into the working steps of the instrument.
ÿ Describe the problem of proportionalizing a process

cost accounting using an example.
ÿ Discuss the pros and cons of EVA as a company incentive system.
ÿ What levers does supply chain management offer to influence

working capital?
ÿ From Performance Measurement to Balanced Scorecard: mark this
further development. ÿ What
are the perspectives of the generic scorecard? Provide three strategic
goals and associated metrics for supply chain management per
perspective.
ÿ Draft a balanced scorecard for supply chain management. Name
the advantages and disadvantages of the Balanced Scorecard.
ÿ Show the causality of a Balanced Scorecard as an example
hand of supply chain management. ÿ What is the
difference between Balanced Scorecard and Strategy Map? ÿ Design a strategy
map for a consumer goods manufacturer. Describe the selected work steps.
"You've been reading some old letters - You

smile and think how much you've changed.
All the money in the world
couldn't buy back those days."
(the The)
538
glossary
glossary
3PL System service provider in the supply chain.
4PL System integrator in the supply chain.
ABC analysis Inventory differentiation according to value and quantity.
Advanced Planning and Scheduling Further development of the ERP system. Cross-
(APS) de and simultaneous real-time coordination.
Adaptive supply chain systems Adaptable components that react immediately to disruptions.
actuators drive elements. Receiving information emitted by

sensors and having an immediate effect on the physical
world.
alert management Tracking (alarm) system for early detection of target/

actual deviations.
work schedule Sequencing of operations.
augmented reality Computer-aided extension of human perception of reality.
discontinuation control Series discontinuation of products.
Available to Promise (ATP) Promise to complete customer orders on time.
Balanced Scorecard (BSC) Performance measurement approach. Out of-
weighed causal concept for strategy derivation. Basis:

vision and mission of the company. Evaluation of target
achievement using key figures per perspective.
barcode identification technique. Optoelectronic pulse

train, translation into computer-understandable signals
(decoding).
Needs-based procurement Production synchronous procurement.

https://doi.org/10.1007/978-3-658-32429-2
glossary
Load-oriented order release Order management according to urgency (deadline

(BOA) and load limit).
benchmarking Systematic evaluation process. Internal, competitive

or cross-industry performance comparison.
procurement Broader than purchasing (strategic view), ensuring

security of supply.
Reinforcement Learning Reinforcement Learning. Reinforcement learning.

Algorithm learns independently about reward
or punishment.
relationship management Mission statements and measures of vertically

cooperating actors. Building, maintaining or
expanding relationships.
big data Technologies for processing and evaluating large

amounts of data.
Black box supplier Independent transfer of product development

sovereignty to suppliers.
Blockchain Makes it possible to transmit information in a

tamper-proof manner with the help of a decentralized
database used by many participants, so that copies
are excluded.
Bottleneck engineering Instrument for uncovering development-specific

bottlenecks.
bullwhip effect whiplash effect. Inventory build-up due to

information deficits in the
may planning.
business reengineering Bombing strategy, organizational process reorientation.
Capable to Promise (CTP) Internal ability to deliver on a delivery promise made

to customers.
Cash to Cash Cycle liquidity cycle. Days Sales Outstanding plus Days
on Hand minus Days Payables Outstanding. Indicator
of working capital management.
540
glossary
collaborative Coordinate the collaboration of supply chain actors in

real time.
Co-Managed Inventory precursor of VMI. Customer must
Confirm blow to inventory management.
Computer Aided Design (CAD) Technical component of CIM, computer

supported development.
Computer Aided Engineering Technical component of CIM, computer-aided design.

(CAE)
Computer-aided manufacturing Technical component of CIM, computer-aided

(CAM) manufacturing.
Computer-aided planning Technical component of CIM, computer-aided planning.

