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Performance Management.
By : Hemant Kale. 1
What does these Companies Logo
mean to you ?
1. Amazon.com 2. McDonald's
3. Unilever 4. Intel
5. Inditex 6. Cisco
7. H&M 8. Samsung
9. Colgate-Palmolive 10. Nike
11. The Coca-Cola Company 12. Starbucks
13. Wal-Mart Stores 14. 3M
• 15. PepsiCo
• 16. Seagate Technology
• 17. Nestlé
• 18. Lenovo
• 19. Qualcomm
• 20. Kimberly-Clark
• 21. Johnson & Johnson
• 22. L'Oréal
• 23. Cummins
• 24. Toyota Motor
• 25. Home Depot
6
Supply Chain Management: Definition.
7
Supply Chain As Defined & Implemented
8
Supply Chain: Evolution
9
Supply Chain Management : Evolution…
10
Supply Chain Management – Key Functions
Planning Purchasing
Distribution &
Manufacturing
Logistics
11
Supply Chain Management: Domain 1.
Planning
12
Supply Chain : Planning – Domain 1
13
Supply Chain : Planning – Domain 1
Demand
Planner
Factory
Planner
14
Supply Chain : Planning – Domain 1
Coordination
with FG w/h
&Transportation
Distribution Central Supply
Planner Planner
Planner
Inputs to and
Interaction with
Purchasing
Makes
Factory
Manufacturing Plans Planner
and updates daily
15
Progress
Supply Chain : Purchasing –Domain 2
Purchasing / Procurement
16
Supply Chain : Purchasing –Domain 2
17
Supply Chain : Logistics – Domain 3
• This is an important function & are the hands and feet for the
Organization
• They make the product Move , Change Hands , Change Location
• And the hands and feet work towards converting challan and
invoices to cheques and money transfers .
18
Supply Chain : Logistics – Domain 3
19
Supply Chain : Manufacturing – Domain 4
Manufacturing
• What to Measure ?
• When to Measure ? At What Frequency ?
• Who should Measure ?
21
Supply Chain Management: Domain 5
22
Supply Chain Bold Objectives :
Cost Product
Availability Q
Lead
time
Flexibility Service
v/s
Capability
v/s
Reliability
24
Where does Risk in Supply Chain comes from…?
Uncertainty
Capability of
Reliability
People &
Processes In Service
Quality Cost
Variability
in a safe and environment friendly manner
25
Supply Chain Risk…
• To Summarize :
• Risk Co-relates with Failure, Money Loss, Any Deficit to an extend Loss of Life !!
27
Supply Chain Risk…
28
Supply Chain Risk…
• Natural Calamities
• Disaster Management
• Occurrence of fire
• Fire Safety , Fire proof equipment's , Quick Fire Control Mechanisms
• Risk of Theft
• Ensure adequate controls
• Risk of Malpractices
• Audit Controls , Authority Controls , Severe Punishments
30
Supply Chain Risk…
32
Risk Management Process…
Assess
Risk
Risk Control or
Identify
Risk
Management Mitigate
Process Risk
Review
Controls
33
How do you define a Risk ….
• Name it
• Make a risk statement
• List down likely events thus the scope of risk
• Risk classification and its nature on timescale potential
• List down People involved or those who have exposure to this risk – Internally
and Externally
• Measure the Magnitude of the event
• Existing Controls , Desired Controls , Exposure beyond these controls
• Auditing Risk Compliance.
34
Types of Risk…
Occurrence or Likelihood
36
Steps and Principles of Risk Management
• Organization faces very wide range of risk that can impact desired outcome.
• The events that can impact an organization may inhibit :
• What it is seeking to achieve – Hazard Risk
• Enhance that Aim – Opportunity Risk or
• Create uncertainty about outcomes – Control Risk
• Risk Management need to provide an integrated approach to –
• Evaluation / Control & / Monitoring of above three types.
• Risk Management cannot happen in isolation it needs support of organization
• Risk Management Frame work could be : RASP.
• Risk Architecture or Risk reporting structure e.g 26/11 reporting
• Risk Strategy or Over all Risk Management Strategy e.g. A plan in place.
