Creating performance measures

In this regard, a key driving principle, as espoused by the Balanced Scorecard, is that measures should be aligned to strategic objectives. Supply chain strategy, however, differs for every company and depends upon its current competencies and strategic direction. Companies, for example, can generally fall into the following developmental stages that will dictate the types of measures and the degrees to which they will need to focus:

  • Functional Excellence – a stage in which a company needs to develop excellence within each of its operating units such as the manufacturing, procurement, or logistics departments. Metrics for a company in this stage will need to focus on individual
    functional departments.
  • Enterprise-Wide Integration – a stage in which a company needs to develop excellence in its cross-functional processes rather than within its individual functional departments. Metrics for a company in this stage will need to focus on cross-functional processes.
  • Extended Enterprise Integration – a stage in which a company needs to develop excellence in inter-enterprise processes. Metrics for a company in this stage will focus on external and cross-enterprise metrics.

Historically most companies have focused their performance measurement on achieving functional excellence. With the advent of Supply Chain Management (SCM) principles aimed at integrating their supply chains, many have objectives to increase their degree of enterprise-wide integration and extended enterprise integration. In order to achieve these types of objectives, their performance measurement systems will need to align to them. Advice for these supply chain measurement systems falls into five areas that include:

  1. Function-based measures
  2. Process-based measures
  3. Cross-enterprise measures
  4. Number of measures to be used
  5. Alignment of executive to management-level measures
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