Supply Chain Performance Measurement using Analytical Framework. Prasanta Kumar Dey Aston Business School

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1 Supply Chain Performance Measurement using Analytical Framework Prasanta Kumar Dey Aston Business School

2 British Council funded on-going research project under PMI 2 Connect It reports a few initial findings

3 Collaborating organizations University of Thai Chamber of Commerce, Bangkok Rolls Royce, Derby Land Rover, Solihull Brintons Carpets, Kidderminster TEP KINSHO, Thailand JONG PATTANA, Thailand THAI URETHANE PLASTIC, Thailand

4 Context and Problem Statement Conventional performance measurement Internally focused Reactive in nature Disintegrated functional focused (e.g. finance, production, supplier performance) Supply chain performance measurement Although covers upstream suppliers, internal supply chain and downstream customers, but does not integrate across the decision levels (strategic, tactical and operational)

5 Literature review SC performance Balanced Score card perspective Kaplan and Norton (1997) (Financial, internal process, innovation and improvement, customer) Component of performance measures Beamon (1999) (Time, resource utilization, output, flexibility) Location of measures in supply chain links Gunasekaran et al. (2001) (Planning and product design, supplier, production, delivery, customer) Decision-making level - Gunasekaran et al. (2004, 2007) (Strategic, Tactical and Operational) Financial base De Toni and Tonchia (2001) (financial and non-financial) Traditional vs. Modern measures Bagchi (2006) (Functional-based, value-based)

6 Objectives Supply chain performance management Identifying critical success factors / key performance indicators (performance metrics) Developing framework for performance measurement Measuring supply chain performance of participating organizations Benchmarking supply chain performance of participating organizations Suggesting improvement measures

7 Methodology

8 Literature review (Phase 1) Performance measurement constructs & framework Supply chain performance measurement constructs & framework Gaps Literature review (Phase 2) Supply chain characteristics Performance metrics /constructs/ critical success factors Measurement frameworks / methods Questionnaire for observing SCM practices of the case study organizations in the UK and Thailand SCM characteristics of the case study organizations in the UK and Thailand Delphi technique Supply chain performance measurement framework Multiple criteria decision-making technique Customized Supply chain performance measurement framework for each organization Measuring supply chain performance of each organization Benchmarking

9 Conceptual framework for measuring supply chain performance Identifying critical success factors with respect to Customer relationship management Internal supply chain management Supplier relationship management In Strategic, tactical and operational levels Developing hierarchical framework for performance measurement using the analytic hierarchy process

10 Supply chain Performance constructs Customer relationship Management Internal supply chain management Supplier relationship management Strategic Tactical Operational

11 Integrated supply chain performance measurement framework

12 Tactical Operational Supplier Relationship Management Strategic Quality supplier selection Supplier integration Effective procurement processes Supplier performance Quality of products Delivery performance Overall reliability Coordination and resource sharing Operations Decision-making Production planning Effective communication with production Developing right material specification Identifying right suppliers for specific materials Selection process Robust selection criteria Clear scope, specification and criteria for selection Effective negotiation Right contract Information integration Information sharing Collaborative planning Joint demand forecasting Standardised means of communication across functions and suppliers Effective management of purchase portfolio Segregation of materials as per value and criticality Maintaining up-to-date supplier database Making purchase decision accordingly Green purchasing strategy Environment policy Design Manufacturing Reverse logistics Organizational relationship Designing and maintaining of communication channels Risk sharing Common objective and teamwork Use of information technology Effective contract administration Contract selection Inspection and verification Payment Evaluation State of art system in place System s effectiveness System improvement

13 Tactical Operational Strategic Internal Supply Chain Management Facilit y Inventory Transportation (inbound and outbound) Internal integration Human Resources Operations Capacity utilization Percentage capacity utilization Efficiency Capital cost Operating cost Flexibility Ability to change product mix Quality State of art technology Continuous improvement possibility Reliability Environment friendly Safe Availability / Effective maintenance Optimal inventory policy Decrease inventory levels Decrease inventory costs Shared inventory with customer Shared inventory with suppliers Warehouse utilization Raw material Finished products Spares and maintenance materials Capacity utilization Percentage capacity utilization Efficiency Capital cost Operating cost Flexibility Ability to change Reliability Adhering to delivery schedule Environment friendly Safe Availability / Effective maintenance Information integration Improve data validity Information systems flexibility Information accuracy Enterprise application integration Real-time monitor Information sharing Internal quick response Strengthen information sharing Information timeliness Information availability Information technology State of art system System s effectiveness System improvement Efficiency Capital cost Operating cost Operational performance Flexibility Customer services Consistence quality Reliability Waste reduction Environmental performance Environment policy Environmental audit Energy consumption Emission Reverse logistics Innovation State of art technology Continuous improvement Motivation Safety Training Innovation and learning

