Supply chain performance metrics framework

The following list is not intended as a prescription for metrics, it is simply a framework that can be used when considering what to include in the scorecard.  Great care needs to be given to the selection of metrics in terms of their linkage to the overall business strategy.   

Plan

•  Strategic

1. Level of customer perceived value of product.
2. Variances against budget.
3. Order lead time.
4. Information processing cost. 
5. Net profit Vs productivity ratio. 
6. Total cycle time.
7. Total cash flow time. 
8. Product development cycle time.

• Tactical

1. Customer query time. 
2. Product development cycle time
3. Accuracy of forecasting techniques. 
4. Planning process cycle time. 
5. Order entry methods. 
6. Human resource productivity.

•  Operational

1. Order entry methods. 
2. Human resource productivity.

Source

• Tactical 

1. Supplier delivery performance.
2. Supplier leadtime against industry norm. 
3. Supplier pricing against market.
4. Efficiency of purchase order cycle time. 
5. Efficiency of cash flow method. 
6. Supplier booking in procedures.

• Operational

1. Efficiency of purchase order cycle time. 
2. Supplier pricing against market.

Make/Assemble

• Strategic

1. Range of products and services.

• Tactical

1. Percentage of defects. 
2. Cost per operation hour. 
3. Capacity utilization.
4. Utilization of economic order quantity.

• Operational

1. Percentage of Defects. 
2. Cost per operation hour. 
3. Human resource productivity index.

Deliver

• Strategic 

1. Flexibility of service system to meet
   customer needs. 
2. Effectiveness of enterprise distribution planning schedule.

• Tactical

1. Flexibility of service system to meet customer needs.
2. Effectiveness of enterprise distribution planning schedule.
3. Effectiveness of delivery invoice methods.
4. Percentage of finished goods in transit. 
5. Delivery reliability performance.

• Operational

1. Quality of delivered goods. 
2. On time delivery of goods.
3. Effectiveness of delivery invoice methods. 
4. Number of faultless delivery notes invoiced.
5. Percentage of urgent deliveries.
6. Information richness in carrying out delivery. 
7. Delivery reliability performance

Goal congruence: Historical development and next steps

Goal congruence is applied to an organization to ensure that all its operations and activities are aligned to support the organization's goals.  The organization reviews all of its operations and activities to ensure that they do not operate in a way that limits or inhibits the organization's ability to reach its goals.

Management by Objectives (MBO) is a process for defining objectives within an organization so that management and employees agree to the objectives and understand what they need to do in the organization.
MBO was first popularized by Peter Drucker in his 1954 book 'The Practice of Management'. In 1965, George Ordione, published "Management by Objectives; a System of Managerial Leadership" building on Drucker's original thinking.  MBO continued to develop with additional refinements through to the late 1980's.

Advantages derived from MBO

1. Motivation – Involving employees in the whole process of goal setting and increasing employee empowerment.
2. Better communication and Coordination – Frequent reviews and interactions between superiors and subordinates.
3. Managers can ensure that objectives of the subordinates are linked to the organization's objectives.

 The Balanced Scorecard (BSC) in 1987 the concept of BSC was first introduced by Art Schneiderman at Analog Devices.  In 1992 Robert Kaplan and David Norton published "The Balanced Scorecard - Measures that Drive Performance" in the Harvard Business Review.  BSC now began to gain impetus. 

The 1st Generation design method proposed by Kaplan and Norton was based on the use of three non-financial topic areas as prompts to aid the identification of non-financial measures in addition to one looking at Financial. Four "perspectives" were proposed:

• Financial: encourages the identification of a few relevant high-level financial measures. In particular, designers were encouraged to choose measures that helped inform the answer to the question "How do we look to shareholders?"
• Customer: encourages the identification of measures that answer the question "How do customers see us?"
• Internal Business Processes: encourages the identification of measures that answer the question "What must we excel at?"
• Learning and Growth: encourages the identification of measures that answer the question "Can we continue to improve and create value?".

Since the Balanced Scorecard was popularized in the early 1990s, a large number of second generation alternatives to the original 'four box' Balanced Scorecard promoted by Kaplan and Norton have emerged.

Third Generation BSC.  In 2002  I.C. Cobbold and G.J.G Lawrie introduced a paper at the Third International Conference on Performance Measurement and Management. The paper, "The Development of the 3rd Generation Balanced Scorecard" that went on to address the difficulties with 2nd Generation BSC.  Cobbold-Grant concluded that 2nd Generation BSC has advanced the Kaplan-Norton process and, where adopted, performance benefits have been accrued.  Furthermore, 3rd Generation BSC has begun to bridge the strategic and tactical worlds in an organization.

BSC continues to develop and Cobbold-Grant highlight that more work is needed in bridging the strategic/tactical agendas, aligning performance management with performance reporting and understanding the organizational inhibitors preventing BSC adoption.

Thank you for reading this Blog and the Cobbold-Grant paper.  I would be most interested to capture your comments on this subject matter.