SEM 3.

Curso:
Supply Chain Management

Ciclo: 2023-2

SUPPLY CHAIN
PERFORMANCE
MEASUREMENT
 OBJECTIVE
• Demonstrate a basic level of knowledge and
application of SUPPLY CHAIN PERFORMANCE
MEASUREMENT and the SCOR model to
interpret performance.

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 Performance Measurement
INTRODUCTION

• Firms with the best supply chains create hierarchies of precise performance
measures at the execution level combined with a distillation of meaning at the
strategic level.
• These organizations realize that strategic goals at the top will only succeed if there
is a clear path to performance measures at the transaction level to identify
execution problems.
• Designing standards and then monitoring the many activities or processes indirectly
or directly impacting financial performance can provide much better information
for decision-making purposes.
• During the 2009 crisis,. Companies focused on improving purchasing, logistics, and
performance measurement.
• EJ. Walmart, for instance, decided to purchase up to 80 percent of its private label
merchandise directly from manufacturers, saving billions of dollars.

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 Performance Measurement
• Achieving adequate performance and then continually improving on those
measures are what firms aim toward. Using an adequate system of performance
measures allows managers to pursue that vision. However
• Only about 50 percent of the firms had even moderately well-developed
performance measurement systems. And in another survey of business
technologists, about 75 percent said their firms mainly relied on their suppliers to
furnish them with inbound performance information.

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 A. VIEWING SUPPLY CHAINS AS A
COMPETITIVE FORCE
• For companies to be successful, supply chain
customers and end-product users must be
satisfied. Thus, firms must invest time and
effort understanding supply chain partner and
end-customer requirements, and then adjust
or acquire supply chain competencies to
satisfy the needs of these customers.

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 A. VIEWING SUPPLY CHAINS AS A
COMPETITIVE FORCE
Understanding Customers
• Instead of taking a one-size-fits-all approach,
companies consider customer segment needs
such as:
• The variety of products required,
– The quantity and delivery frequency needed,
– The product quality desired,
– The level of sustainability sought, and
– The pricing of products.
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 A. VIEWING SUPPLY CHAINS AS A
COMPETITIVE FORCE
Understanding Supply Chain Partners
• Supply chain strategies must consider the
potential trade-offs existing among the cost,
quality, sustainability, and service
requirements mentioned above.
– Responsiveness. (meeting due date, lead-time,
and quantity requirements while providing high
levels of customer service)
– Efficiency. (enabling lower prices for goods)
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 A. VIEWING SUPPLY CHAINS AS A
COMPETITIVE FORCE
Adjusting Supply Chain Member Capabilities.
Matching supply chain capabilities to end-
customer requirements means that firms and
their supply chain partners must be continually
reassessing their performance with respect to
these changing end-customer requirements.

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 A. VIEWING SUPPLY CHAINS AS A
COMPETITIVE FORCE
Adjusting Supply Chain Member Capabilities.
This brings us back to the importance of
performance measures and their ability to relay
information regarding the per-formance of each
member within the supply chain, along with the
performance of the supply chain vis-à-vis the
end customers.

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 B. TRADITIONAL PERFORMANCE
MEASURES
• Traditional cost-based and financial statistics
reported to shareholders in the form of annual
report, balance sheet, and income statement
data
• Decisions that are made solely to make the
firm look good don’t necessarily mean the
firm is performing well or will continue to
perform well in the future.

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 B. TRADITIONAL PERFORMANCE
MEASURES
• Use of Organization Costs, Revenue, and Profitability
Measures. What about uncontrollable environmental
conditions? And difficulty in attributing any financial
contributions to the various functional units or processes.
• Use of Performance Standards and Variances. Meeting targets
may imply that managers can be pressured to find ways to
make up these variances
• Productivity and Utilization Measures. Do not allow the firm
to determine the actual performance of any of the resources
behind these elements.

