Supply Chain Management

Since many decades, Supply chain management has proven to be a major component of organizational competitive strategy to enhance the productivity and profitability, but not until recently the need of a robust and comprehensive supply chain performance management system has been recognized. Supply chain management is a very critical success factor for any organization today because it affects the strategic and tactical decisions and also the operations planning and control. The Supply chain Performance measurement and metrics play an important role in setting objectives, evaluating performance, benchmarking and baselining the processes and determining the future courses of action for the supply chain and in turn the organization. Hence their importance in the overall organizational cycle cant be undermined. It is said that You cannot improve what you cannot measure. Measuring the performance of underlying activities and components is the first step in the decision making process. Hence, a proper performance measurement system needs to be in place so that organizational goals and achievement of those goals can be measured, thus allowing the effectiveness of the strategy and techniques employed to be assessed. Earlier, when the organizational philosophy used to be Supply creates its own demand, the focus of the organization understandably was on mass production. Even the performance measurement also used to be focused on mainly cost and profitability parameters. But as the supply chain theory evolved, people started talking about end consumer needs, customer satisfaction, process integration to create better responsiveness etc., the need for other comprehensive measures arose. Organizations started realizing the importance of both financial and non-financial measures in balanced manner. Then came, the balanced scorecard theory proposed by Kaplan and Norton (1992) which emphasized the need of performance measurement along four broad areas i.e. the financial perspective, the Customer perspective, the internal business process perspective and the learning and growth perspective. It holds true for the supply chain performance measurement as well, where the focus was earlier on only operational efficiency and effectiveness, but today the perspective of other stakeholders like customers are equally important to be included. In this report, we will explore the various options and will define a comprehensive framework for the performance of a supply chain.

Performance Measurement and Metrics in Supply Chain Management

To design a comprehensive measurement system, the metrics that are used in performance measurement must truly capture the essence of the supply chain performance. The measurement system should facilitate the assignment of metrics to where they would be most appropriate. For effective performance measurement and continuous improvement, measurement goals must be in synergy with the overall organisational goals and metrics selected should not be unidimensional but should reflect a reasonable balance between financial and non-financial measures that can be related to strategic, tactical and operational levels of decision making and control. In general, the metrics must be able to:

Define the current state of organization/supply chain from the perspectives of all the stakeholders Provide feedback to facilitate continuous improvement Facilitate the performance trend analysis by tracking the metrics Allow the organization to fix accountability and devise a incentive system based on the real data and not subjective judgements and conjectures. Allow baselining and benchmarking and also scalability