Question

Discuss performance measurement systems that are used by different parts of the supply chain. Which one do you believe is the most effective/accurate? Why or Why not?

Answer 1

We can measure the supply chain performance as a approach for performance review of the supply chain system and these can be classified into two categories-:

1)Quantitative Measures

2)Qualitative Measures

Let us discuss both of this features one by one-:

QUANTITATIVE MEASURES

This can include the following responsive time in supply chain,delivery time ,how the resources are utilised.

You may find that most of the measures for performing can be similar to each other but the aim and agenda behind every objective is different.This helps the company to measure performance and cross check all the track performance in all fields and this can also be classified into two measures-:Financial and Non-Financial Measures

1)Cycle time-This comes in non-financial measures and also known as lead time and this helps to tell about the delays in the business process.Such as order-to-delivery helps to determine the delay in time in the middle processes of order needs to be delivered to the customer as if item the item need to get produced as per the demand of the customer it would be sum of lead time+manufacturing lead time+distribution lead time.

2)Customer Service level

Order Fill Rate-This is the part of consumer order which can get done by the items already available in the stock and for this type there is no requirement for considering supplier lead time and the manufacturing lead time.

Stockout Rate-This is the opposite of what we have learned in order fill rate as it refers to mark the orders lost by company due to out of stock.

Backorder Level-This measure is used to keep track of total number of orders awaiting to be fulfilled.

3)Inventory Levels

As we know that this increases the costs very much but it is very necessary to carry a sufficient amount of inventory to meet and complete customer demands as you don't know the situation in the market that can occur.So, in supply chain system this can be divided into four points to get understood-:

Raw materials-Every company should have significant amount of raw materials with them as anytime, any of raw material can be out of market due reason and you should have backup to meet demands of customers.

Work-in-process-Company should maintain proper inventory for unfinished and 50% finished goods.

Finished goods inventory-Every company should have proper inventory for the products as anytime there can be demand of their products in the market and helps to meets all the demands.

Spare Parts-Companies should have all necessary spare parts for the machines and all to use them in anytime in any emergency situation to repair machine quickly.

Financial Measures

This can be linked to all operational costs in the supply chain and the aim is to keep track of all financials and maximize the revenue.Financial Performance is tracked by many items such as-:

Cost of raw materials,costs of transportation of goods,cost for the expired products,penalties for late orders,all costs linked to manufacturing,assembling etc , cost of products returned by customers and many more.

QUALITATIVE MEASURES

This include all the measures to be take about the satisfaction of the customers and about the quality of the product.This do not play big role in supply chain performance as Quantitative which we have discussed above.

From my point of view Inventory levels in Qualitative are very important as it is important to maintain all types of inventory for every kind of situation and meets the customer demands and keep the operations smooth and this also helps to maintain good system of efficiency.