1. Table of Contents
1.
Table of Contents .................................................................................................................................. 1
1.
Introduction .......................................................................................................................................... 2
2.
Supply Chain Management Vs. Supply Chain Strategy ......................................................................... 2
3.
Supply Chain Analysis and how to perform it ....................................................................................... 3
4.
Measuring Supply Chain Performance and choosing KPIs .................................................................... 3
5.
Models to measure Supply Chain Performance ................................................................................... 4
6.
5.1.
Supply Chain Balanced Score-card System (BSC) ...................................................................... 4
5.2.
Supply Chain Operations Reference Model (SCOR) .................................................................. 5
5.3.
Function Based Measurement System (FBMS) ......................................................................... 5
5.4.
Efficiency Based Measurement System .................................................................................... 5
5.5.
Hierarchical Based Management System (HBMS) .................................................................... 5
Conclusion ............................................................................................................................................. 5
Bibliography .............................................................................................................................................. 6
OTM 452 Supply Chain Management
Assignment # 1
“Achieving Organizational Excellence by Conducting Supply Chain Analysis”
a. Introduction
This report aims to establish how the nature of competition has evolved from being between
individual businesses to supply chains at large. By the thorough literature review of published
journals, we seek to understand how organizational excellence can be achieved by conducting a
holistic supply chain analysis. This report will discuss various SC strategies used by the leading
companies as well as how those strategies are measured for performance.
2. Supply Chain Management Vs. Supply Chain Strategy
Understanding supply chain management requires us to first develop a reasonable grasp on
how a product reaches its end customer. It is usually multiple businesses that are involved in
the production and distribution of a product. Think of these businesses as cogs in a watch, each
cog must play its designated part for the watch to run efficiently. The watch symbolizes the
supply chain. Similarly, each business forming a part of supply chain must meet its own
predetermined efficiency criterion for the supply chain to work smoothly. After the term
‘Supply Chain Management’ was coined in 1982 by Keith Oliver, it has grown to become the
most essential aspect of conducting business. Lu and Swaminathan (2015) state that supply
chain management has evolved from initially being understood as only logistics to an intricate
multifunctional corporate endeavor that ranges from procurement and demand forecasting to
distribution and after-sales services (p. 03). A supply chain is the set of entities that are involved
in the designing of new products and services, procurement of raw materials, transforming the
raw material into semifinished and finished products and finally, delivering them to the end
customers (Swaminathan 2001).
For individual businesses, in today’s global business landscape, operating on optimal level is the
bare minimum to survive. As the nature of competition changes with globalization on an alltime high, businesses are reminded that the next step to staying in business pertains to the
supply chain strategies they employ. To cope with demand uncertainties i.e., predicting
customer demand, and supply uncertainties i.e., purchase of materials and manufacturing
uncertainties, various supply chain strategies emerged. Three different types of Supply chains
can be recognized in a business organization.
i.
A lean supply chain strives to achieve minimal waste in every step of the supply
chain from production to consumption. The key elements of lean SC include
warehousing, transportation and repeat customers.
ii.
iii.
An agile supply chain, seeks to achieve fluidity with the response to market by doing
things quickly, saving cost and maintaining flexibility.
The third, a hybrid supply chain, which combines the capabilities of lean and agile
SCs to create a supply network that meets the needs of complex products (Birhanu
et al., 2014).
3. Supply Chain Analysis and how to perform it
Supply chain analysis, also known as supply chain optimization, involves stakeholders working
across multiple companies aimed at eliminating waste and minimizing the supply chain time in
the delivery of goods and services to the end-customer. Sroufe (2011) defines Supply chain
management as the study of quantitative models that help reduce waste and optimize the
performance of a supply chain. Supply chain analysis is a vast field of study which includes but is
not limited to prescriptive, descriptive, and predictive models. A new addition to the analysis is
the Life Cycle Assessment (LCA) tool, which we will discuss in this report.
Life cycle assessment (LCA) measures and tracks a product’s resource use and impacts from
production to consumption, from raw material procurement to after-sales services. This tool is
essential for managing sustainability risks and waste minimization as well as discovering
opportunities to create environmentally and socially driven value (Sroufe, 2011). The LCA
framework includes the following steps:
b.
c.
d.
e.
A definition of the objective and scope of the assessment
The LC inventory analysis phase
The LC impact assessment phase
The LC interpretation phase
According to Sroufe (2011), an LCA allows a decision maker to study an entire product system
and supply chain to avoid the suboptimization that could result if the study focused on only a
single process.
