Performance Measures for Supply Chain Management

1. PSM
503
Performance Measures
for Supply Chain
Management
Facilitated by:
Muhammad Adnan Rahman
Deputy Project Director
Modern Food Storage Facilities Project, Ministry of
Food &
Executive Engineer, Public Works Department
(PWD)
BRAC Institute of Governance and
Development
BRAC University

2. 4
0
Final Exam
Assessment- Written/MCQ or
Both Time- within 2.0 hours
2
0
Midterm Exam
Assessment- Written/MCQ or
Both Time- within 1.5 hours
2
0
1
0
Quiz (Best 2 out of
3)
Term Assignment
Spot
Assessment
Attendance
05
05
Total:
10
0
Marks
Distributions

3. Concept of Measuring
Performance of Supply
Chain Management

4. Supply-Chain Management (SCM) can be described as
follows:
• Managing the broad range of activities required to plan,
execute and control a product’s flow, from acquiring
raw materials and manufacturing execution through
distribution to the final customer, in the most
streamlined and cost- effective way possible.
• The management of the flow of goods and services
involves the movement and storage of raw materials, of
work-in- process inventory, and of finished goods from
point-of-origin to point-of-consumption.
Concept of Measuring Performance
of SCM
What is Supply Chain
Management

5. SCM can be further characterized as the design,
planning, execution, control, and monitoring of supply-
chain activities with the following objectives:
•Value Creation: Creating maximum value for its
customers while utilizing the minimum amount of
resources.
•Sustaining Competitive Advantage:
Developing and sustaining a competitive
infrastructure.
•Responding to the market: Market Synchronizing
supply with demand across the supply chain.
•End to end visibility: Effectively measuring end-
to-end supply-chain performance, thus driving
continuous improvement.
• Customer satisfaction
Objectives of Supply Chain
Management
Concept of Measuring Performance
of SCM

6. • Productivity Pressure
• Scarce Resource
• Intensified Competitions
• Blurred industry boundaries
• Rapid change in technologies
etc.
It’s a concept where an organization is made up of NOT
only its employees, owners, board members and
executives but also its partners like suppliers, customers,
even the competitors.
Why the concept of Extended Enterprise is being popular:
• Globalization of Market
Characteristics :
Concept of Extended
Enterprise
Concept of Measuring Performance
of SCM
• Virtual Integrations
• Outsourcing
• Collaborative
Marketing
• R&D Partnerships
• Joint Ventures
• Customer Cares

7. The Vocabulary of
Performance
Concept of Measuring Performance
of SCM
• Performance measurement can be defined as the process of
quantifying the EFFICIENCY and EFFECTIVENESS of past
action.
• A performance measure can be defined as a parameter used
to quantify the efficiency and/or effectiveness of past action.
• A performance metric is the definition of the scope, content
and component parts of a broadly-based performance
measure.
• A performance measurement system enables informed
decisions to be made and actions to be taken because it
quantifies the efficiency and effectiveness of past actions
through the acquisition, collation, sorting, analysis and
interpretation of APPROPRIATE DATA.
Give an Example of
A performance Measure and related Performance Metrics

8. Concept of Measuring Performance
of SCM
Why Measuring Performance is
Important
• Performance management systems provide an effective
framework for management decision-making
• Performance measures facilitate all-directional and
cross- functional, performance-focused
communication
• Performance measures direct the behaviour of the
members of the organisation and supply chain in
pursuit of desired goals
• Effective performance management fosters innovation
and improvement, by encouraging people to identify
and pursue improvement opportunities
• Performance measures help organisations and supply
chains to evaluate their competitive positioning and
capabilities

9. Supply chains are fluid, because of-
• change in supply and demand
• change in customer need
• change in organizational strategy and
structure
• development of science and IT
• globalization
• environmental factors and so on………..
What you cannot
measure, You
cannot manage
Concept of Measuring Performance
of SCM
Why Measuring Performance is Important
in SC

10. Concept of Measuring Performance
of SCM
Why Measuring Performance is
Important
For remain
competitive in the
ever changing
market environment
For
identifying
and
Reduction
of waste
For better
understanding the
operational
process
Ensuring
value
addition
What
MORE?
Encourag
e
innovatio
n
Helps
decision
making

11. Concept of Measuring Performance
of SCM
Measuring Performance is Important
BUT…
in very complicated.
• Operating a performance
measuring system is highly
resource intensive. (Time/
Money/ effort) n
s
e
e
• It me create conflict betwee
business units
• It may be misleading for busines
operations. How?
• Value addition of performanc
measurement my be less than th
operational cost of the same.
• Establishing an appropriate system
M
IND
IT
The game my not
be worth the
candle

12. Concept of Measuring Performance
of SCM
Different Aspects of SC Performance
Measurement
Performance of a supply chain can be measured in the context
of-
• Alignment with Organizational Strategy
• Buyer or sellers’/ suppliers’ perspective
• Operational outcome (product quality, lead time, inventory
etc…….)
• Relationship with the stakeholders
• Social and Environmental impact
• Innovation and improvement
• Customer satisfaction and many more….
What will We
learn in this
course?

