Professional Documents
Culture Documents
Management
Metrics
UNIT 1 LECTURE 7 &8
Performance Management
Traditionally, performance management has been developed as
a basis for monitoring and controlling an organization
But these have been primarily based on financial ratios like ROI,
EPS and ROA
While these are value based , they are lagging indicators, and
do not provide help for planning future investments nor provide
clues for performance improvement
They solely concentrate on minimizing costs and increasing
labor efficiency but neglecting operational performance
measures like quality, on time and full delivery amongst others
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Performance Measures-Logistics
Freight costs per unit weight/unit volume
Warehousing costs per unit of throughput
Logistical packaging costs per unit product/volume/weight
Labor cost per product/weight /volume
Logistics assets utilization
Logistics productivity performance
Logistics cycle time performance
Reverse logistics related costs/returns/damaged stocks
All such costs to be finally measured as percent of sales and per unit
volume and per unit weight
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Measurement Approaches
Supply Chain Councils Supply Chain Operations Reference (SCOR) Process
Reference Model examining cost, assets, reliability and flexibility metrics
Balance Scorecard- assessment based on financial, customer, internal
business & learning/growth perspectives
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SCOR Model
- 5 Core Management Processes
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SCOR Model
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Level 2:
Configure Supply-Chain
Processes and
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-internal facing(1)
Cost
-internal facing
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Delivery performance
Order fulfillment performance-fill rate, fulfillment lead
time
Perfect order fulfillment
Flexibility
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Unit of
Median
Measureme Class
nt
Percentage 81%
Best in
Class
Number of
days
42.0
8.3
Number of
days
66.6
24.7
96%
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Unit of
measurement
Median
Class
Best in
Class
Consumer
packaged goods
SCM cost % to
Revenue
11.2
5.3
Chemical and
Pharmaceuticals
SCM cost % to
Revenue
9.8
4.0
Telecom
Equipment
SCM cost % to
Revenue
8.5
3.3
Defense and
industrial
SCM cost % to
Revenue
10.2
4.5
Computers and
Electronics
SCM cost % to
Revenue
9.1
4.0
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SCOR Model-Benefits
It aligns improvement efforts with the supply chain ,
and not the organization
It provides a comprehensive analysis of the supply
chain focusing on the customer as the end point
It enables selection of SCM improvement projects
which will have maximum impact on the firms
strategic objectives
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SCOR Model-limitations
Does not cover :
Sales and marketing development
R& D
Product development
Elements of post-delivery customer support
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Since these above measures can be many and will vary from to
firm, the key is to strike a balance amongst all of them to truly
reflect and measure what are the particular firms Key Success
Factors or Key Performance Indicators
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Customer
Relations
To achieve our vision
how should we appear
to our customers?
VISION AND
STRATEGY
Internal Service
Process
To satisfy our shareholders
and our customers that
what business processes
we must excel
Learning,
Innovation and
Growth
To achieve our vision
how will we sustain our
ability to change and improve ?
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BSC triangle
Desired state
Mission
Vision
Differentiating activities
Strategy/Goals
Objectives
In each perspective
Measures
In each perspective
success is
measured
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Financial Perspective
What financial steps are necessary to ensure the execution of
our strategy/goals?
Are the programs/ departments goals, implementation, and
execution contributing to the bottom line?
Are we meeting operational and financial targets?
Dimensions of Quality:
Efficiency
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Competence
Participation
Involvement and commitment
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