Historical Development and Strategic Role of the BSC

The Balanced Scorecard originated in the early 1990s. Kaplan and Norton’s seminal
Harvard Business Review article (1992) reported that research with leading
companies showed traditional financial metrics alone were inadequate for guiding
strategy or operational improvement . Instead, they proposed a “balanced” set of
measures including customer satisfaction, internal process efficiency, and
learning/growth factors alongside finance . In 1996 Kaplan & Norton expanded the
concept in a book that guided firms in “translating strategy into action” through the
BSC, emphasizing objectives and initiatives for each perspective. Over time, the
BSC evolved from a static scorecard into a dynamic strategic management system.
Kaplan and Norton (2001, 2004) introduced strategy maps to visualize
cause-and-effect links between objectives across perspectives, reinforcing that the
BSC must align with and drive strategy. As the Balanced Scorecard Institute notes,
a truly strategic BSC does more than organize existing metrics – it uses measures to
communicate vision, incentivize key drivers, and steer the organization toward
long-term goals .

Strategically, the BSC has significant advantages. It forces leaders to articulate and
share strategic objectives, ensures different departments work toward common
goals, and balances short-term results with long-term capabilities. For example, by
integrating customer satisfaction and innovation metrics with finances, firms can
focus on building future competitive advantage as well as current profitability
. Today the BSC is widely used: half of Fortune 1000 companies reportedly employ
some form of it, often including supply chain and operational metrics under the
framework . In summary, the BSC has become a leading strategy execution tool,
moving beyond performance reporting to actively align operations (including
supply chains) with corporate strategy .

The Four BSC Perspectives

The classic Balanced Scorecard organizes objectives and measures into four
perspectives. Each perspective answers a strategic question and includes relevant
KPIs. Table 1 summarizes each perspective and its typical focus.

Financial Perspective: “How should we appear to our shareholders?” This

perspective tracks financial health and long-term growth. Typical metrics include
profitability, cost management, and asset utilization. In supply chain management,
finance KPIs might focus on supply chain cost and cash flow. For example, cash
conversion cycle (CCC) measures how quickly cash returns to the firm after
production (a key supply chain finance metric). Other examples include inventory
turnover rate, return on capital employed (ROCE), net profit margin, and total
supply chain cost as a percentage of sales. Hayes (2025) notes that common
financial measures are revenue growth, profitability, and cash flow, and Chang et al.
emphasize revenue growth, cost reduction, and asset utilization as core themes. In
practice, supply chain leaders use such metrics to ensure that logistics and
manufacturing processes contribute positively to financial targets.

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Customer Perspective: “How should we appear to our customers?” This angle
reflects customer needs and market success. It includes metrics on customer
satisfaction, retention, and service. In a supply chain context, customer-oriented
KPIs often measure delivery performance and order fulfillment. Common examples
are on-time delivery rate, order fill rate, perfect order rate, and customer satisfaction
scores. For instance, a “perfect order rate” combines multiple factors (orders
delivered complete, damage-free, with correct documentation, and on schedule) .
As Savkin (2023) describes, key indicators here include order cycle time (average
time from order receipt to delivery) and order fill rate (percentage of orders shipped
complete and on time) , which together determine the perfect- order performance.
Customer retention rate and net promoter score (NPS) are other examples. Aligning
supply chain activities – like reliable shipping and quality – to these measures helps
ensure that supply chain processes directly support customer satisfaction and
competitive advantage.

Internal Process Perspective: “At what processes must we excel to satisfy

customers and shareholders?” This perspective covers the internal operations and
capabilities. It focuses on process efficiency, quality, and innovation. Typical
supply chain process KPIs include production lead time, order fulfilment cycle time,
inventory accuracy, throughput, defect or returns rate, and capacity utilization. The
goal is to identify bottlenecks and improve throughput. Hayes (2025) suggests
tracking KPIs like cycle times and defect rates to optimize processes . Chang et al.
(2018) note that internal-process objectives include improving product quality,
accelerating innovation (new products), and delivering on-time to customers . In
supply chains, this translates to metrics such as order fulfillment lead time,
warehouse pick/pack speed, and frequency of stockouts. For example, reducing the
time to process and ship an order directly impacts customer perspective metrics
while also lowering costs for the firm.

Learning & Growth (Organizational Capacity) Perspective: “How will we

sustain our ability to change and improve?” This perspective addresses the
organizational infrastructure: people, technology, and culture. Supply chain learning
KPIs measure workforce skills, innovation capacity, and system improvements.
Common measures include employee training hours, skill certification rates, staff
turnover, and number of process improvement initiatives implemented. Hayes
(2025) lists metrics like employee training hours and technology investment under
this perspective . Chang et al. (2018) similarly mention employee satisfaction,
skills alignment, suggestion rates, and training time as key measures . In a supply
chain, investing in employee skills (e.g. supply chain analytics training) or in
information systems (e.g. warehouse management software) falls here. A strong
Learning & Growth system ensures the company can innovate (e.g. new fulfillment
strategies) and continuously improve operational processes, closing the loop on the
BSC and driving long-term performance.