13. Indicative Course
Outlines Concept of Measuring Performance of
SCM
Strategic Position of SCM in an
Organization
Understanding
Competitiveness
Models of Markets and their Supply
Chain
Value Chain
Analysis
Achieving Strategic
FIT
Supply Chain Performance
indicators
Supply chain Performance
Categories
Data Collection and
Evaluation
Performance Measurement
Tools
Challenges of measuring performance of
SCM
Concept of Measuring Performance of
SCM Strategic Position of SCM in an
Organization Understanding
Competitiveness
Models of Markets and their Supply
Chain Value Chain Analysis
Achieving Strategic FIT
Supply Chain Performance
indicators Supply chain
Performance Categories Data
Collection and Evaluation
Performance Measurement Tools
Challenges of measuring performance of
SCM

14. • Anything that transforms or information into something the
customer wants
• Value is what the customer is actually willing to pay for
• The utility derived from any action/ activity.
• Value adding activity
• Value for money
• What is not “Valuable?”
The Concept of
VALUE
Value Chain
Analysis

15. Value Chain
Analysis
Porter’s Value
chain

16. Value Chain
Analysis
Porter’s Value
chain
Primary Value
Activities
• Inbound logistics- receiving, storing and disseminating
inputs:
materials handling, warehousing, inventory control etc.
• Operations- transformation of inputs into finished goods or
services.
• Outbound logistics- storing, distributing and delivering the
finished goods to customers.
• Marketing and sales- communication with the customers to
provide a means by which they can purchase the product (as
well as an inducement to do so).
• Service- occur after the point of sale to enhance or maintain
the value of the product for the customer.

17. Value Chain
Analysis
Porter’s Value
chain
Secondary Value Activities
• Firm infrastructure refers to systems and assets for planning,
finance, quality control and management.
• Human resources are all the activities involved in
recruiting, deploying, retaining and developing people in
the organisation.
• Technology development activities relate to both equipment,
systems and methods of work organisation: product design and
improvement of production processes and resource utilisation.
• Procurement is all activities to acquire inputs for primary
activities.

18. Value Chain
Analysis
How SCM can add
value
• By selecting appropriate suppliers they can improve the quality of
inputs, with consequent improvement in the quality of outputs.
• By effective negotiation and tendering they can reduce the cost of
inputs.
• By effective functional management they can reduce the cost of
processing purchase transactions.
• By effective dialogue with user departments they can
improve specifications
• By effective liaison with user departments and suppliers they can
ensure that inputs surplus to requirements are eliminated.
• By effective inventory management they can minimize the
costs of acquiring and holding stock

19. • Waste categories
(Ohno)-
• Transport and
handling
• Inventory
• Motion
• Waiting
• Over-processing
• Over-production
• Defects
• Continuous Improvement: Long-term process of
regular, incremental changes to improve processes and
reduce waste
REDUCED
Lead time
Process
time
Defect
Cos
t
Concept of WASTE/ Continuous Improvement/
Kaizen
IMPROVED
Quality
Sustainabilit
y
Environmen
t

20. Strategic Position of SCM in an
Organization
The vocabulary of
strategy
TERM EXAMPLE
Mission Provide all customers with access to quality products
Vision
(strategic intent)
Provide best value for money in the market, based on
lean and competitive supply
Values Zero waste, cost-focused, value-adding, fair and responsible pricing
Goal Achieve lowest cost responsible supply
Objective Reduce external spend by 30% over five years
Scope Externalise logistics, transport and warehouse management to
specialist outsource providers
Strategic capability
(or competitive
strengths)
Well developed partnership agreements and integration with
suppliers with lean or agile supply capability
Strategies Low-cost country sourcing
Leverage of supply chain relationships for waste and cost reduction
Business model Lean supply, based on a collaborative supply network with
integrated information systems
Ref.
-
1.CIPS ( Chartered Institute for Procurement and Supply)Modules
2
. https://www.linkedin.com/pulse/order-vision-mission-goals-strategies-objectives-tactics-
germaise/