(CAP)
Computer Aided Quality Assurance Technical component of CIM, computer-aided quality

(CAQ) assurance.
Computer Integrated Manufacturing Integrated use of IT in all functional areas linked to

(CIM) production.
conjoint measurements Derivation of part utility values from the total

utility of the product. The product is not a
homogeneous whole, but a heterogeneous bundle of
partial properties.
Continuous Replenishment Continuous replenishment of goods. Strategic

superstructure of VMI.
cooperation Special form of horizontal integration. Consists of

Corporation (cooperation) and Competition
(competition).
Cost Charge Back Automatic chargeback of costs due to qualitative,

quantitative or temporal delivery deficits.
cost tracking Special monitoring system to show the effectiveness

of activities.
cross-docking Store-specific order picking at a central transshipment

point.
541
glossary
Customer Relationship Planning, management and control of measures

Management (CRM) to intensify customer relationships.
cyber-physical-production- Integrated production system. Intelligent

system interlocking of originally separate cyber-
physical systems.
data mining tools in the data warehouse. Automatic reÿ

know and show data patterns.
data warehouse Database separate from operational IT systems.

Company-wide information
storage and processing.
Decomposition of stocks Breakdown of the total inventory at the level of an

account group.
Demand Chain Management Chain of customers. Integration of activities in the

(DCM) direction of the customer (pull orientation).
Design for manufacturing and Manufacturing and assembly-oriented construction

Assembling (DFMA) in early phases (design phases).
Design to Cost (DTC) Precursors of Target Costing. B2A segment, target

costs are derived from close cooperation between
client and contractor.
Detail default supplier Manufactured according to the manufacturer's strict

instructions (drawings, sketches).
digital left Identification number. Number of shared systems

within a supply chain.
digital twin Digital Doppelganger. A clear, virtual image of the

real object.
disputes Doubtful (dubious) claims.
double sourcing Synonym: dual sourcing. Voluntary dual source

purchase per type of material.
downcycling Specific sub-form of recycling. Increasing quality

loss per recycling run.
542
glossary
Dual internationalization Hybrid competitive strategy. Simultaneously explore

the strategy mix at home and abroad.
lead time deadline time. Period from receipt of order to

customer delivery (total cycle time).
Dynamic product differentiation Hybrid competitive strategy. Different manufacturing

tion processes enable a change of strategy.
Economic Value Added (EVA) Absolute key figure in value increase management.
Also committed to shareholder value and management
remuneration (incentive system).
Efficient Consumer Response Efficient customer response. Derived from

(ECR) Quick Response. Integration of logistic and marketing
instruments, guaranteed by modern IT.
Efficient Product Introduction Efficient product launch to reduce flop rates. ECR
(EPI) Marketing Tools.
Efficient Promotion (EP) Efficient sales promotion between manufacturer

and trade. ECR Marketing Tools.
Efficient Store Assortment (ESA) Efficient assortment design by mixing strategy and
profit items. Marketing tools from ECR.
Efficient Unit Load (EUL) Optimized use of standardized load carriers for
manufacturer-controlled inventory management
(VMI).
Ecommerce Electronic Commerce. Part of the electronic business

via e-hubs (market hubs).
E-Fulfillment Operative and systematic measures for electronically

supported processing of customer orders.
Purchasing Strategic and operational activities to ensure the

supply of the company.
543
glossary
shopping cards Synonymous with "purchasing card". Electronic

purchasing systems for purchasing overhead materials.
Electronic Data Interchange Electronic data exchange between minÿ

(EDI) at least two partners.
Electronic Data Interchange for Globally usable and industry-independent

Administration, Commerce and gigantic standard for EDI.
Transportation (EDIFACT)
Electronic Marketplace Market hub for commercial and electronic goods

exchange (e-hub).
embedded system Embedded System. Electronic calculator embedded in

a technical context.
Enterprise Relationship Continuous tracking of customer orders. All systems are

Management (ERM) geared towards full customer integration.
Enterprise Resource Planning Company-wide successive planning system.

(ERP) Contains modules for maintenance and human
resources.
disposal Synonymous with "retrodistribution". elimination of

residues.
E-Supply Chain Secures the electronically supported supply, disposal

and recycling of goods.
Also extends to information, money and social flows.
excess goods Some uncommon goods. Value adjustment up to a

maximum of 50%.
subject portal Gateway for transactions on electronic markets.
Failure Mode and Effects Analysis Instrument for preventive error avoidance.
(FMEA) Calculation of a risk priority number from three probabilities
of occurrence.
Case-by-case procurement Synonymous with "single procurement".
544
glossary
vertical integration Identification number. Percentage of in-house production

in the sales achieved in the direct area.
Forecast Accuracy Synonymous with "sales forecast accuracy".
Forrester boost Basis of the bullwhip effect. Unplanned surges in

demand as the initial spark for disproportionate
production.
cumulative count Breaking down the procurement and production

process into control blocks. Shows the progress of
production.
freight cost-inventory cost- Combination of inventory costs and freight
Portfolio (FREDI) costs.
business attractiveness Combination of Market-Based-View and

