Global Journal of Management and Business Studies.

ISSN 2248-9878 Volume 3, Number 9 (2013), pp. 999-1006

© Research India Publications
http://www.ripublication.com/gjmbs.htm

Review of Various Supply Chain Performance Measurement

Frameworks: A Proposed Framework for ITES Industry

Meenakshi Srivastava1*, Akansha Srivastava2 and Shashi Kant Rai3

1*, 2
Management Student, 1*, 2,3MBA-MSCLIS Division, Indian Institute of Information
Technology, Allahabad, Uttar Pradesh, INDIA.

Abstract

This paper establishes the need for Supply Chain Performance

Measure through the review of available literature on supply chain.
The evaluation of various performance measure frameworks and
metrics already available suggests that supply chain performance
measure can be observed under various categories such as cost and
non-cost; strategic and operational level; financial and business process
perspective; customer, financial, internal operation, learning and
growth perspective. The core features and limitations in various
performance metrics available for the selection and adoption by
business organisations have been analysed. The limitations of these
frameworks suggest that companies should select and implement one
or more metrics depending upon the nature of their business and its
supply chain. It is also comprehended from literature that there is a
need for integration of IT in supply chain performance measurement.
Since the already present frameworks are quite generalised, this paper
proposes a specialised framework for supply chain performance
measure in Information Technology Enabled Service (ITES) industry.
The use of the proposed frame work would increase the profit of IT
company by reducing its cost. Any company from the IT industry can
use complete framework or it can customise the framework depending
upon its need.

Keywords: Supply Chain; Framework; Performance Measurement;

Information Technology Enabled Service (ITES).
1000 Meenakshi Srivastava et al

1. Introduction
Supply chain can be defined as integrated set of processes involving business entities
such as: supplier manufacturerdistributor retailer customers. The processes
involve acquiring raw materials, converting these raw materials into finished products
and delivering these products to customers. According to (Beamon, 1999), there is a
forward flow of materials and backward flow of information in a traditional supply
chain. The objective of a business organisation is to capitalise on supply chain
management practices in order to ensure timely delivery of products and services to the
customers at the lowest cost possible.
Since supply chain management has a major impact on the overall operations of
the organisation therefore, its performance measurement becomes an integral part of
the organisation. Performance measure not only serves to measure effectiveness and
efficiency of an existing process but also helps in comparing alternatives. Supply chain
performance measurement helps in greater understanding and improvement in the
overall performance as suggested by (Charan et al. 2008). In the ever changing
environment it becomes necessary for the company to keep a check on its supply chain
performance by using metrics and framework suitable for the particular business
organisation. Supply chain performance measure can be observed under various
categories such as cost and non-cost; strategic and operational level (Gunasekaran,
2004); financial and business process perspective (Beamon, 1999); customer, financial,
internal, learning and growth perspective (Kaplan, 1992).

2. Literature Review
The literature available in this field describes the need for supply chain performance
measure while it establishes various approaches and framework of measurement.
According to (Ballou, 1992) , there are three different hierarchial levels in an
organisation that are- strategic level, operational and tactics level where different
policies and tradeoffs take place and suiatable control exerted. The strategic level
measurement impact the top management decisions, corporate financial plans,
competitiveness and level of adherence. The tactical level focuses on the resource
allocation, measurement of performance against the specified targets. At the
operational level, measurements affects lower level management functions. The
discrete sites in supply chain which pursue objectives independently cannot maximise
efficiency as observed by (Lee and Billington, 1992). They reflect that inappropriate
performance measures existing in industries. All the supply chain members should
understand measurement ando nly minimal manipulation opportunity must be
available (Schroeder, 1986). Some companies focus on financial foctors for
measurement while others focus on non-financial factors for measurement (Maskell,
1991). (Cross and Lynch, 1989) gave strategic measurement analysis and reporting
technique system which describes four level pyramid of objectives (corporate vision,
business unit financial goals, business unit operational objectives, department level
operational criteria and measure). Performance measurement questionnaire has been
Review of Various Supply Chain Performance Measurement Frameworks 1001

developed by (Dixion et al, 1990) which involves a workshop to develop, review and
redeploy the set of performance measures. (Vitale et al, 1994) suggested strategic
performance measurement system tool concentrated on organisational strategies, ideas
and conceopts based on experience. While Integrated dynamic performance
measurement which was developed by (Ghalayinin et al, 1996) suggests to achieve
integrated system by combining three main areas that are, management, process
improvement team and factory shop floor. Another such approach was developed by
(Kueng, 2000) as a holistic process performance measurement which assesses the
process performance in five aspects: financial perspective, employee perspective,
customer perspective, societal perspective, and innovation perspective.