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 C. WORLD-CLASS PERFORMANCE
MEASUREMENT SYSTEMS
• An effective performance measurement system should consist
of the traditional financial information for external reporting
purposes along with tactical level performance criteria used
to assess the firm’s competitive capabilities.
• It should include measures that assess what is important to
customers.
• Ej. researchers found that in firms with successful lean and Six
Sigma programs, there was use of a wider variety of both
financial and nonfinancial performance measures.

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 C. WORLD-CLASS PERFORMANCE
MEASUREMENT SYSTEMS
Developing World Class Performance Measures

• Identify the firm’s strategic objectives.

• Develop an understanding of each functional area’s set of requirements for
achieving the strategic objectives.
• Design and document performance measures for each functional area that
adequately track each required capability.
• Assure the compatibility and strategic focus of the performance measures to be
used.
• Implement the new performance monitoring system.
• Identify internal and external trends likely to affect firm and functional area
performance over time.
• Periodically reevaluate the firm’s performance measurement system as these
trends and other environmental changes occur.

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 C. WORLD-CLASS PERFORMANCE
MEASUREMENT SYSTEMS
• World-class firms establish strategically oriented performance
criteria among each of their functional areas, using the
categories of quality, cost, customer service, and perhaps
sustainability

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C. WORLD-CLASS PERFORMANCE
MEASUREMENT SYSTEMS

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C. WORLD-CLASS PERFORMANCE
MEASUREMENT SYSTEMS

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
• It must effectively link supply chain trading
partners to achieve breakthrough
performance in satisfying end users.
• The focus of the system should be on value
creation for end customers, since customer
satisfaction drives sales for all of the supply
chain’s members.

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
• In a 2008 survey of 287 companies and their supply chains
conducted by Connecticut-based AMR Research, the most
successful supply chains were found to be more centralized,
integrated, global, and focused on measuring performance.
• In a ranking of the “Top 25” supply chains compiled each year
since 2004 by business research firm Gartner, one of the
common characteristics is a focus on measure- ments that
matter; measures that will improve operational results.19

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
Supply Chain Environmental Performance
• Environmental sustainability
• Green supply chain management (GSCM)
– Today, software is available that enables
companies to analyze the carbon footprints of
their supply chains and then evaluate design
configurations and various options for reducing
total carbon emissions.

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
To achieve the type of performance alluded to in
this chapter specific measures must be adopted
by supply chain trading partners such that
performance can be further aligned with supply
chain objectives. Some measures are listed ..

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
1. Total Supply Chain Management Costs
2. Supply Chain Cash-to-Cash Cycle Time
3. Supply Chain Production Flexibility
4. Supply Chain Delivery Performance
5. Supply Chain Perfect Order Fulfillment Performance
6. Supply Chain e-Business Performance
7. Supply Chain Environmental Performance

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
The Balance Score Card.
• Developed in 1992 by Drs. Robert Kaplan and
David Norton and representatives from a
number of companies as a way to align an
organization’s performance measures with its
strategic plans and goals.
• 80 percent of large U.S. businesses either
using it or having previously used it.

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
The Balance Score Card

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
The Balance Score Card.

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
The Balance Score Card.

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 D. SUPPLY CHAIN PERFORMANCE
MEASUREMENT SYSTEMS
Web-Based Scorecards
Web-based balanced scorecard applications are
also sometimes referred to as performance
dashboards

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 SCOR MODEL
 Developed in 1996 by supply-chain consulting firms Pittiglio Rabin
Todd & McGrath and AMR Research
 This firms founded the Supply Chain Council (SCC) a non-profit
global organization.
 Today the membership level is over 600 profit and non- profit
companies, to manage the SCOR model.
 In 2014, APICS and SCC merge in order to providing our members,
customers and the supply chain community at large the most up-to-
date, relevant and complete body of knowledge in supply chain and
operations management.