Core Competencies Portfolio (GE- Resource Based View.
KKO)
Global sourcing Systematic extension of the procurement policy to

international sources.
Green supply chain Sustainable change from yield chains to substance

chains. Strict compliance with economic, ecological
and social aspects (sustainability).
Hard (soft) analysis Deviation Analysis. Reconciliation of sales, EBIT and

net income. Is called synonymously "P-3 analysis".
Horizontal cooperation strategies Cooperation with partners at the same value-added

level in the supply chain.
Mostly in the form of strategic alliances.
House of Quality Identification of customer and design requirements in

product development. Tools for QFD.
Industry 4.0 Fourth industrial revolution. Implemented by the

Smart Factory.
internet of things Networking of the Internet with everyday objects.
545
glossary
internet retailers Organization that conducts its business primarily via

the Internet.
inventory reserve Valuation adjustment of inventories due to

immovability.
Just in Sequence (JiS) procurement concept. Match line speed in-order to

customer demand to reduce inventory.
Just in Time (JiT) procurement concept. Production-synchronous

procurement of goods with the aim of keeping inventories
as low as possible. Historical predecessor of JiS.
Kaizen management Policy of small and continuous improvement steps

(Continuous Improvement).
Kanban Pull concept (hol concept). Inventory reduction

instrument through the formation of meshed, self-
controlling, decentralized control loops.
Make-to-order principle.
catalog supplier Retrieval of standard parts (DIN standards), so to speak,

from the catalogue. Mostly purchase of standardized B
and C parts.
KPI radar spider image. Instrument for detecting target/actual

deviations.
Key Performance Indicator (KPI) Strategic indicator with a high impact on success
togetherness Derived from the performance
measurement.
Cognitive Supply Chain Learning supply chain. Selected supply chain

components are able to learn independently, recognize
recurring patterns and derive recommendations for
action from them.
collaborative processes Interorganizational cooperation of legally independent

partners in real time.
consignment Transfer of ownership and risk of goods after call or

expiration of the deadline.
546
glossary
Artificial intelligence branch of computer science. Human learning and

thinking should be transferred to the computer. Instead
of being programmed for every purpose, the computer
finds answers and solves problems on its own.
Courier, express and parcel Independent service provider for the flexible distribution
service (CEP) of goods of small consignment sizes.
inventory turnover Identification number. Synonymous with "turn rate".

Measures the number of inventory turns of materials
per year. Reciprocal of the past-related inventory range.
lean management Exploitation of optimization potential by streamlining

hierarchies and eliminating inefficiencies.
Supplier logistics center Special form of consignment. 3PL operates central

(LLZ) warehouse near an OEM. Stocks are owned by the
suppliers and owned by the 3PL.
Delivery service level (LSG) Identification number. Percentage of on-time, quantity

and quality order items.
Life cycle costing Consideration of costs over the entire product lifecycle
(preliminary phase, market phase, follow-up
phase). Strategic cost management approach.
logistics Primarily physical flow of goods to bridge space and

time. Basic characteristics are procurement, production
and distribution logistics.
logistics chain Linking of traditional physical logistics activities to bridge

space and time between externally acting value
creation partners.
machine learning By recognizing patterns in existing

ing databases, IT systems are able to independently find
solutions to problems. Further development to Digital
Twin.
547
glossary
Make to Engineer (MTE) Customer order-related production. Creation of

special development services.
Often found in B2B or B2A projects.
Make to Order (MTO) Customized production (built-to-order).

Production of standardized items according to
customer orders, pull concept.
Make to Stock (MTS) Manufacture to stock (push principle) to exploit

economies of scale and price advantages.
Market Based View Market-focused strategy approach (outside-in

perspective). Protagonist: ME Porter. Aim:
Position for success in the market by considering
the forces of competition.
Market into Company Main Variant of Target Costing. Derivation of target

costs from the market.
Marketing Channel Management Specification of the distribution of goods in direction

customer by optimizing the sales channels (sales
intermediary).
mass customisation Hybrid competitive strategy, customized mass

production through mixed push-pull principle.
Material requirement planning Successive planning concept of material requirements.