3. Analysis of Supply Chain Performance Measure Frameworks

TABLE 1: List of Supply Chain Performance Measure Frameworks and

Their Features/ Limitation

Serial
Framework Features/ Limitations (Kurien, 2011)
No.
1. Measures and  Supply chain activities / processes- plan, source,
metrics make/assemble, deliver/customer.
(Gunasekaran,  Defined for strategic and operational level
2001)
2. Balanced  Customer Perspective
Score Card  Financial Perspective
(BSC)  Internal business Perspective
(Kaplan et al,  Innovation/ Learning Perspective
1992)  Gives overall performance view to top level managers
 Not applicable to factory level operations
 It is a monitoring and controlling tool rather than an
improvement tool
 Competitor perspective excluded
 Mathematical relationships not established between
variables
1002 Meenakshi Srivastava et al

3. Performance  Shareholder satisfaction; Strategies; Processes and

Prism (Neely, Capabilities;
2001)  Shareholder contribution
 Reviews company’s e existing strategy before
selecting a measure
 Does not describe the realisation of the framework
 Does not consider the company’s prevailing
performance measurement systems
4. The  Links an organisations strategy with its operations
Performance  Four levels of objectives- corporate vision, business
Pyramid unit objectives, business operating systems,
(Tangen,2004) departments and work centres
 No mechanism to identify key performance indicators
 Does not include the concept of continuous
improvement
5. Theory of  Focussed on production planning, scheduling methods
constraints and performance measurement
(Goldratt,  Three measures are used- net profit, ROI and cash
1984) flow
 Simple approach, easy to comprehend
 provides incomplete performance measurement
6. Supply Chain  Develop for firms to increase their effectiveness in SC
Operations  Common processes of supply chain: Planning
Reference SourcingMaking Delivering
(SCOR)  Twelve performance measures grouped as- Delivery
model reliability, Flexibility and responsiveness, Costs,
Assets
 For quantifiable SC performance measure extra
operational measure is needed
7. Time based  New product development time
performance  Manufacturing lead time
measures  Delivery speed
(Jayaram,  Responsiveness to customers
2000)  These four measures need to be integrated to provide a
complete supply chain performance measure

Table 1 shows some significant performance measurement metrics and

frameworks. A company can select and implement any one or more of the available
frameworks for performance measurement. Also, these frameworks can be integrated
together based on the type and need of the supply chain of the organisation. Other such
framework proposed by (Thakkar, 2009) suggests tangible (time, cost, capacity,
productivity ) and intangible measure (effectiveness, reliability and flexibility). With
Review of Various Supply Chain Performance Measurement Frameworks 1003

the integration of Information Technology in business, some IT based performance

measurement framework have been developed. According to (Bititci,2002), few of IT
based tools include- Integrated Performance measurement software (IPM) developed
by Lucidus Management Technologies, PerformancePlus by InPhase Company. Such
systems make information handling and maintenane easy for the organisation. But,
these systems do not support the overall organisation performance measurement due to
limited impact of IT on business.