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 SCORE MODEL
Broader Benefit
• The SCOR model is used as a supply chain
management diagnostic, benchmarking and process
improvement tool by manufacturing and service
firms in a variety of industries around the globe.
• Success cases include Intel, IBM, 3M, Cisco,
Siemens and Bayer.
• Cisco appointed a vice president responsible for the
SCOR model’s functions, as this company set out to
revamp their supply chain in 2005 using the model.
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SCOR MODEL
SCO MODEL 1

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SCO MODEL 2

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SCORE MODEL
 SCOR Framework
Plan

Plan Plan
Deliver Source Make Deliver Source Make Deliver Source Make Deliver Source

Return Return Return Return Return Return

Return Return
Enable Enable
Enable
Suppliers’ Customers’
Supplier Supplier Your Organization Customer Customer

Internal or External Internal or External

SCOR
MODEL
 Processes and Categories
• Plan. Demand and supply planning including
balancing resources with requirements;
establishing/communicating plans for the supply
chain; management of business rules, supply chain
performance, data collection, inventory, capital
assets, transportation and regulatory requirements.
• Processes that balance aggregate demand and supply
to develop a course of action which best meets
sourcing, production, and delivery requirements.

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 Processes and Categories
• Source. Sourcing stocked, make-to-order and
engineer-to-order products including scheduling
deliveries, receiving, verifying, and transferring
product, authorizing supplier payments, identifying
and selecting suppliers, assessing supplier
performance, managing incoming inventory and
supplier agreements.
• Processes that procure goods and services to meet
planned or actual demand.

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 Processes and Categories
• Make. Make-to-stock, make-to-order and engineer-
to-order production exe- cution including scheduling
production activities, producing, testing, packaging,
staging, and releasing product for delivery, finalizing
engineering for engineer- to-order products,
managing work-in-process, equipment, facilities and
the production network.
• Processes that transform product to a finished state
to meet planned or actual demand.

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 Processes and Categories
• Deliver. Order, warehouse, transportation and installation
management for stocked, make-to-order and engineer-to-
order product including all order management steps from
order inquiries and quotes to routing shipments and selecting
carriers, warehouse management from receiving and picking
to loading and shipping product, invoicing customer,
managing finished product inventories and import/export
requirements.
• Processes that provide finished goods and services to meet
planned or actual demand, typically including order
management, transportation management, and distribution
management..
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 Processes and Categories
• Return. Returns of purchased materials to suppliers
and receipt of finished goods returns from customers
including authorizing and scheduling returns,
receiving, verifying, and disposition of defective or
excess products, return replacement or credit, and
managing return inventories.
• Return – Processes associated with returning or
receiving returned products for any reason. These
processes extend into post-delivery customer
support.
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 Processes and Categories
• Enable. Processes being associated with the
management of the supply chain. These processes
include management of: business rules,
performance, data, resources, facilities, contracts,
supply chain network management, managing
regulatory compliance and risk management. The
process is implemented in Version 11 (Dec 2012).

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 Levels of Processes
• There are three standardized levels of process
detail in the SCOR model.
• Users select appropriate process categories
from the SCOR configuration toolkit to repre-
sent their supply chain and select from
thirteen performance attributes

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 Levels of
Processes
• Level 01. Users select
appropriate process
categories from the
SCOR configuration
toolkit to represent
their supply chain and
select from thirteen
performance attributes.
• TOP Level

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 Levels of
Processes
• Level 02. The SCOR
processes are further
described by process
type. Within each
process type are
process categories that
users specify.
• Configuration LEVEL.

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 Levels of
Processes
• Level 03. Process flow
diagrams are defined
with process elements
or specific tasks for
each of the process
categories established
in Level 2, showing
inputs, process
elements and outputs.

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 Levels of
Processes
• Level 03. Specific
performance measures
are identified for each
of the process
elements within the
flow diagrams.
• Best practices can also
be identified at this
level.

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 Levels of
Processes
• Level 04. specific
performance measures
are identified for each
of the process
elements within the
flow diagrams.
• Best practices can also
be identified at this
level.

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47
END

Thank you!

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