14 Tactical Operational Strategic Customer Relationship Management Customer service Customer integration Demand forecasting Market analysis Responsiveness Quality Innovation Customer satisfaction Extent of cooperation to improve quality New product and service development Regular operations Under contingency Forecasting system in place State of art technology Forecasting model Forecasting process Market equity % market share % change Trend Customer acquisition Customer order processing & delivery Response time Order fill rate Order flexibility Delivery performance Handling customer complaints System in place Number of complaints received Number of response made Value added service Flexibility of services to meet particular customer needs After sales services Information integration Information sharing Collaborative planning Joint demand forecasting Standardised means of communication across functions and customers Organizational relationship Designing and maintaining of communication channels Risk sharing Common objective and teamwork Use of information technology State of art system in place System s effectiveness System improvement Decision-making Governance Fast decision-making Reliability of demand data % increase Critical zone Customer retention % shift Critical zone Accuracy of forecasting techniques Improve response to customer demands Decrease prediction errors Forecast volatility Increase employee s adaptation for changes Government policy over market equity Subsidy of raw materials Equal trade opportunity Knowledge sharing among public and private sector

15 Case study: TEP Kinsho Food Limited

16 Production facilities Factory No.1, Production of Frozen Seafood, Factory No.2, Production of Hoof Animal Meat, Factory No.3, Production of Imported Fish, Factory No.4, Production of local Fish, Factory No.5, Production of Breaded Products

17 High Level Process Map Suppliers Special Order Revise Production Plan Order, Raw Material Check Production- Inventory Status Production Start Logistics Planning Comment System, Forecasting Demand Warehouse TKF Direct Ship Customers Warehouse 3Rd-Party

18 Typical Supply chain Internal SC Information Factory Warehouse Information Supplier Raw Material Logistics Quality Control Customer Retail_Domestic Ingradient Packaging Information and DCM Office of MD Retail_Oversea

19 Methodology Customized supply chain performance measurement framework for TEP Kinsho was developed through focus group The outcomes are as follows:

20 Tactical Operational Supplier Relationship Management Strategic Quality supplier selection Supplier integration Effective procurement processes Supplier performance Quality of products Delivery performance Overall reliability Green purchasing strategy Environment policy Design Manufacturing Reverse logistics Information integration Information sharing Collaborative planning Joint demand forecasting Standardised means of communication across functions and suppliers Use of information technology State of art system in place System s effectiveness System improvement Effective communication with production Developing right material specification Identifying right suppliers for specific materials Effective contract administration Contract selection Inspection and verification Payment Evaluation

21 Tactical Operational Strategic Internal Supply Chain Management Facilit y Inventory Transportation (inbound and outbound) Internal integration Operations Capacity utilization Percentage capacity utilization Efficiency Capital cost Operating cost Flexibility Ability to change product mix Quality State of art technology Continuous improvement possibility Reliability Environment friendly Safe Availability / Effective maintenance Optimal inventory policy Decrease inventory levels Decrease inventory costs Shared inventory with customer Shared inventory with suppliers Warehouse utilization Raw material Finished products Spares and maintenance materials Capacity utilization Percentage capacity utilization Efficiency Capital cost Operating cost Flexibility Ability to change Reliability Adhering to delivery schedule Environment friendly Safe Availability / Effective maintenance Information integration Improve data validity Information systems flexibility Information accuracy Enterprise application integration Real-time monitor Information sharing Internal quick response Strengthen information sharing Information timeliness Information availability Information technology State of art system System s effectiveness System improvement Efficiency Capital cost Operating cost Operational performance Flexibility Customer services Consistence quality Reliability Waste reduction Environmental performance Environment policy Environmental audit Energy consumption Emission Reverse logistics

22 Tactical Operational Strategic Customer Relationship Management Customer service Customer integration Demand forecasting Market analysis Responsiveness Quality Innovation Customer satisfaction Extent of cooperation to improve quality New product and service development Regular operations Under contingency Forecasting system in place State of art technology Forecasting model Forecasting process Market equity % market share % change Trend Customer acquisition Customer order processing & delivery Response time Order fill rate Order flexibility Delivery performance Information integration Information sharing Collaborative planning Joint demand forecasting Standardised means of communication across functions and customers Organizational relationship Designing and maintaining of communication channels Risk sharing Common objective and teamwork Use of information technology State of art system in place System s effectiveness System improvement Decision-making Governance Fast decision-making Reliability of demand data % increase Critical zone Customer retention % shift Critical zone Accuracy of forecasting techniques Improve response to customer demands Decrease prediction errors Forecast volatility Increase employee s adaptation for changes

23 Conclusion Case study organization s supply chain performance measurement constructs match closely with the generic framework

24 Thank you for your attention

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