(MRP I) Available capacities are not taken into account.
Material Resource Planning Further development of MRP I. Successive planning

(MRP II) concept of material requirements and capacities.
material flow analysis Comprehensive system for spatial and temporal

delimitation of logistics networks.
materials management Broader than procurement. Takes the entire material

handling into account: warehousing, internal
transport, material supply through to production.
548
glossary
Maverick buying Wild, uncontrolled purchasing bypassing existing

framework agreements. B and C parts in particular
are affected. Increase in average purchase costs.
Determined by TCO analysis.
Milk Run direct transport. Distribution of full and simultaneous

collection of empty load carriers in the distribution
process.
Modular sourcing Order complete assemblies (modules) from selected

first-tier providers. Reduction in the number of active
suppliers.
multiple sourcing Voluntary multi-source procurement. counterpart of

single sourcing. Utilization of price advantages. Spot
market relationship, often based on electronic
tenders for the procurement of catalog parts.
Multiple User Warehouse Joint use of a deposit by several legally independent

actors. Cost sharing of logistics costs.
obsolete goods Totally uncommon goods. Value adjustment up to a

maximum of 95%.
life cycle assessment

Comparison of input and output relations to promote
green supply chains.
According to thermodynamics, energy and mass
can neither be created nor destroyed, only
transformed.
offshore Geographical relocation of activities primarily

abroad to subsidiaries (internal offshore) or legally
independent partners (offshore outsourcing).
On Time Delivery to Commit Identification number. "Delivery reliability on the

confirmed date". Percentage of orders completed on
time.
On Time Delivery to Request Identification number. “Customer Requested

Delivery Reliability”. Percentage of orders delivered
to customers on time.
549
glossary
On-line analytical processing Management support in the data warehouse.

(OLAP) Characteristic properties are multidimensionality,
flexibility, ergonomic user interface and speed.
Order fulfillment lead time order processing time. Time in days to process
customer orders.
Order Promising availability check. The main variants are available-

to-promise and capable-to-promise.
Order-to-Payment-S Step-by-step process of supply chain management,

from the customer order (Order) to payment
(Payment). Primary pull orientation.
Organization for Data Exchange European automotive industry standard for electronic
by Teletransmission in Europe data exchange (based on EDI).
(ODETTE)
Out of stock zero stock. Synonymous with “stock out”.
outpacing Hybrid competitive strategy. Timely switch between

cost leadership and differentiation.
Payment-on-Production (POP) Payment only after product completion.
performance measurements Basis for balanced scorecard and performance

Pyramid, measurement via performance and
service indicators. combination of financial and
non-financial metrics.
Pioneer follower management concept for determining the optimized time to market
(acceleration versus deceleration).
Postponement Deliberate delay of supply chain activities.

Production taking into account the cost growth curve.
predictive analytics Appointing trends and recurring

Patterns from historical data. Predictions about the
probability of future events ("what will happen?").
550
glossary
Prescriptive Analytics Giving advice from historical data to redirect

trends in the desired direction (“how can we make
it happen?”)
Product carbon footprint CO2 footprint of products and processes
measures to reduce greenhouse gases. Conversion

of all greenhouse gas potentials to CO2 equivalents.
Production planning and Business component of CIM.

production control (PPS) Computer-aided production planning and
production control.
Activity-Based Costing Cost transparency in the indirect areas by identifying

cost drivers.
Reduction of overhead costs. Instrument of
strategic cost management.
Quality Function Deployment Customer- and resource-focused coordination of

(QFD) quality-driven processes.
Quick Response Precursor to ECR. Approach from the clothing
education industry, quick recognition of customer

requirements.
Rack jobbing Automatic and independent shelf replenishment by

suppliers.
rapid prototyping Additive manufacturing process (CADÿ

supported) for the creation of prototypes.
recycling Use (processing) or recycling (processing) of

substances.
range of stocks Identification number. Synonymous with Inventory

Days of Supply. Measurement of tied-up capital.
Reciprocal of inventory turnover.
Resident Engineering Temporary posting of suppliers' employees to

customers.
Resource Based View Resource-focused approach to exploiting potential

for success. Mostly on the basis of core competencies.
551
glossary
retrodistribution Disposal of residues.
Retrograde termination Production control against the material flow.

