PERFORMANCE AND RISK MESUREMENT

Most consultants‖ recipes for effecting business change and behavior in an organization use ingredients for measuring ongoing performance. Once a company‘s road map for change is laid out, it can develop a set of performance metrics or key performance indicators (KPIs) to ensure that it knows when it is meeting its objectives.

These are not new business ideas, but there are a few new twists. Using measurements to support manufacturing operations has its roots back to the late 19th and early 20th centuries with ideas espoused by Frederick W. Taylor, the father of applying scientific methods to running business. His ideas for time and motion studies of operations were successfully used to scientifically manage production lines and warehouse operations. These ideas, however, led to exaggerated business processes that transitioned into ―running a business by the stopwatch‖ with employers treating human employees as if they were highly reliable, predictable machines to be monitored and controlled. Over time, the workplace‘s view of performance measurement became more humane and these exaggerated types of monitor and control methods fell out of favor, replaced by a focus on a measuring a business‘ performance rather than that of the individual.

Throughout the last decade, companies have expended significant amounts of time and effort to re-engineer their supply chains through business process change and technology focused on implementing integrated Supply Chain Management (SCM) principles. While substantial financial and human resources have been spent on doing this, there has been little sign of realized benefits. While consultants are recommending supply chain measurement, they generally lack formal approaches to it. In addition, while SCM software providers are selling solutions that enable companies to drastically improve their supply chain performance, these same vendors do not adequately provide tools needed to measure these improvements.

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