PRESENTED BY ANIL VERMA MANOJ KUMAR PRADEEP KUMAR

“ THE THING CAN’T BE MEASURE CAN’T BE IMPROVED.”

Measurements to directly controlling behaviour and indirectly to performance Keeping a company towards achieving its supply chain improvement objectives Picking the wrong measures and leaving out important ones could lead to S.C. performance degradation. Driving a supply chain based only on after- the-fact measures, like losing an important customer or having poor financial performance is not very effective

Balanced Scorecard The Supply Chain Council’s SCOR Model The Logistics Scoreboard Activity-Based Costing (ABC) Economic Value Analysis (EVA)

Recommends the use of executive information systems that track a limited number of balanced metrics that are closely aligned to strategic objectives. It focused on executive enterprise - level measurement. Balanced Scorecard principles provide excellent guidance to follow when doing it.

Financial Perspective How do we look to shareholders? Customer Perspective How do customers see us? Innovation & Learning Perspective Can we continue to improve and create value? Operations Perspective What must we excel at?

Financial perspective (cost of manufacturing and cost of warehousing ) Customer perspective (on-time delivery and order fill rate) Internal business perspective (manufacturing adherence-to-plan and forecast errors) Innovative and learning perspective ( APICS- certified employees)

Provides guidance on the types of metrics one might use to get a balanced approach towards measuring the performance of overall supply chain. SCOR Model’s Performance Measures: Reliability: Delivery Performance, perfect Order fulfillment Responsiveness: order fulfillment lead times Flexibility: Supply chain response time, production flexibility Cost: scm cost, cost of goods sold, value added productivity Assets: cash to cash cycle time, inventory days of supply

Logistics financial performance measures :- (expenses and return ) Logistics productivity measures :-(orders shipped per hour and transport container utilization) Logistics quality measures :-(inventory accuracy and shipment damage ) Logistics cycle time measures :-(in transit time and order entry time)

The method involves breaking down activities into individual tasks or cost drivers, while estimating the resources (i.e., time and costs) needed for each one. ABC analysis does not replace traditional financial accounting. But provides a better understanding of supply chain performance for same no. in a different way.

Financial analysts advocate estimating a company’s return on capital or economic value-added. To quantify value created by an enterprise, basing it on operating profits in excess of capital employed Example: Executive evaluation

supply chain measurement systems :- Function-based measures Process-based measures Cross-enterprise measures

Function-base measure:- Each functional area measures its performance in its own terms. When each functional area sets its performance measures in isolation from those of others, it often leads to functional silos and conflicting organizational goals. DIFFERENT TYPES OF FUNCTIONAL BASE SERVICE Customer Service and Sales – In these functional areas, employees are measured their ability to maintain customer service levels. satisfying potentially smaller sized customer orders and carrying high levels of finished goods inventories by stocking inventories in multiple locations close to customers to shorten cycle times

LOGISTICS: – In this functional area, employees are measured by transportation and warehousing costs, and inventory levels. Measured in this context only, Logistics personnel tend to keep inventories low and batch customer orders to ensure that trucks are shipped full and picking operations are minimized. MANUFACTURING:- they want to make longer production runs that result in higher levels of finished goods inventories. In a make-to-order manufacturing environment there will be a tendency to consolidate customer orders into longer production runs, making them less responsive to dynamic customer demands

Purchasing :- employee are measured in the materials costs and supplier delivery performance., buyers will purchase in large quantities to get volume discounts and use more suppliers for each item to ensure a low price. Process-Based Measures :- To help integrate their supply chains, companies are starting to break down the functional silos by organizing around cross functional processes. This is done by either creating departments responsible for an overall process or creating cross- functional teams that drive an overall process, such as:

The “Perfect Order” Complete Orders Delivered To Customers Requested Date And Time In Perfect Condition, Including All Documentation. Procter and Gamble found that when it started measuring perfect order fulfillment in the mid 1990s, it was at about 60 percent. Now, it is operating in excess of 90%. Correct order entry Items are available Order picked correctly Timely arrival Shipment not damaged

Cash-To-Cash Cycle Time:- A firm is managing its supply chain efficiently, it should be able to reduce the average time that it needs to convert a dollar spent to acquire raw materials into a dollar collected for finished products. This is the reasoning underlying the cash-to-cash cycle time (C-to-C) measure. good performance on this metric is positively correlated with corporate performance. Cross-Enterprise Measures :- The cross-functional process approach to measuring supply chains is applicable for inter- as well as intra-enterprise processes

The availability of the right products at the point of consumption The total landed cost to get the products to the point of consumption (including all material, manufacturing, transportation, warehousing, and inventorying costs along the supply chain)

Methods Available For Setting Performance Targets:- There are four methods that can be used to set performance targets, described in detail below:- Historically based targets External benchmarks Internal benchmarks Theoretical targ ets

External benchmarks:- external benchmarks to help set performance targets, with com- panies looking outside their operations for best practices and performance comparisons. Example Herbert W. Davis and Company (Fort Lee,NJ) is a small consulting firm that has been conducting logistics cost and service surveys for over 20 years, including its most recent survey that is comprised of information on around 300 North American manufacturer, distributor, and retailer companies. Internal Benchmarks:- Performance target setting using internal benchmarks is a common approach, since it requires only internal measures. Within this method, comparable functional departments, processes, and facilities within a company are measured in the same way.

Historically Based Targets Historically based target setting is the most frequently used among all the methods. In this method, performance targets are based on historical baseline levels. For example, a company an historical order fill rate of 90% might set a performance target at 95%, trying to improve by five percentage points. Theoretical Targets:- This method a company conducts an analysis to theoretically determine how its supply chain performance could be improved. It would then implement the business changes necessary to achieve these improvements and put a set of performance targets in place based on estimates made during the analysis

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