21. Hierarchy of
objectives
Missio
n
Goal
s
Objective
s
Strateg
y
Tactic
s
Operation
al Plan
• Corporate strategies apply to the whole organization.
• Tactical or business level strategies apply to particular
divisions, functions or strategic business units.
• Operational strategies and plans apply to functions
and departments.
Levels of
strategy
Strategic Position of SCM in an
Organization

22. Corporate level
strategy
• The range and diversity (or diversification) of the organisation in terms
of its products and markets
• Corporate growth (by market development, product
development, innovation, horizontal or vertical integration)
• The geographical range of the organisation in terms of its supply
markets, product markets and/or areas of operation
• The scope of the organisation within the value chain
• Changes in organisational structure or culture
• How corporate resources are to be allocated across the activities
and parts (business units) of the organisation
Strategic Position of SCM in an
Organization

23. Business level
strategy
• What products or services the business unit will offer, and in what
markets
• How the business unit will obtain and maintain competitive
advantage or ‘edge’ over competitors
• How the business unit will develop flexibility, innovate,
exploit opportunities and so on
Functional strategy
• Functional specialisms and disciplines are effectively utilised to
deliver strategies
• Activities within each functional area are integrated, and
resources allocated, in order to optimise delivery of
strategies
• Functional objectives are aligned with higher levels of strategy
Strategic Position of SCM in an
Organization

24. CORPORATE
OBJECTIVES
PROCUREMENT AND SUPPLY CHAIN
OBJECTIVES
Maintain and
increase market
share
Provide supplies to match customer needs;
assure quality; reduce delivery lead time;
reduce cost
Improve profits,
cashflow, and return
on capital
Reduce stocks; improve reliability; more
frequent deliveries
Shorten time to market Early supplier involvement; simultaneous engineering
Eliminate non-
core activities
Develop effective make-or-buy policy; integrate
sourcing, procurement and capacity planning
Introduce
continuous
improvement
Optimise the supplier base; partnership and
co- makership approaches; reduce product
complexity; increase accuracy and reliability
Become world
class supplier
Work with suppliers to establish world class
standards; improve flexibility of response to
market conditions; liaison with technological
sources
Strategic Position of SCM in an
Organization
Link between Corporate & SC
Objectives

25. Strategic implications of
SCM
A strategic SCM approach implies the need to develop
strategies for:
• The role and positioning (or repositioning) of an organisation
within the total supply chain
• The configuration of the chain or network, and the
competitive or collaborative nature of the relationships
within it
• The selection of strategic supply chain partners
• Internal and trans-organisational processes for materials and
information flow
• Collaborative and integrative arrangements, where appropriate
Strategic Position of SCM in an
Organization

26. The goals of strategic
SCM
• Reducing non-value-adding (waste) activities
• Reducing total costs throughout the supply chain
• Reducing cycle times
• Improving responsiveness to customer requirements
• Giving access to complementary resources and
capabilities
• Enhancing quality and service
• Improving supply chain communication
• Optimising the balance of service levels and costs
• Greater transparency for cost and risk management
• Greater supply chain visibility
Strategic Position of SCM in an
Organization
Lead
time
vs
Cycle
time

27. Potential problems with
SCM
• SCM requires both internal support and supplier willingness
• there must be sufficient resources and appropriate systems in
place to develop suppliers effectively
• Investment in integrated systems, supplier development and so on
may not be worth the potential gains for a given organisation
• Risks of over-investment in relationship-specific assets,
dependence on a smaller supply base or association with
suppliers
• Network information-sharing may expose the firm to loss of control
over commercial informational, intellectual assets and distinctive
competencies
• It is difficult to measure the effectiveness of (or business case for)
SCM co- operation in meaningful ways
Strategic Position of SCM in an
Organization

28. • Vertical alignment
•ensuring that goals set at every level contribute towards the
overall or higher objectives of the business
• Horizontal alignment
•ensuring that the plans of every unit or activity in an
organisation (or supply chain) are co-ordinated with those of
others, so that they facilitate the flow of value to customers –
and present a consistent, coherent face to the world
Strategic Alignment
of SC
Strategic Position of SCM in an
Organization

29. Gattorna’s strategic alignment
model
Strategic Position of SCM in an
Organization

30. Strategic Position of SCM in an
Organization
Market Analysis and
Testing
Ansoff Matrix

31. Quiz-1
October 20,
2023