• Risk Protocols or Over all guidelines and procedures e.g. Do’s and Don’t’s 37
Features of Risk….
• Proportionate
• Aligned
• Comprehensive
• Embedded and
• Dynamic
• P A C E D ( PACED)
38
Decisions with Certainty & Uncertainty related with Risk
Matured or
Growth
Established
Potential
Reward
Start of
Decline
Operations
Risk Exposure…
40
Risk Ignorance
41
Risk in Supply Chain…
• All these have only led to Higher and Higher Risks in SC. Thus importance of
Risk Management in Supply Chain.
42
Risk in Supply Chain…
• Due to Integration :
• Due to E Business :
• Due to Globalisation :
• Due to Outsourcing : 44
Risk in Supply Chain…Due to Outsourcing.
48
• HW - Review 41 and 45
49
Identifying and Analysing Risks…
Each Organization decides on what classification suits them the best depending on the exposure and nature .
50
Identifying and Analysing Risks…
• ISO Audit , Process Audit , Systems Audit , Financial Health Audit , Operations
Audit , Safety Audit , Environment Audit ,
• Analysing Operations :
• Its nature – hazardous , non hazardous
• Environmental , Health and Safety Aspect
• Controls & Checks.
51
Identifying and Analysing Risks…
• We have seen that there are 3 styles of Risk Management related to nature of risk
under consideration:
• Namely Hazard , Control and Opportunity Management.
• Hazard will always have a negative outcome with the risk. Thus the maximum
exposure to the risk that is acceptable to the organization is Hazard Tolerance.
• Similarly Control Risk will have costs associated with managing the risk , this is cost
of control acceptance.
• Lastly Opportunity Risk will have a range of possible outcomes – Highly positive or
negative. The resources put behind the Opportunity risk are said as Opportunity
Investment.
• Each of these risks are involved in unique or together in an organization.
• Hazard could be associated with Insurance , while control with audit and
opportunity with strategic planning. 54
Styles of Risk Management:
55
Risk Management Information System - RMIS
• Use of questions and checklist to collect information that will assist with recognition of the risks
Questionnaires and Checklists
• Collection and Sharing of ides at workshops to discuss the events that could impact the objectives ,
Workshops and Brain Storming core processes or key dependencies.
Inspections and Audits • Physical inspection of premises and activities and compliance audits for systems and procedures.
Flow Charts and Dependency • To identify critical components that are key to success or where dependency is very large.
Analysis
• Hazard and Operability Studies and Failure modes effects analysis are quantitative techniques for
HAZOP and FMEA failure analysis.
• Strengths Weaknesses Opportunities and Threats ( SWOT ) and Political ,Economical ,Social ,
SWOT AND PESTLE Analysis Technological , Legal and Environmental analysis.
58
Risk Appetite for an Organization:
Reduced Risk
I Concerned Zone Zone
M Or Risky Zone
P
A Cautious
C Zone
T
Increased
Com Comfort
fort Zone
Zone
59
Likelihood
Risk Classification Systems:
Project Legal
Environmental
61
Detailing PESTLE Classification System :
• Tax Policy, Employment Laws, Environmental Regulations, Trade restrictions, Tariffs , Political Instability or
Political Stability
• Economic Growth /Decline , Interest Rates , Exchange Rates , Inflation , Minimum Wages , Employment ,
Economic Credit Availability, Cost of Living
Sociological • Cultural Norms , Health awareness ,Population growth , age distribution , safety , career attitude
Technological • Technological changes , entry barriers , Investing in Technology or Buying it out , Outsourcing
• 1. Manufacturing Partners
• 2. Logistics Re-engineering
• 3. Process re-design
• 4. BPR – Business Process Re-engineering
• 5. Channel Distribution Management
• To
• Efficient or Effective Supply Chain – KPI monitoring
• Robust Supply Chain- Could absorb changes to an extent
• Sustainable Supply Chain – For the next generation , legacy
• Resilient Supply Chain ??
