A framework for supply chain performance measurement

ARTICLE IN PRESS344A. Gunasekaran et al. / Int. J. Production Economics 87 (2004) 333–347planning schedule, effectiveness of delivery invoicemethods, number of faultless delivery notesinvoiced, percentage of urgent deliveries andinformation richness in carrying out the deliveryare moderately important. According to the ratingof measures, while unquestionably important,these measures are not as important as the qualityof the delivered product and on time delivery. Itwould seem, at least on the surface that on timedelivery would result from an effective enterprisedistribution planning schedule, so itwould probably be unwise to ignore the obviousimportance of the enterprise distribution planningschedule—one is the means and the otherthe end.In the survey, companies were asked to expresstheir views on reducing the cost of a deliverysystem. Their responses tended to emphasizetechniques like JIT and the application of automationalternatives to reduce costs. Trade-offsbetween centralisation of the distribution systemand decentralisation of the system were mentionedas was third party logistics.6. A framework for performance measurement ina supplychainIn this section, a framework for performancemeasures and metrics is presented (see Table 6),considering the four major supply chain activities/processes (plan, source, make/assemble, and deliver).These metrics were classified at strategic,tacticaland operationalto clarify the appropriatelevel of management authority and responsibilityfor performance. This framework is based in partof a theoreticalframework discussed by Gunasekaranet al. (2001) and on the empiricalanalysisreported herein. Measures are grouped in cells atthe intersection of the supply chain activity andplanning level. For example, Supplier deliveryperformance can be found at the intersection ofthe Source activity and Tactical planning levelindicating that it pertains to sourcing activities(source) and the tactical planning level. Supplierdelivery performance would thus be a measureuseful in analyzing the performance of mid-levelmanagers as they undertake sourcing activities—mid-level managers who are generally the onesresponsible for tactical decisions.The items in each cell are listed in the order ofimportance based on percentage importance ratings.Those ratings can be seen in Tables 1–5.Readers can refer to those tables in order to moreclosely examine the importance ratings of individualmeasures/metrics.Some measures appear inmore than one cell, indicating that measures maybe appropriate at more than one managementlevel. Measures used at different managementlevels will most assuredly require adjustment totailor them to planning and control needs of thedifferent levels. For example, appropriate measurementmay require that data used by the lowerlevel of management be aggregated in some formor fashion to make the data appropriate for thenext higher level (convert data into informationappropriate for the context). There is nothingnovelabout this approach, as it has been usedfor years in management planning and controlsystems.The approach we used in organizing themeasures for the framework could be used byorganizations in development of a performancemeasurement program for SCM. Managers and/orconsultants could identify measurements (werecommended many such measurements herein),rate their importance using the methodology weused for rating importance, and construct a matrixlike our own to identify the supply chain activity/process to be measured, the measurement, andlevel of management to which the measure shouldbe applied. More detail could be added to fixpersonalresponsibility for measures with individualmanagers,or management positions.Readers should keep in mind that this frameworkis based largely on metrics discussed in theliterature. Individual firms will certainly haveperformance measurement needs that reflect theunique operations of their business and of coursenot all supply chains are identical. Thus othermeasures may be desirable and should be developedby firms and supply chain participants toreflect their unique needs. This framework shouldbe regarded as a starting point for an assessmentof the need for supply chain performance measurement.It is likewise important to understand