Supply Chain KPIs by Perspective

Below are illustrative supply chain KPIs for each perspective:

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Financial Perspective KPIs: Cash conversion cycle (days), inventory carrying
cost, total supply chain operating cost (% of sales), return on supply chain assets,
net profit margin, return on capital employed (ROCE). For example, Cash
Conversion Cycle (CCC) measures days from outlay to cash recovery, and is critical
in managing working capital in logistics (Savkin, 2023). Reducing CCC or
inventory cost increases supply chain profitability.
Customer Perspective KPIs: On-time delivery rate (% of orders delivered by
promised date), order fill rate (percentage of orders filled completely), perfect order
rate (composite index of orders on-time, complete, and error-free) , customer
satisfaction index, customer retention rate, and market share in target segments. For
instance, Savkin (2023) highlights order fill rate (orders on-time and in-full) and
related perfect order metrics as key customer-focused supply chain measures .
High values indicate a reliable supply chain that meets customer needs.
Internal Process Perspective KPIs: Order-to-delivery lead time, supply chain
cycle time,production cycle time, throughput rate, inventory turnover rate, capacity
utilization, quality/ defect rates, and on-time shipment rate (orders shipped as
scheduled). These measure how efficiently the supply chain operates. For example,
a common KPI is order cycle time – the average days to fulfill an order. Reducing
cycle times and defects improves both customer satisfaction and cost performance.
(Hayes, 2025 ; Chang et al., 2018 ).
Learning & Growth Perspective KPIs: Employee training hours per supply chain
staff, rate of cross-training, employee turnover (lower is better), number of
improvement projects or innovations implemented, IT system uptime, and employee
engagement scores. These reflect the organization’s capacity to adapt. E.g., tracking
supply chain training hours and skill certifications helps ensure workers can use
new technologies and processes. (Hayes, 2025 ; Chang et al., 2018 ).
Selecting the right KPIs is critical – too many metrics dilute focus, while too few
may miss important drivers. The BSC encourages identifying the “vital few” KPIs
for each perspective (Kaplan & Norton, 1996). Ideally, 3–5 objectives and related
metrics are chosen per perspective to maintain balance and manageability.

Case Studies and Examples

Logistics Company (Turkey): Baykasoglu and Kaplan (2007) applied the BSC in
a large international logistics firm that operated shipping and freight services. They
found that the complexity of the company’s processes made performance evaluation
difficult using only financials . By adopting a BSC, the firm defined objectives and
measures across finance, customer, internal, and innovation perspectives. For
example, under Financial, they tracked profitability per service line and cost
reductions; under Customer, they measured on-time shipment percentages; under
Internal Process, they monitored workflow cycle times and process efficiency; and
under Learning & Growth, they measured employee training and system
improvements. The strategy map linked outcomes (e.g. higher customer satisfaction
through faster deliveries) back to financial results, reinforcing strategic alignment.
Baykasoglu and Kaplan conclude that the BSC clarified strategy and highlighted
performance gaps in this logistics company, enabling targeted improvement actions.

Automotive Manufacturing: Nagyová and Sütövá (2014) describe implementing a

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BSC in an automotive component manufacturer. They created a strategy map to
depict how strategic objectives (quality, innovation, delivery performance, etc.)
linked through the four perspectives . For each perspective they selected metrics
that support the company’s strategy: for example, in Financial they chose return on
assets and cost per unit; in Customer they used order fill rates and external quality
failure rates; in Internal Process they tracked production throughput, scrap rates, and
on-time shipping; and in Learning & Growth they measured employee suggestion
programs and training hours. Their case emphasized focusing on a limited number
of critical indicators and using the PDCA (Plan-Do-Check-Act) cycle to continually
improve. The authors noted that with the BSC in place, the company could better
align its quality and productivity goals with overall strategy, though success
required sustained leadership commitment and iterative refinement of the scorecard.

Beyond these, many global firms have used BSCs in supply chain contexts. For
example, Apple and Volkswagen have integrated supply chain KPIs into their
corporate scorecards to ensure that logistics, manufacturing, and supplier
performance all support strategic goals . Transportation and retail companies also
frequently employ BSC frameworks to balance cost, customer service, and
innovation. These real-world uses underscore the adaptability of the BSC: it can be
tailored to diverse sectors (from high-tech to heavy industry) while retaining its core
structure of four perspectives.

Advantages of the BSC Approach

The Balanced Scorecard offers several strengths, particularly for complex supply
chain environments:

Strategic Alignment: BSC links day-to-day operations with long-term strategy. By

defining objectives in each perspective based on the company’s vision, it ensures
that all activities (including supply chain processes) contribute to strategic aims
(Kaplan & Norton, 1996). This alignment helps firms prioritize initiatives that affect
competitive advantage.
Balanced View: It broadens focus beyond financials to include customer
satisfaction, process efficiency, and organizational learning . In supply chains,
this is crucial because success depends not just on cost-cutting but on quality,
delivery and flexibility. As Balaji et al. (2018) note, BSC enables distinct
competitive advantages by integrating multiple dimensions of performance
.
Communication and Accountability: A common framework and language for
metrics promotes clearer communication. Teams across procurement,
manufacturing, and distribution can “speak the same language” (e.g. filling targets,
quality goals), improving cross-functional coordination (Heartpace, 2024). Chang et
al. (2018) emphasize that BSC helps monitor performance and improve
communication, streamlining the company’s vision throughout the organization .
Focus on Leading Indicators: By including non-financial, often leading measures
(like training levels or process throughput), the BSC encourages managers to
monitor predictors of future performance, not just lagging financial results . This is
particularly valuable in supply chains where early detection of problems (e.g. rising