Consideration of discontinuous processes.
Return on capital employed Identification number. Measurement of the return

(ROCE) on capital by deriving the relation between EBIT
and capital employed.
reverse engineering Part-level decomposition of competing products.
Radio Frequency Identification identification technique. Contactless, electronic object

(RFID) identification. Consisting of computer, reading unit
and transponder (tag).
Roll Cage Sequencing (RCS) Loading of vehicles for store-specific order picking.
Tools from VMI.
set-up costs Synonymous with "setup costs". Optimization

through the development of setup matrices.
sensors Register and process different measurement data from

the real world.
sharing economy Sharing instead of owning. Sharing of things.
Simultaneity Hypothesis Hybrid competitive strategy. Simultaneous cost

leadership and differentiation.
Simultaneous engineering Parallel processing of tasks in multifunctional expert

teams.
single sourcing Voluntary source of income per material type.
smart factory intelligent factory. Based on the principle of virtualization.

In the smart factory, cyber-physical systems enable
the digital and agile combination of individual
components to form an overall solution.
smart maintenance Intelligent maintenance via sensors.
Sole sourcing Forced source reference per material type.
552
glossary
Squeeze in time Identification number. Time span for the complete

integration of actors into the supply chains.
stereolithography Additive manufacturing process. CADÿ

oriented technique for creating prototypes from
photopolymers.
Strategic Alliance Horizontal cooperation strategy.
Strategy map Strategy map based on the Balanced Scorecard.

Possibility of visualizing the strategic thrust.
subcontractor Indirect supplier for manufacturers (2nd tier or

higher order).
Supplier Rating System (SRS) System for evaluating suppliers. Rating

of logistic errors.
Supplier Relationship Supplier selection, development and integration

Management (SRM) activities.
Supply chain design (SCD) Strategic network design. Strategic superstructure for
the design of the supply chain.
Supply Chain Event Early warning mechanisms for supply chain

Management (SCEM) systems (permanent monitoring).
supply chain management Integrated internal and external activities of supply,

(SCM) disposal and recycling, including accompanying flows
of money and information, also geared to the social
level.
Supply Chain Execution Initiation of logistics activities through transport

processing, production processing and warehouse
management.
Supply Chain Execution System Clever control center. Represents supply chain
relevant information to stakeholders
tion.
Supply Chain Operations Process reference model for standardizing

Reference Model (SCOR) processes within the supply chain.
Developed by PRTM. Measurement via internal
and external key figures.
553
glossary
supply chain relationship Part of supply chain management with an affinity

Management (SCRM) for relationships (intensification of social relationships).
Supply chain score card Scorecard with special consideration of supply

chain aspects. perspectives e.g. B.
Finances, customers, processes, suppliers,
cooperation.
Synchronized production Synchronized manufacturing. Tools from ECR.
system supplier Supplies directly to the manufacturer, Tier 1 supplier.
target costing Target cost management, full cost accounting,

instrument of strategic cost management.
Time Based Competition Time-focused optimization, time-to-market within a

supply chain.
time to market time span in the innovation process. Ranging from

product development to market launch
tion.
Total benefits of ownership total benefit of an investment. Extension of Total

(TBO) Cost of Ownership.
Total Cost of Ownership (TCO) Acquisition and follow-up costs over the entire
product life cycle.
Total quality management meta-leadership approach. Primarily quality-

(TQM) focused process control to increase customer
satisfaction.
tracking and tracing shipment tracking system. Consists of monitoring

(tracking) and data archiving (tracing).
transaction costs Costs incurred when switching objects to a new

sphere of activity.
Transshipment point Docking station, central transhipment point (cross

docking).
554
glossary
Supervised Learning Supervised Learning. Dynamic algorithm learns a

function from given pairs of inputs and outputs of a
behavioral model.
unsupervised learning Unsupervised Learning. Given a set of inputs, an

algorithm creates a model that makes predictions. A
specific goal is not specified.
upcycling recycling form. Recycled fabrics compete with

innovation.
Upside production flexibility Production increase flexibility. Time in days to

react to an unplanned 20% surge in demand.
value analysis value analysis. Decomposition of products in the

market cycle.
value engineering value creation. Decomposition of products in the

development cycle.
Vendor Managed Inventory Manufacturer-controlled inventory management. Logistic