• We will discuss on last two types in next two sessions. 63
What is this SC Evolution:
• In todays business environment the organizations have formed new networks for sourcing raw
materials , manufacturing products , creating services , or storing and distributing goods – ultimately
to have economical and on time and complete supply of products to customers and consumers.
• This is in short Supply Chain Management and the focus is moving internally as well as externally.
• The organizations today should learn how to balance stake holders interest in a short term mean as a
means to maximizing shareholder value in long term.
• Partnering , Collaborative working , Usage of Advance data systems , Globalization , Regional Hub
manufacturing , Seamless way of doing operations are gaining rapid pace or already have come in to
existence.
• Cutting Barriers that drive costs up and service down are no more to be used.
• Shared thinking and commitment must replace fear , distrust and arrogance if a company expects to
create and maintain an efficient supply chain that dominates its markets. It has to have a cutting
edge.
• Retailing giant Wal- Mart has been working with Warner – Lambert for over two years to improve the
accuracy of sales forecast . Product cycle time for was reduced to six weeks from twelve weeks.
64
What is this SC Evolution: From Costs view point.
• While there is Total cost of making and selling the SC costs are broken down
in to smaller elements and then are focused at :
• While first two levels are internal third and fourth level are external
• Level4- You are a Industry Leader( Top Supply ,Customer & Mgmt Networks
Demand Supply Linkage and quick on time responses , Global Market) 66
Supply Chain Vulnerability
67
67
Creating a Resilient Supply Chain …
• resilient
• adjective
1. (of a substance or object) able to recoil or spring back into shape after
bending, stretching, or being compressed.
2. "a shoe with resilient cushioning“
3. (of a person or animal) able to withstand or recover quickly from
difficult conditions.
• "babies are generally far more resilient than new parents realize"
synonyms:
flexible, pliable, pliant, supple, plastic, elastic, springy, rubbery
69
69
Changing Times & An Uncertain World
• Known knowns
• We know that there exist uncertainties, which we know how to solve
• ‘Known known’
• Knowable Unknowns
• There are some uncertainties which we don’t know how to solve, We may
choose ignore or face it
• Unknowable Unknowns
• However, there are still uncertainties that we don’t know that we don’t know
71
71
Changing Times & An Uncertain World :
72
Supply Chain wicked problems
73
Level 1: Process Engineering & Inventory Management
74
Level 2: Asset & Infrastructure dependencies
75
Level 3: Organization & Inter-Organizational Networks
• Political
• Green movement
• Wars
• Economic
• Social
• Technological
• RISK MANAGEMENT
• Risk avoidance
• Contingency planning
77
Supply Chain Risk Categories or 6 sources OF Risks
CATEGORY RISK
NATURE External Natural disaster, plant fire, disease & epidemics
POLITICAL SYSTEM “ War, terrorism, labor disputes, regulations
COMPETITOR & MARKET “ Price, recession, exchange rate
Demand, customer payment
New technology, obsolescence substitutes
AVAILABLE CAPACITY Internal Capacity cost, supplier bankruptcy
INTERNAL OPERATION “ Forecast inaccuracy, safety
Bullwhip, agility, on-time delivery
Tradeoff: inventory/fill rate
Quality
INFORMATION SYSTEM “ System breakdown
Distorted information
Integration
Viruses/bugs/hackers
78
Specific Risk-mitigation Steps Contextual risks
RISK MITIGATION
Environmental risk & compliance Environment team creation , Audit Committee reporting.
Proactive anticipation of regulations. Lead Free. Asbestos.
Regulation compliance Use of reputable auditors . Even PWC failed in Satyam case.
79
Sustainability in the Supply Chain
80
Sustainability in the Supply Chain
➢ Ecological challenge – Intense global competition for natural resources forcing companies to
improve eco-effectiveness of their supply chains
➢ Social challenge – Organization of your global challenge enables exercise of greater control,
i.e.. Minimum pay or avoidance of child labor
81
Sustainability in the Supply Chain
• People
• Planet
• Profit
• “The movement towards sustainable supply chain management is rooted in
the concept of sustainability…
82
Resilient Supply Chain :
• “Resilience is the ability of a global supply chain to reorganize and deliver its
core function continually, despite the impact of external and or internal
shocks to the system.”