4. Proposed Framework for Information Technology Enabled

Service (ITES) Industry
On analysing various supply chain performance measure frameworks given different
authors we find that not every method is suitable for all types of industries. Also, most
of the proposed frameworks are quite generalised and needs to be customised for a
particular industry. Thus, we have proposed a framework for performance
measurement of ITES industry. The framework describes the measurements for both
hardware component and software products. The supply chain for hardware can be
given as: Purchasing Manufacturing Logistics Customer Service/ Sales.
Figure 1, shows the set of measurement parameters adopted for various sections of
the IT supply chain. Purchasing stage which deals with procurement process of
components required for the manufacturing of computers and other hardware
components require measurements like unit purchase cost, acquisition cost for
materials etc. In the manufacturing phase, the resources and materials are used to
produce the semi -finished and finished hardware products such as- CPU, monitor,
printers, storage devices etc. the resources also include the human resources. The
metrics such as product quality, cost per unit of product produced etc. are used. The
logistics deals with storage and inventory of final products ready to be delivered to the
customers. Here, the measurement parameters are, on time delivery, time to market
and others. The customer services deals with the delivery of finished products to the
customers. We use revenues, customer satisfaction etc. to measure the performance of
this phase.
The various performance measurement metrics proposed for the software product
development and delivery function of the IT Industry is also shown in Figure 1.
Software development has five stages: planning designing developing testing
delivery to customer. The software is measured through indirect measures because
quality features cannot be measured using a numerical scale. The first stage of
planning consists of requirement specification analysis; it requires measurements such
as total lead time, requirement analysis cost and time. In the designing phase, the
software features and functions to be developed are considered. The development
phase deals with coding of the software according to planning. In this phase the
number of function points of the software can be measured through ISO standard tools
for functional size measurement: COSMIC, IFPUG, FiSMA 1.1, MARK-II, NESMA.
1004 Meenakshi Srivastava et al

ITES Industry Metrics

HARDWARE SOFTWARE

Planning
Purchasing
 Material/ Component Inventories  Total Lead Time
 Material/ Component Cost  Requirement analysis time
 Unit Purchase Cost  Requirement analysis cost
 Material Acquisition Cost  Design Flexibility
 Net Profit of Software

Manufacturing Designing
 Product Quality  Development Cycle Time
 Cost per Unit Produced  Milestones
 Source to make cycle time  Deliverables
 Setup/ Changeover Costs  Software design schedule
 Production Cycle time  Designing time
 Per cent Rework  Number of Modules
 Space Utilisation
 Warranty Costs
 Overtime Usage Developing
 Number of lines of code
 On time development
Logistics  Number of Function points used
 Finished Goods Inventory turns  Time for Coding
 On Time delivery  Cost of person hour
 Obsolete Inventory  Developer Productivity
 Damaged Shipments
 Warehouse Space Utilisation
 Delivery time Testing
 Transportation Cost
 Warehouse Cost  Bugs per lines of code
 In-transit Inventories  Execution Time
 Warehouse Inventories  Software Flexibility
 Time to Market  Software Efficiency
 Cost per Bug
 Total Testing time
Customer Service/  Total Testing Cost
 Cash Flow  Percentage of defects
 Revenues
 Customer Satisfaction
Delivery to Customer
 Customer Disputes
 Order Track  Customer Satisfaction
 Customer Returns  Count of Faultless Software
 Backorders/ Stock outs delivery
 Order Fill Rate  On time Delivery
 Order Path  Total delivery Time
 Service order lead-time  Customer Query Time
 Delivery Reliability

Post Sales Benefits

Figure 1: A Holistic Model for ITES Industry.

Review of Various Supply Chain Performance Measurement Frameworks 1005

Testing phase consists of various types of tests to detect any bugs in the software.
Cost per bugs, percentage of defects etc. is used for measurement. The delivery of
software to customer requires total delivery time, customer query time and other
parameters. Quality parameters are indirectly measures for lesser number of bugs mean
reliable software.
The benefit of this framework is in the post sales benefits which include: regular
software updates are made available to the customers, better service is provide to the
customers through keen monitoring of performance measurements, better quality
products are produced by using the framework for supply chain performance
measurement, better feedback from customers and timely resolution of customer
complaints. This creates value for the company. All these benefits help in, not just
reducing cost for the company but it helps in generating profit. Thus the customers’
need is satisfied through good post sales service which is monitored using the given
performance metrics.

5. Conclusion
This paper reaffirms the need for supply chain performance measurement in an IT
organisation. Many authors have given different frameworks; on reviewing them we
have found certain limitations in each one of these frameworks. Thus, any one of them
may not be sufficient for measuring the performance of supply chains of IT Industry.
Thus, an IT company may need more than one or combination of some metrics from
given frameworks for its supply chain measurement. In this paper we have also
proposed a framework for ITES Industry which helps in increasing profits while
reducing their cost. This framework suggests measurement parameters for both
hardware supply and software supply function of IT industry. It shows that holistic
measurement of performance leads to a better post sales service which helps in
satisfying the needs of the customers.

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