4. Measuring Supply Chain Performance and choosing KPIs
Performance measurement is the process of quantifying the efficiency and effectiveness of an
action by means of a set of metrics (Gunasekaran &Kobu,2007, p. 2821). Therefore, measuring
SC performance requires the employment of a multi-dimensional approach as no single
measure will be sufficient in measuring performance. Numerous indicators of performance can
be used by any organization, but it is important to note that a distinction must be made
between various indicators based on three primary levels i.e., the supply chain level, the
organization level and the process level.
The organization level performance indicators include inventory level, responsiveness,
throughput rate, and total organizational cost. Similarly, the process level performance
indicators include responsiveness, process yield, throughput time, and process cost.
According to the research conducted by Ambe, I. M. (2013) on the Vehicle manufacturers in South
Africa, the supply chain level performance indicators identified included:
a.
b.
c.
d.
e.
f.
g.
h.
Product availability
Quality
Responsiveness
Delivery Reliability
Cost
Supplier reliability
Innovation
Supply Chain Asset management
Different manufacturers preferred different KPIs based on their own competencies and
competitor analysis. We have already established how performance is measured at various
levels. The basic conclusion that can be drawn from the existing literatures and industrial
practices is that the KPIs are tailored to the goals of the companies and they vary not only from
one company to another but from one industry to another as well. Choosing appropriate KPIs
depend on where the company stands in its life cycle and what its short-term and long-term
goals are. We take this basic premise and apply it to supply-chains to gauge the KPIs for the
supply chains.
5. Models to measure Supply Chain Performance
The Supply Chain Management (SCM) performance is bifurcated into financial and non-financial
measures. The table below lists some of the most widely used SCPM approaches used:
Table 1- SCPM Approaches
Financial Performance Measures
1. Activity Based Costing (ABC)
2. Traditional Cost Accounting
1.1.
Non-Financial Performance Measures
iv.
Supply Chain Balanced Score-card
system
v.
Supply Chain Operations Reference
Model (SCOR)
vi.
Function Based Measurement System
(FBMS)
vii.
Efficiency Based Measurement System
(EBMS)
viii.
Hierarchical Based Measurement
System (HBMS)
Supply Chain Balanced Score-card System (BSC)
Supply Chain Balanced Score-card System (BSC) is a management system for improving
performance. It balances financial measures with performance measures and objectives related
to all other parts of the organization. The four scorecard perspectives include, financial,
customer, internal processes and organizational capacity.
1.2.
Supply Chain Operations Reference Model (SCOR)
The SCOR model is designed to help evaluate the business models for effectiveness and
efficiency. SCOR model assists in standardizing the process of evaluation which helps create a
measurable way to track results. Using this model, analysts can gauge how well a supply chain
process aligns with the business goals.
1.3.
Function Based Measurement System (FBMS)
Function based measurement system views different functions of a supply chain in isolation
from the overall strategy. It combines the measures of the various supply chain functional
processes across the chain.
1.4.
Efficiency Based Measurement System (EBMS)
EBMS, as the name suggests, evaluates the supply chain in terms of its efficiency. EBMS
provides a framework to study SCMP by developing a Data Envelopment Analysis (DEA) model
for the internal supply chain performance.
1.5.
Hierarchical Based Management System (HBMS)
HBMS deals with various management levels to ensure swift and appropriate judgements.
HBMS scope caters to strategic, tactical and operational levels.
6. Conclusion
This report encapsulates the supply chain management and the strategies that are deployed
by companies and analysts to achieve competitive advantage in supply chains since the nature
of competition has evolved. Supply chain analysis and performance measures with their due
importance has been the core of this report followed by the measurement models as stated in
the Supply chain literature.
Bibliography
[1]
Lu, Lauren & Swaminathan, Jayashankar. (2015). Supply Chain Management.
International Encyclopedia of the Social & Behavioral Sciences. 10.1016/B978-0-08-0970868.73032-7.
[2]
Birhanu, Dagne & Lanka, Krishnanand & Rao, A.. (2014). A Survey of Classifications in
Supply Chain Strategies. Procedia Engineering. 97. 10.1016/j.proeng.2014.12.473.
[3]
Sroufe, Robert. (2011). Supply Chain Analysis.
[4]
Gunasekaran, A., &Kobu, B. (2007). Performance measures and metrics in logistics and
supply chain management: A review of recent literature (1995–2004) for research and
applications. International Journal of Production Research, 45(12),2819-2840.
[5]
Ambe, I. M. (2013). Key Indicators For Optimizing Supply Chain Performance: The Case
Of Light Vehicle Manufacturers In South Africa. Journal of Applied Business Research (JABR),
30(1), 277-290. https://doi.org/10.19030/jabr.v30i1.8301
[6]
Huang, S. H., Sheoran, S. K. & Wang, G. “A Review and Analysis of Supply Chain
Operations Reference (SCOR) Model,” Supply Chain Management: An International Journal.