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defect rates) can avert larger losses.
Improved Performance and Productivity: Empirical studies suggest BSC
implementation tends to improve operational productivity and profitability. Balaji et
al. (2018) report that companies using BSC saw gains in productivity by aligning
metrics with strategy. For supply chains, this means streamlining processes and
reducing waste in ways that directly support financial goals.

Overall, the BSC makes organizations more strategic and performance-driven. For
supply chain managers, it provides a holistic dashboard: one can see at a glance how
cost measures (finance), delivery metrics (customer), process indicators (internal)
and improvement initiatives (learning) are trending and interrelated. This broad
view fosters better decision-making and continuous improvement.

Disadvantages and Challenges

Despite its benefits, the Balanced Scorecard approach has limitations, especially in
supply chain settings:

Implementation Complexity: Developing a BSC is resource-intensive.

Organizations must clearly define strategy, identify objectives, and choose
appropriate KPIs for each perspective. Tailoring the scorecard to a company (and its
supply chain) requires substantial analysis and consensus. As one practitioner noted,
a BSC must be customized to the organization’s unique needs, which can be time-
consuming. Without sustained leadership commitment, BSC projects can stall or be
seen as just administrative overhead ([Link]).
Overload of Metrics: There is a risk of tracking too many or irrelevant indicators.
If every department adds its own KPIs, the scorecard loses focus. The Balanced
Scorecard Institute cautions that simply “organizing the measures we have”
(without strategic guidance) adds little intelligence . In other words, a
superficial BSC with dozens of metrics yields no strategic insight and may not
justify the effort. Effective BSC design requires discipline to select the few KPIs
that truly reflect strategic priorities.
Data and Measurement Challenges: Many supply chain metrics require reliable,
timely [Link] and maintaining this data can be difficult. For example,
calculating a perfect order rate requires integration of order, delivery and quality
data across systems. If data collection is manual or fragmented, the BSC becomes
stale or inaccurate. Moreover, supply chain dynamics can change rapidly (e.g.
sudden shifts in demand or disruptions), and traditional BSC processes (often
reviewed monthly or quarterly) may not capture real-time issues. Thus, some critics
say BSC may encourage an internal focus, underweighting the need to respond
flexibly to external changes .

Context Dependency: A BSC must align with organizational structure and

strategy. In complex
multi-tier supply chains, it can be challenging to cascade scorecards effectively. For
example, aligning a corporate scorecard with those of suppliers and distributors
requires collaboration and data-sharing that may not exist. If units do not share the
same objectives or if the BSC is imposed top-down without buy-in, it can cause

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confusion or resistance.

Balanced Focus Trade-offs: By definition, the BSC tries to balance competing

objectives (e.g.
cost vs. quality). However, in practice this can lead to difficult trade-offs. For
instance, maximizing inventory turnover (reducing stock) may conflict with a
resilience goal of having safety stock for disruptions. Without careful strategic
judgment, focusing on one perspective’s KPIs can inadvertently harm another
perspective.

In supply chain contexts, these disadvantages mean that BSC implementation must
be handled carefully. For example, the Turkish logistics case noted that BSC
effectiveness required linking the scorecard to continuous improvement (PDCA)
processes ; without that, metrics would not drive change. Similarly, if a BSC
becomes too rigid, it may not keep up with market changes in global supply
networks. Thus, organizations must regularly review and adapt their BSC, ensuring
it remains relevant and not just a static reporting tool .

References (APA):

Balaji, M., Dinesh, S. N., & Parthiban, V. V. (2018). Applying balanced scorecards
to supply chain performance. ISE Magazine, 50(11), 5–10.

Chang, H.-H., Hung, C.-J., Wong, K.-H., & Lee, C.-H. (2013). Using the balanced
scorecard on supply chain integration performance – A case study of service
businesses. Service Business, 7, 539–561.

Hayes, A. (2025, April 23). What is the Balanced Scorecard (BSC)? Examples and
Uses. Investopedia. Retrieved from
[Link]

Kaplan, R. S., & Norton, D. P. (1992). The balanced scorecard – Measures that
drive performance. Harvard Business Review, 70(1), 71–79.

Kaplan, R. S., & Norton, D. P. (1996). The Balanced Scorecard: Translating

Strategy into Action. Harvard Business School Press.

Nagyová, A., & Sütövá, A. (2014). Case study of Balanced Scorecard use in
automotive industry. In Proceedings of Quality and Innovation 2014 (pp. 42–49).
Košice – Hradec Králové: Technical University of Košice.

Savkin, A. (2023, September 8). Supply chain: Example of strategy scorecard with
KPIs. BSC Designer. Retrieved from [Link]