This document discusses approaches to measuring performance in supply chain management. It outlines traditional measures like productivity, quality, customer service, and costs. It also describes a contemporary analytical framework for measurement that facilitates root cause analysis and process improvement. Specific tools discussed for performance measurement include the balanced scorecard, activity-based management and costing, economic value added, and the Supply Chain Operations Reference model. The overall goal of performance measurement in supply chain management is to track operational KPIs, identify opportunities for increased efficiency, and enable benchmarking against industry standards.

1. PERFORMANCE MEASUREMENT AND
TOOLS
Presented by
Jilsiya a
Saranya raj c v

2. OBJECTIVES
 There are number of operational aspects of supply chain, such
as movement of goods, storage efficiency, facility operations,
inventory parameters, supplier efficiency, and so on. There is
a need to track performance against operating plans and to
identify opportunities for enhanced efficiency and
effectiveness.
 Supply chain management involves a number of inward
facing activities as well as outward facing activities. The
internal and external categorization make it easier to measure
and analyse functions, and addresses issues for improvements.
 Supply chain performance measurement system must
facilitate benchmarking across peers, best of the industry, and
across industries. Temporal benchmarking would also help in
constantly striving for improvements.

3.  It must be consolidate and not focus on isolated issues of
logistic drivers. This is were the contemporary approach
to performance management as viewed by management
accountants is helpful.

4. APPROACHES TO PERFORMANCE MEASURES
1) Traditional approach
It consists of
a) Productivity measures
It is measured as a ratio of output to input. The output
can be measured by way of the amount of revenue earned and
the volume of goods produced. Inputs could be the factors of
production like man-hours, number of persons employed, cost
of labour, capital employed and so on. To measure
productivity, one should first define the time window and unit
of measurement.
Some commonly used productivity measures in supply
chain include:

5.  Units shipped per employees
Employee productivity is one of the key measures as it
captures employee efficiency and effective span of operation.
 Units to labour costs
Employee cost efficiency could be an important factor. The
difference between productivity per employee and employee
cost efficiency is that while the former is the number of units
produced or served per employee, the latter is a measure of
productivity vis-a vis employee costs which include
salaries, rentals, and running costs.
 Equipment downtime
It refers to the loss of time due to machinery breakdown or
the failure of a component. This could critically effect supply
chain productivity both directly and indirectly.

6.  Capacity utilization
The importance of measuring and controlling capacity
utilization, which directly effects the speed of response to
customers demands. Hence, by measuring capacity, gains in
flexibility, lead-time, and deliverability will be achieved.
 Order per sales person
A supply chain manager coordinate between the sales team
and operations team for planning and scheduling the
production function.
 Oder entry efficiency
This is a measure of both productivity and quality. Order
entry efficiency measures the ability to capture a customer
order quality and delight the customer on order capture.

7. b) Quality measures
A quality indicator refers to an attribute of a logistical
or cross-functional driver that can be used to gauge the
quality of supply chain performance in a specific area. A
quality measures is in effect a rule that assigns numeric
values to a specific quality indicator. The essential
distinction between quality indicators and quality measures
is that quality measures take on numeric values, while
quality indicators refer only to unquantified attributes of the
supply chain function.
Some of the commonly used quality measures in
supply chain are as follows.
 Number of faultless notes invoiced
An invoice shows the delivery date, time, and the
condition under which goods are received. This is also
referred to as document/ invoice accuracy. By comparing
these with the previous agreement, it can be determined
whether a perfect delivery has taken place or not.

8.  Order entry accuracy
This is an important measure for order management at the
warehouse level. With increased automation, this error is being
addressed largely. Yet the scope of order entry error is high because of
manual feed and improper understanding of product features. A wrong
order entry triggers a whole range of unwanted activities across the
supply chain.
 Picking/ shipping accuracy
It refers to the number of orders that are picked accurately as per
order fill requirement. This is important because picking accuracy
captures the service level at picking activity level. This can be
commonly seen in component stores and warehouses, pharmaceutical
stores, and finished goods warehouses were customer order needs to be
picked for delivery.
 Number of customer returns
Number of customer returns as a quality measure is important from the
perspective of customer acceptance of products and dispatch efficiency,
ie, the product is delivered without being damaged.

9.  Damaged frequency
This is a related measure of quality. Damages can occur while
at manufacture, warehousing, transportation, and in delivery
process. Any supply chain manager would focus on achieving
zero damages. One of the cases where this kind of measure can
be critical is where customer requirement is unique and customer
service is hampered for want of proper care.
 Information availability
Supply chain partners such as suppliers, after completing their
physical flow, wait for financial flow and keenly track
information on financial transaction. Hence it is a critical quality
measure which a focal organisation must provide to its stake
holders.

