SCM PERFORMANCE

MANAGEMENT

Prepared by: Mehul Makasana

Naveen Mandowara
Pragya singh
Chandrika Shah
Outline
 Overview of performance management and
Performance management in SCM

 Objectives for performance management in Supply

Chain

 Measuring supply chain performance

 Supply chain metrics

Overview of performance management

 Traditional Supply Chain Technology Tools do not well

Support Effective Response to Problems and Delays; True
Real-Time Visibility is Required.

 The high volume of customers and suppliers coupled with

the distance, language, and the number of execution
activities can be difficult enough to develop let alone
manage.
Objectives for performance management in Supply
Chain

 Reduce the cost of supply chain operations.

 Accelerate the flow of goods through the chain.
 Increase flexibility to meet changing demand.
 Reduce inventory levels.
 Improve on-time deliveries.
 Increase fill rates. 
Measuring supply chain performance

 Key performance indicators

 inventory turnover
 cost of annual sales per inventory unit
 inventory days of supply
 total value of all items being held in inventory
 fill rate
 fraction of orders filled by a distribution center within a
specific time period
Key performance indicator
Cost of goods sold
Inventory turns =
Average aggregate value of inventory

Average aggregate value of inventory =

= (average inventory for item Xi) (unit value item i)

Average aggregate value of inventory

Days of supply =
(Costs of goods sold)/(365 days)
Key performance indicators
1. Cost of goods sold: $425 million
2. Production materials and parts: $4,629,000
3. Work-in-process: $17,465,000
4. Finished goods: $12,322,000
5. Total average aggregate value of inventory (2+3+4): $34,416,000

$425, 000, 000

Inventory turns = = 12.3
$34,416,000

$34,416,000
Days of supply = = 29.6
($425,000,000)/(365)
Other Measures of Supply Chain Performance

 Process Control
 Monitoring and controlling the process in
supply chain

 Supply Chain Operations Reference

(SCOR)
 establish targets to achieve “best in class”
performance
 SCOR Model Processes

Plan Make Deliver

Source
Develop a course of Transform Provide products
Procure goods
action that best product to a to meet demand,
and services to
meets sourcing, finished state to including order
meet planned
production and meet planned management,
or actual
delivery or actual transportation
demand
requirements demand and distribution

Return
Return
products,
post-delivery
customer
support
 SUPPLY CHAIN METRICS
SCOR: Customer Facing
Performance Performance Definition
Attribute Metric
Supply Chain Delivery Percentage of orders delivered on time
Delivery performance and in full to the customer
Reliability Fill rate Percentage of orders shipped within24
hours of order receipt
Perfect order Number of orders delivered on time and in
fulfillment full, perfectly matched with order with no
errors
Supply Chain Order fulfillment Number of days from order receipt to
Responsiveness lead time customer delivery

Supply Chain Supply chain Number of days for supply chain to

Flexibility response time respond to an unplanned significant
change in demand without a cost penalty
 SCOR: Internal Facing
Performance Performance Definition
Attribute Metric
Supply Chain Supply chain
Direct and indirect cost to plan, source and
Cost management deliver products and services
cost of goods
Direct cost of material and labor to produce a
sold product or service
Value-added Direct material cost subtracted from revenue
productivity and divided by the number of employees,
similar to sales per employee
Warranty/returns Direct and indirect costs associated with
processing cost returns including defective, planned
maintenance and excess inventory
Supply Chain Cash-to-cash Number of days that cash is tied up as working
Asset cycle time capital
Management Inventory days Number of days that cash is tied up as
Efficiency of supply inventory
Asset turns Revenue divided by total assets including
working capital and fixed assets
Thank You
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