(VMI) core element of ECR. Derived from Continuous
Replenishment.
Vertical cooperation strategies Systematic involvement before or after

stored value-added levels in supply chains.
Virtual Freight Exchange Electronic platform for commercial offers and requests
for freight projects.
virtual venture Organization that appears to customers as a unit

without having any organizational or legal structures.
stock procurement procurement principle. Buffer formation in the

warehouse for B and C parts, in particular to exploit
price advantages.
Web EDI Open and standardized electronic

Data exchange via the Internet. Offers SMEs
the ability to quickly identify changes in demand in

the supply chain.
555
glossary
value chain Consideration of all factors of value increase

and value destruction. Historical forerunner of
supply chain management
ment.
value driver tree Analytical or logical linking of key figures in

systems. The top metric is called the root node.
working capital Identification number. Liquidity determined by

current assets (can be liquidated within one
year) less short-term liabilities
ten.
XYZ analysis Differentiation of inventories according to

their consumption behavior (Forecast Accuracy).
556
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Supply chain management tools

Supply chain management tools

Another effect of using radio frequency technology in the supply reduction of

activities (using handheld scanners) decreases and fewer pickers

Supply chain management tools

The customers Finally, improving customer satisfaction is closely linked to

Practical examples Various fields of application of RFID technology in different

The pharmaceutical industry uses radio frequency technology to RFID to

Supply chain management tools

Warehouse The special possible uses of RFID technology in warehousing are

Finally, in warehouses with a finishing function, radio frequency systems

the reading accuracy hit rate.

Supply chain management tools

D.6.4 Data Warehouse

selected information. OLAP (Online Analytical Processing) places high demands

ÿ Multidimensionality: OLAP is the basis for the aggregation of different

Supply chain management tools

nearest branch to his new place of residence. A forwarding agent is

The information systems of business management and technology Avoid isolated

Supply chain management tools

Proceed further The components of Computer Integrated Manufacturing are to be

Figure D.18 CIM architecture

Computer Integrated Manufacturing (CIM)

Business component Technical components

Production Planning and Control Computer Aided Engineering (CAE)

Computer Aided Quality Assurance

D.6.5.1 Production planning and control (PPS)

ÿ Order data (customer orders).

ÿ Product structure data (quantity relationships and technological relationships of

ÿ Material procurement data (stock management and supplier

ÿ Operation data (assignment of the repetition factors to the machine

ÿ Equipment data (performance range of potential factors).

The PPS system is based on the successive planning concept : A Interdependencies

Supply chain management tools

procurement set procurement strategies . If companies focus their activities on the

D.6.5.2 Computer Aided Design (CAD)

ÿ Design: The focus of design is on calculations and the creation of

ÿ Detailing: The optimum combination must be selected from the multitude

the subsequent production and material costs must be estimated at ment

an early stage. Different design alternatives are simulated, which

D.6.5.3 Computer Aided Planning (CAP)

Planning (CAP) carries out computer-aided planning tasks . They are

Computer Aided Planning determines the processing steps in the Computer-aided

duration of a processing. The sequence of operations is defined in

Supply chain management tools

D.6.5.4 Computer Aided Manufacturing (CAM)

A special form of CAM are industrial robots (handling devices). A Programming

The highest degree of automation is achieved with flexible Adaptation-

work steps. However, NC machines cannot handle a closed

Supply chain management tools

D.6.5.5 Computer Aided Quality Assurance (CAQ)

D.6.6 Enterprise Resource Planning and Advanced

special plans. In contrast to MRP II, however, the Enterprise tion

Resource Planning modules also guarantee functions such as

Supply chain management tools

ÿ There are no interrelationships between the subordinates

ÿ The provision of information is time-critical because there are so many

processing of individual activities in the planning process. This eliminates sequential

Supply chain management tools

ÿ Material Requirement Planning: A medium- to short-term material requirement Simulate material

a replacement, but rather a supplement to ERP. Within the company, tion

A critical appraisal of APS systems rounds off the Diverse