10. C) customer service measures
customer service measures are some of the critical performance
measures of supply chain effectiveness. A supply chain network is
organised for serving an ultimate customer and hence measures
around availability, reliability, and operating parameters towards
customer needs would be important to understand supply chain
effectiveness.
 Order lead time
The total order cycle time, which is also called ‘order lead time’,
refers to the time that elapses between the receipt of the
customer’s order and the delivery of the goods.
 The customer order path
The path that the orders traverse is yet another important measures
where by the time spend in different routes and non-value adding
activities can be identify and suitable steps can be taken to
eliminate them.

11.  The order entry method
it determines the way and the extent to which the customer
specification are converted in to useful information, and
are passed down along the supply chain. Such
information connects all levels of supply chain and
effects the scheduling of all activities.
 The customer query time
It refers to the time it takes for a firm to respond to a
customer inquiry which the requierd information

12. d) Cost measures
The most important efficiency measure is the cost factor as
it is direct and simple to calculate and easy to interpret.
 Total inventory costs
In a supply chain, the total cost associated with the
inventory consist of following
• Opportunity cost consisting of warehousing, capital and
storage
• Cost associated with inventory as incoming stock
level, working progress
• Cost held up as finished goods in transit
• Cost associated with scrap and re work

13.  Total distribution cost
It include:
 Inbound cost to regional distribution centres and any
stock point
 Outbound cost from a distribution centre to the next
stage and from every stage to the ultimate customer
 Cost of managing regional distribution centres, which
will include wages and salaries, rent, insurance and so
on.
 stock holding cost, which is inventory holding cost.

14.  Finance and logistics cost
The financial performance of a supply chain can be
assist by determining total logistic cost. Since logistic cut
across functional boundaries, care must be taken during
decision-making as the cost in one area effects the cost in
other areas.
 Asset measure
Supply chain asset include plant, equipments, and
current assets such as account receivable and inventories. It
is common that firms do their best to make the most of
capital assets they have deployed in business.

15. 2) Contemporary approach
The contemporary supply chain measurement approach
must have three capabilities:
An analytical framework; a process orientation; and linkages.
The measurement must facilitate rout cause analysis, suggest
approach for improvement areas, and monitor action
implemented for validation of corrective actions.
 Analytical framework
A frame work is one which brings structure to an analysis
and would work if certain fundamentals are well laid out. This
include
 Explicit statement of supply chain objectives.
 Identification of key metrics that effect the objectives.
 The description, targets, and acceptable range for each metric.
 List of reports were the metric can be found.

16.  Process orientation
as supply chain management has deep-rooted process
orientation, performance measurement system must capture
the same. Also, since supply chain management cuts across
function, it is important to capture these inter-relations. When
there is a delink among departments, there is a tendency to
observe local optimization at the cost of overall process
orientation. Typically, a supply chain analyst must enable all
round process-based metrics with a focus on current and
future requirements.
 Linkages
An ideal system should use the analytical framework to define
linkages between two metrics that are related to business
process but associated with different departments. In
addition, the system should be able to show linkages of any
metric with different hierarchies with in the same department.

17. TOOLS OF PERFORMANCE MEASUREMENT
 Balance score card
It is a strategic planning and management system that
is used extensively to align business activities to the
vision strategy of the organization, improve internal and
external factors, and monitor organization performance
against strategic goals. A true balanced score card must
include metrics that provide both historical and future
insights.
 Activity-based management and costing(ABC)
it is a costing model that identifies activities in an
organization and assigns the cost of each activity
resource to all products and services according to the
actual consumption by each product. It assign indirect
costs into direct costs.

18.  Economic Value added(EVA)
it is an estimate of true economic profit after making corrective
adjustments to accounting provisions and charges on
capital, including deducting the opportunity cost of equity
capital. EVA can be measured as Net Operating Profit After
Taxes less the money cost of capital. This can be applied to
supply chain function and asset.
 Process driven metrics-Score frame work
The supply-chain operations refers-model is a process reference
model that has been developed and endorsed by the supply-chain
council as the cross-industry standard diagnostic tool or supply
chain management. It is a process reference model for supply
chain management, spanning from the supplier’s supplier to the
customer’s customer. The score model has been developed to
describe the business activities associated with all faces of
satisfying a customers demand.

19. THANK YOU