Supply Chain Performance Measurement: Key Characteristics Explained

BUSN-0213 – ACC -Purchasing & Supply Chain Mgmt. Bhagwan Singh Robertson College Ishwinder Pal Singh 1 st July, 2023 1

Table of Contents Supply Chain Performance Measurements .............................................................................. 2 1) An efficient performance measuring system has the following three characteristics: ...... 2 2) For a number of reasons, benchmarking performance against a non-competitor might be beneficial ........................................................................................................................... 3 References .................................................................................................................................. 5 2

Supply Chain Performance Measurements 1) An efficient performance measuring system has the following three characteristics: 1. Alignment with Corporate Goals and Objectives: A measure should be in line with corporate goals and objectives since this assures that the performance assessment system is directly assisting the organization's strategic direction. Employees are given clarity about what is essential and are guided in their behaviours and actions in order to achieve the required outcomes when measurements are in line with business goals and objectives. This alignment makes it easier to concentrate efforts on tasks that advance the success of the organisation and prevents wastage of funds on unimportant or competing goals. Ultimately, by keeping everyone focused and working towards a single goal, an aligned measuring system enhances the performance of the organisation as a whole. 2. Relevance and Meaningfulness: The organisation and its stakeholders should find the measures to be both relevant and meaningful. This feature makes sure that the measurements are useful for understanding performance and helping with decision-making. Key performance indicators that have a direct bearing on the success of the organisation should be captured by pertinent measurements (Ittner, C. D., & Larcker, D. F. (2003)). They should represent the crucial success elements and performance drivers that are necessary to achieve targeted outcomes, and they should be in line with the organization's unique requirements and goals. Meaningful metrics promote successful communication and a common knowledge of performance throughout the organisation because they are simple to comprehend and give stakeholders clear, actionable information. 3. Balance and Multiple Perspectives: A successful performance assessment system should have a set of measurements that are well-balanced and represent a variety of viewpoints. This trait makes sure that performance is assessed thoroughly and prevents any 3

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overemphasis on a particular component of performance that can result in less-than-ideal results in other areas. Organisations may acquire a comprehensive understanding of their operations and pinpoint opportunities for innovation and development by taking into account a variety of performance-related factors, including financial, customer, internal procedures, and employee views. Given that it takes into consideration the various requirements and expectations of many stakeholders, a balanced approach to assessment promotes a more comprehensive and long-lasting performance improvement effort. 2) For a number of reasons, benchmarking performance against a non-competitor might be beneficial. 1. Learning from Best Practises: Comparing an organization's performance to that of a non- competitor enables businesses to go beyond their immediate rivals and investigate procedures and methods employed in other sectors or industries. Regardless of their sector, businesses may learn a lot and implement best practises that may be applicable to their own operations by researching organisations that thrive in particular areas. When using more than just rivals as standards, new ideas and breakthroughs might emerge that might not have been obvious before. (Camp, R. C. (1989)) 2. Preventing Competitive Bias: Comparing performance to rivals can occasionally lead to a limited emphasis on besting them rather than obtaining higher performance all around. Organisations may overcome this competitive tendency and concentrate on absolute performance improvement rather than relative rankings by benchmarking against a non- competitor. This strategy pushes businesses to strive for excellence rather than focusing only on outperforming their direct competitors. As organisations may exchange information and learn from one another without worrying that their rivals would gain an advantage, it also encourages a more collaborative mentality. 4

3. Fostering innovative Thinking : Benchmarking against a non-competitor stimulates innovative thinking by challenging traditional wisdom. Organisations might explore novel ideas and get new views by exploring beyond their sector or business (Kaplan, R. S., & Norton, D. P. (1996)). This may result in game-changing inventions and fundamental modifications to procedures, goods, or services. By comparing themselves to other businesses that operate in other environments, organisations are exposed to fresh perspectives and novel approaches to problem-solving, boosting innovation and developing a culture of constant improvement. A balanced collection of measurements should be included in an effective performance assessment system, which should also be relevant and useful and in line with business goals and objectives. Comparing your performance against that of non-competitors can help you avoid competitive biases, foster innovative thinking, and make improvements. 5

References Camp, R. C. (1989). Benchmarking: The search for industry best practices that lead to superior performance. Productivity Press. Ittner, C. D., & Larcker, D. F. (2003). Coming up short on nonfinancial performance measurement. Harvard Business Review, 81(11), 88-95. Kaplan, R. S., & Norton, D. P. (1996). The balanced scorecard: translating strategy into action. Harvard Business Review, 74(1), 75-85 Krajewski, L. J., Ritzman, L. P., & Malhotra, M. K. (2019). Operations Management: Processes and Supply Chains. Pearson. . 6

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