• The design of a resilient supply chain is one that is not vulnerable to risks. This
is generally achieved by normal practices of good logistics management.
• The balancing point here is : How far you can move in direction of a Lean
Supply Chain and keep on removing the slack in the system . The potential
coverages for disruptions has to be methodically considered.
84
Principles of Designing a Resilient Supply Chain :
86
Use of Parallel Paths or Using Alternatives :
Resilience is High
• It reduces Vulnerability and increases Resilience much better than when the
operations are put in one sequence:
• When Reliability is HIGH , Probability of failure is Low.
• Multiple Sourcing :
• Vendor Share and Customer Dependency balancing.
• More Logistics Channels to the customer :
• Regular Distribution
• Direct Selling , E trading , Home Delivery Models , Locational or Mobile
• Outsourcing :
• Could be a back to internal activities
• e.g : HR Payroll , Transport , Catering , Auditing , Packing, Internal Surveys
87
Resilient Supply Chain : A view…
• More than 80% of companies are concerned about supply chain resilience.
Supply chain managers traditionally focus on reducing cost and increasing
reward. As a result organizational standards may not be aligned with building
resilience. Executives are struggling to find a balance between managing risk
and building resilience across organizations. − Public policies can be further
developed to incentivize resilience across supply chain actors. − A blueprint
for resilience offers a practical framework for joint action.
88
Resilient Supply Chain : What If ?
• What happens when fire strikes the manufacturing plant of the sole supplier
for the brake pressure valve used in every Toyota?
• When Dell and Apple chip manufacturers in Taiwan take weeks to recover
from an earthquake?
• When the U.S. Pacific ports are shut down during the Christmas rush?
Stages of Disruption
90
Resilient Supply Chain : Stages of Disruption
1. Preparation In some cases, a company can foresee and prepare for disruption,
minimizing its effects. Warnings range from the 30-minute tornado alert General
Motors Corp. received in Oklahoma on May 8, 2003, to the several months of
deteriorating labor negotiations at West Coast ports that preceded the October
2002 lockout. In other cases, such as 9/11, there is little or no warning.
2. The Disruptive Event The tornado hits, the bomb explodes, a supplier goes out
of business or the union begins a wildcat strike.
3. First Response Whether there’s a physical disruption, a job action or an
information technology disruption, first response is aimed at controlling the
situation, saving or protecting lives, shutting down affected systems and
preventing further damage.
91
Resilient Supply Chain : Stages of Disruption
4.Initial Impact The full impact of some disruptions is felt immediately. Union Carbide Corp.’s chemical plant in
Bhopal, India, went off-line immediately after the gas leak disaster in December 1984. Other disruptions can
take time to affect a company, depending on factors such as the magnitude of the disruption, the available
redundancy, and the inherent resilience of the organization and its supply chain. When inventories of critical
parts ran out during the 2002 West Coast port lockout, it took New United Motor Manufacturing Inc., the joint
venture of General Motors and Toyota, four days to halt production. During the time between the disruptive
event and the full impact, performance usually starts to deteriorate.
5. Full Impact Whether immediate or delayed, once the full impact hits, performance often drops precipitously.
6. Recovery Preparations Preparation for recovery typically start in parallel with the first response and
sometimes even prior to the disruption, if it has been anticipated. They involve qualifying other suppliers and
redirecting suppliers’ resources (as Nokia Corp. did in the aftermath of the 2000 fire in a Royal Philips Electronics
NV manufacturing plant that disrupted its chip supply; finding alternative transportation modes (as NUMMI did
when it used airfreight to get parts during the 2002 West Coast port lockout) and determining what parts are
available and selling products built from those parts (as did Dell Inc. after the 1999 earthquake in Taiwan;(See
“Supply Chain Elements.”)
92
Resilient Supply Chain : Stages of Disruption
7. Recovery To get back to normal operations levels, many companies make up for lost production by
running at higher-than-normal utilization, using overtime as well as suppliers’ and customers’
resources. After the West Coast port lockout, NUMMI made up for its one-week plant closure and
posted record sales by year’s end despite the work stoppage.
