Defining Metrics for Supply Chain Performance

[The assistant]

Hello all,

First post with a couple of very easy question:


1. Who or which parties decide or define the Metrics for a Supply Chain (objective is to measure/evaluate its performance)?

2. Who should be involved when deciding the metrics for the SC?

3. Is it possible/enough to measure the performance of a supply chain without taking into count the performance of such functions as Marketing and Sales, Finance, R&D etc? OR the business environment such as competitors?

4. Are the supply chain metrics (for performance evaluation) static and if not, who defines the supply chain metrics AND who are the parties that eventually answer to the question "is the supply chain performing "good" or "average" or "bad""?

I would like to talk about SCM and not just Logistics Management.

[Starbucks Junkie]

Hello all,

First post with a couple of very easy question:


1. Who or which parties decide or define the Metrics for a Supply Chain (objective is to measure/evaluate its performance)?

2. Who should be involved when deciding the metrics for the SC?

3. Is it possible/enough to measure the performance of a supply chain without taking into count the performance of such functions as Marketing and Sales, Finance, R&D etc? OR the business environment such as competitors?

4. Are the supply chain metrics (for performance evaluation) static and if not, who defines the supply chain metrics AND who are the parties that eventually answer to the question "is the supply chain performing "good" or "average" or "bad""?

I would like to talk about SCM and not just Logistics Management.

Welcome to the forum,

I would suggest that you interact a little with some of the members first rather than simply posting a question onto this forum..

For instance tell us a little bit about yourself and the relevance of the questions you are asking.

SJ

[The assistant]

Welcome to the forum,

I would suggest that you interact a little with some of the members first rather than simply posting a question onto this forum..

For instance tell us a little bit about yourself and the relevance of the questions you are asking.

SJ

If you are my customer and these are all your requirements, I will answer because I am able to fulfill your demands and I hope that in turn for answering your questions I will have some benefit.

At the moment, I am a PhD student with some work experience in sales, logistics, project materials management, production and ERP systems. To be exact my area of interest at the moment is "the performance of SCs" and thus those questions.

Those questions are relevant not only to my PhD, but I think for SCM research and practionners in general. I do enjoy a bit of philosophical discussion as well.

So, if you decide that the supply chain metrics for your SC are A, B and C, then what if you are wrong and these metrics are not important to your customers OR if your suppliers do not care about performing according to your SC metrics then what can you do if you are not "the man" of the SC?

So if SCM is about designing, implementing and maintaining an efficient and effective SC in strategic, tactical and operational levels, then who should you involve in the process of defining and redefining the metrics for this SC and how to manage the performance measurement system in order to have up-to-date metrics at all levels and all times?

If we let logistics people to define the metrics for a SC then that's what we'll get - logistics metrics. If we let finance people to define metrics for a SC then we'll get financial metrics and what did Kaplan and Norton tell us about this?

Let's say that our SC is perfect in terms of flows of materials, information and finances, but there are no customers for the products and services it produces then what is the performance of this SC - is it "good", "average" or "poor"? Vice versa if our metrics tells us that we are doing shyte, but the customers are completely satisfied and even the maximum shareholder value is reached - then what is the performance of this SC?

[Starbucks Junkie]

Your questions are not easy to answer by giving short responses...

In answer to who should be defining the metrics I think the questions should be How should the Metrics be defined.

In my experience I have always worked from the Customer upwards, what does the Customer want, and how can Supply Chain provide that, by answering that at each step you can define your metrics that will have the biggest impact to the customer.

[The assistant]

In answer to who should be defining the metrics I think the questions should be How should the Metrics be defined.

Thanks for the reply.

Yes - How and by Who (as the definition is done by people...and people make mistakes)?

How:
"How to transform current and future customer needs into current and future SC metrics that will enable short and long term profit maximisation?"

Who:
"Should one or more or all of the following parties be involved when defining or analysing SC metrics?
1. Customers
2. Customers' Customers
3. Suppliers
4. Suppliers' Suppliers
5. IT Partners
6. 3PL
7. ?

In my experience I have always worked from the Customer upwards, what does the Customer want, and how can Supply Chain provide that, by answering that at each step you can define your metrics that will have the biggest impact to the customer.

This is something that seems to be obvious for the practitioners (real business people). However, according to a literature review published in 2009 about 75% of the publications by researchers are concentrated on total costs and minimizing them. 16% have something about profit maximization and 9% take into count other stuff like resource utilization and customer satisfaction. I guess here is the gap between theory and real world.

Have you utilised SCOR or Balanced Scorecard or similar "proven tool".?

Metrics for Strategic, Tactical or Operational levels or all?

[Prabhu]

Hi,

All the best strategies are not suitable for all the Companies.

1. In my view, the good metrics are those with target to know when to take action and what level of action to take and also that are productive, indicating where the company will be rather than where it has been. In addition, metrics should be closely focused on time, quality and money.
   
2. The ideas can also be arise from any level of workforce and value chain.
   
3. It is vague to measure the performance of Supply Chain by leaving out any of the linked functions. At the same time the work and target must be clearly partitioned, and simultaneously considered to contribute towards the overall goal.
   
4. It shall be good, if metrics are renovated after every accomplishment. Overall performance can be measured by integrating the accomplishment level of each and every metrics.

-Prabhu

[Bob R]

The Supply-Chain Council is a consortium of companies that was established specifically for this purpose: to develop common metrics and a standardized methodology for supply chain improvement projects.
The methodology is called the SCOR (Supply Chain Operations Reference) model, which you can find easily by Googling.
It's not simple; it takes some education to use. But it's all about defining the right metrics for your company and then using them to improve.

Part of the beauty of it is that it's been used and repeated often, which helps on achieving buy-in within your company.

[PatriciaGuarnieri]

Hi,

To define metrics the company must consider the customers requirements and try to align these requirements with its business strategy, this kind of strategic decisions requires careful analysis of managers from high level in the company.

The SCOR model is adopted by many companies. To know more about SCOR model, you can read these books:

- Application of the SCOR Model in Supply Chain Management (Hardcover)
Rolf G. Poluha (Author);
- Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model (Hardcover)
Peter Bolstorff (Author)

You can find it at Amazon website.

Regards,

Patricia

[Bob R]

Patricia,
Thanks for mentioning Supply Chain Excellence. I co-authored that with Peter Bolstorff (though he's got all the technical knowledge).

just can't help tooting my own horn here, since it's not the kind of book my mother would read or that would lead her to brag about her author son.
If it's not too over the top, here's a link to it:

Amazon.com: Supply Chain Excellence: A Handbook for Dramatic Improvement Using the SCOR Model (9780814409268): Peter Bolstorff, Robert Rosenbaum: Books

[PatriciaGuarnieri]

Hi Bob,

It's great to know about that and find you in Supply Chain Focus. I ordered this book to few days and when I looked inside of the book at Amazon, I liked very much.
Could I contact you to discuss about the book?
I will use this book to compose part of my PhD thesis, about collaboration in SCM.

Regards,

Patricia