8. Long-Term Impact It typically takes time to recover from disruptions, but if customer relationships
are damaged, the impact can be especially long-lasting and difficult to recover from. For example, the
network of small-scale shoe factories in Kobe, Japan, responsible for some 34 million pairs of shoes a
year, lost 90% of its business in the wake of that city’s 1995 earthquake as buyers shifted to other
Asian factories, and most buyers never came back.
93
THE DISRUPTION PROFILE
94
Resilient Supply Chain :
95
Resilient Supply Chain : Stages of Disruption
96
A Vulnerability Map For A Single Company
• An enterprise vulnerability map categorizes the relative likelihood of potential threats to an organization and the
company’s relative resilience to such disruptions. Such maps can then direct management attention and
prioritize the planning.
97
Business Continuity Management :
• Having seen and understood Risk , Risk Management ,Risk Mitigation , Robust
Supply Chain , Sustainable Supply Chain , Resilient Supply Chain and we move
on to understand its need . Why all this is needed ?
98
Business Continuity Management :
• Some risks are unknowable and not possible to predict and plan always.
• Such events come as a total surprise and the organization may be caught
unaware and at a loss to find further direction may be due to impact or
timing. So what do we do ?
• Thus some organizations do take an approach of actually creating that risk.
• Then to measure the disruption or impact or ways to come out of it like
• Transport strike partial or full
• Key supplier failure or closure
• Or in short create emergencies
• Such events may be termed as “ Disaster Management “ or “ Disaster
Recovery” “ Crisis or Emergency Management” but in a more positive way
called as “ Business Continuity Management ” 99
Business Continuity Management :
• Risk Management and BCM are said to be part of each other and are two
sides of same coin .
• It is also said that Risk Management deals with routine planning whereas
BCM does the repairs when planning fails .
100
Business Continuity Management Features:
• BCM focuses on plans that allow organization to continue its operations and
activity or Recover Quickly after a damaging event has happened .
• The features of BCM could be put as :
• Analyse End to End Supply Chain
• Identify risk prone elements
• Quantify the consequences of each
• Design Work plans on what needs to be done on disruption
• How to ensure key process continuity
• Check for trigger points which could create an emergency
• Rehearse these plans or do mock drills
• Do post mortem after the event has happened and normalcy restored to be
better equipped next time. 101
Business Continuity Management :
• Ensure Physical safety of employees , visitors , customers and all associated with
the operations i.e ensure health, safety and welfare of all stakeholders
• Protection of Business facilities and assets. This will ensure resources for quick
recovery.
• Implement those procedures for returning to a minimum acceptable level of
service.
• Having restored normalcy internally work on external partners in supply chain
• Lastly restore full operations in a timely and cost effective way.
103
Business Continuity Management :
• But
105
Performance Measurement – Supply Chain
• Why to Measure ??
• To Progress
• To Benchmark
• To Meet Customers Expectations
• To Enhance SC capability
• To Enhance Asset Performance
• To Keep Mind , Body , Soul and Intellect progressing
• To continue creating value for :
• The Product , Employees , Employer , Shareholders and Stakeholders
106
Performance Measurement – Supply Chain
107
Performance Measurement – Supply Chain
• Goals • Measures
• Goals • Measures
110
Customer Metrics :
• Goals • Measures
111
Supply Chain Management: Domain 5
112
Performance Measurement – Supply Chain
• Service Metrics:
• how you meet customer needs
• Inventory Metrics:
• how much inventory you have
• Time / Speed / Flexibility Metrics:
• how quickly can you respond to new developments
• Financial Metrics:
• how supply chain management affects your bottom line
113
Aligning Metrics and Business Strategy
(Value Proposition)
"How can we ensure that customers will continue to buy from us?"
114
The table below shows some traditional metrics,
or performance measures, for three functional areas of a typical organization:
115
Customer service Metrics or Order Fill Rate:
Suppose we set inventory levels so that on average we maintain a 95% Line Item Fill Rate and
suppose there are 14 line items on a typical order. Then what is the probability that a typical order
will be filled completely, without delay?
• Looking at our average 95% line item fill rates, if we had only two lines on an order, then the
probability the first item is in stock is 95%, and the probability the second item is in stock is also
95%. To fill the total order we need to multiply these probabilities:
Probability of complete order fill for 2-line order = .95 * .95 = 0.9025 or 90.25%.
Probability of complete order fill for 14-line order = (0.95)14 = 0.4877 or 48.77%.
The probability of complete order fill for a 14-line order is below 50%! The figure below
shows the order fill rate corresponding to a 95% line item fill rate, based on the number of
items in the order:
116
This figure should convince you that if there are a large number of items
on a single customer order, then the chances are good that it won't be
filled completely...
117
Cash Cycle :
Our final "speed" metric is the so-called cash-to-cash cycle, or cash conversion cycle.
Here we try to approximate the average time between a company's outlay for materials and
labor to build a product and the moment the company gets paid for selling the product.
118
Cash to Cash Cycle :
Recall days of supply of inventory ("days of inventory") from the prior discussion of inventory
metrics; this is the average time inventory waits in a warehouse.
• Accounts receivable is the number of days it takes to collect payment from your customers, an
• Accounts payable is how long you wait to pay your suppliers.
For example:
if a company had 45 days of inventory, and its accounts receivable were 30 days and
its accounts payable were 35 days, then the calculation would be:
In this case your cash-to-cash cycle is 40 days from the moment you pay for raw materials to
the time you get paid from customers...
119
Presentation’s: 18.3.17, 10 min each + Q&A , Total marks 20
• 1. Radhyesham – Principles of Designing a Resilient SC and its physical features (118)
• 2. Tanush – Main features and differences in robust SC at FMCG,AUTO and Retail (28)
• 3. Tejaswini – Supply Chain Management define and explain roles of key Function domains ( 83 )
• 4. Harshal T – Present Uncertainty , Variability , Capability and Reliability in SC Context ( 57 )
• 5. Harshal D – Define Risk and present all types , ,categories , and classifications of risks with e.g ( 9 )
• 6. Karan – Explain Risk Management process its principles and features ( 5 )
• 7. Dipesh – Explain with examples at least top 6 SC risks in different functions and possible mitigations. ( 81)
• 8. Suhas – Present LILAC as risk aware culture in organization and assessment techniques as per FDIS ( 42 )
• 9. Akshaj – What is BCM and its features ( 9 )
• 10. Umesh – Explain areas of SC measurements in purchase , manufacturing , logistics and distribution with eamples ( 84 )
• 11. Roshani – Explain 7 R and 4 T ( 36 )
• 12. Akshay – Identifying and Analysing risks from past events ( 20 )
• 13. Baruna – Explain with examples Effective, Robust, Sustainable, and Resilient SC with features ( 32 )
• 14. Rohan - BCM its importance and features ( 96 )
• 15. Udit – Demand Planning to Demand Fulfilment complete process( 67 )
• 16. Sandeep – Importance of Order fill rate and cash cycle ( 77 )
• 17. Prassana - Risk of Demonitisation on SCM ( 13 )
• 18. Nachiket – SCM Risks Cost v/s New Technology in 2020 ( 26 )
• 19. Harshad - Risks in Planning and Purchasing Domains of SCM ( 53 )
• 20. Giriraj – Actual Risks in own business and its mitigation.( 54 ) 120
Internal Presentation Marks MMS – Semester II 18.3.17
121
Internal Presentation Marks MMS – Semester II 18.3.17
122
Traditional Approaches to Performance Measurement:
• Quality :
• 1. Incoming Quality check of RM , PM , Consumables , Services
• 2. In storage Quality Checks
• 3. In formulation checks
• 4. On line Quality checks
• 5. FG quality checks
• 6. Batch wise checks
• 7. Record sample checks
• 8. In market Quality checks / Customer visits
• 9. Competitive Product Quality Checks
• 10. Reporting , Analysing and Upgrading 124
Traditional Approaches to Performance Measurement:
• Customer Service :
• 1.What is needed and what is offered
• 2. Fill Rate , Cycle Time .
• 3. On Time and Complete
• 4. Product Specifications - Of the right specifications
• 5. Meeting desired Quality
• 6. With proper instructions and How to use , assemble , display , maintain
• 7. SOP’s
• 8. Pre Sale – During Sale and – Post Sale guidance.
• 9. Flexibility and Openness
• 10. Feedback loop . 125
Traditional Approaches to Performance Measurement:
• Cost :
• 1. Lowest is the Best. Very Basic Approach. Finance and Audit view discuss.
• 2. Always focus is on Cost savings or Cost cutting
• 3. Cost per Unit , Cost per Piece , Cost of Labour , Cost of Power , Cost of
Conversion , Cost of Transporting ,Cost of Holding , Inventory Cost ,
Opportunity Cost , Cost of Losses , Cost of Rejection , Cost of Promotion , Cost
of Sales , ….
• 4. Costs are always expressed as positive or negative variances.
• 5. Costs are incurred , it’s a spend , Capex Invested , Interest Accrued.
126
Performance Measurement: On Going Changes….
127
Performance Measurement: Score Card concept…
• Supply Chain Balanced Scorecard (SCBS) In 1992, Kaplan and Norton (1992)
introduced the Balanced Scorecard (BSC) as an in dispensable performance
management tool. Since then, it has been recognized as the leading tool for
performance measurement in both research and industry.
• It enables managers to observe a balanced view of both operational and
financial measures at a glance. The authors proposed four basic perspectives
that managers should monitor as follows:
• Financial, Customer, Internal Business Processes and Innovation and Learning
perspectives.
• Managers can translate strategies into specific measures that can monitor the
overall impact of a strategy on the enterprise.
128
Performance Measurement: SCOR
• Supply Chain Operations Reference Model (SCOR) SCOR model was created
by the Supply Chain Council (Stephens, 2001; Huang et al., 2004; Lockamy and
McCormack, 2004).
• The first version was developed in 1996. It is a framework for examining the
supply chain in detail through defining and categorizing the processes that
make up the chain, assigning metrics to such processes and reviewing
comparable benchmarks.
• The SCOR model framework is the only integrated cross functional framework
that links performance measures, best practices and software requirements
to a detailed business process model.
129
Performance Measurement: SCOR
• The SCOR model defines a supply chain as being composed of five main
integrated processes:
• Plan, Source, Make, Deliver and Return.
• Performance of most processes is measured from 5 perspectives:
• Reliability, Responsiveness, Flexibility, Cost and Asset.
• As the model spans the chain from supplier’s supplier to customer’s customer
aligned with operational strategy, material, work and information flows, it is
considered an exhaustive system that requires a well defined infrastructure,
fully dedicated managerial resources and continuous business process re-
engineering to align the business with best practices.
130
131
World Class Manufacturing:
• Japanese started upon it and today the world follows it with best suited
methodologies.
133
World Class Manufacturing:
135
World Class Manufacturing:
136
World class Performance Measurements :
Manufacturing…
• Percentage of quality rejects , in coming , in process stage wise and final check.
• Forecast Accuracy
• Total Inventory Level – Raw , Packing , WIP, Consumables , Finished Goods , Rejected.
• Inventory turns
• Inventory days of supply
• Production to schedule AS PER PLAN.
• Delivery to schedule (procurement) - Service Levels
• Delivery to Schedule ( finished goods ) – FG servicing by SC to Sales
• Exception Messages , Changes , Deviations , Amendments , Corrections
• Capacity Utilization
• Overall Financial margin
• Comparison to budget , Variance with Budget
• Cost of goods sold
• Customer Service , Customer Satisfaction 137
World class Performance Measurements : Organization
• Profits
• Growth
• Market Share
• Customer Satisfaction
138
European Foundation for Quality Model – EFQM.
140
8 Fundamental Concepts of Excellence of EFQM Model:
141
Organizational Excellence: EFQM
142
Organizational Excellence: EFQM 8 Concepts
The Fundamental Concepts of Excellence form the basis for the criteria of the EFQM Excellence Model.
144
Supply Chain Risks and Performance Management :
145