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CHAPTER 6

Frameworks for Supply Chain Performance

Management
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From Supply Chain Planning: Practical Frameworks for Superior
Performance, 2nd Edition
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By Matthew Liberatore and Tan Miller

(A Business Expert Press Book)
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Copyright © Business Expert Press, LLC, 2021. All rights reserved.

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CHAPTER 6

Frameworks for Supply

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Chain Performance
Management

yo Introduction
Te supply chain organizations of most moderate to large-sized frms are
increasingly employing an array of dashboards, scorecards, key perfor-
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mance indicators (KPIs), and/or other measurement indices to monitor
their performance. Te development and availability of insightful met-
rics is a prerequisite for an efective performance management system.
However, how a frm organizes its KPIs and how these KPIs align with
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its supply chain management decision framework and strategy represents

an equally important issue. Tus, frms must not only have strong KPIs
but these KPIs must also align seamlessly with the frm’s supply chain
management framework, activities, and strategy.
In this chapter, we present several frameworks that can enable a frm
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to synchronize its supply chain management plans and decisions with

performance measures that monitor the impact of actions taken. We
frst introduce a hierarchical performance measurement system that pro-
vides a framework to house a frm’s strategic, tactical, and operational
supply chain performance measures. We illustrate how this hierarchical
performance measurement framework aligns with a frm’s supply chain
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management activities at all three planning levels. We then present the

supply chain operations reference (SCOR) model that provides another
useful framework for identifying supply chain metrics and KPIs. SCOR
is a hierarchical process reference model that is based on fve level 1 sup-
ply chain processes that are decomposed into several nested levels. KPIs

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 132 SUPPLY CHAIN PLANNING, SECOND EDITION

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are associated with level 1 processes, while additional metrics are linked

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to lower level processes. Drawing from both performance measurement
frameworks, we show how a set of KPIs can be linked to the frm’s supply
chain strategies, as discussed in Chapter 2. Tese KPIs can be monitored
using a scorecard or dashboard, as shown in Figure 6.1. Ten we intro-

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duce an approach that transforms individual KPIs into a supply chain
performance index that can monitor the overall impact of supply chain
management plans and decisions over time.

A Hierarchical Framework for Performance Measurement1

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Supply chain performance measures are needed for monitoring and con-
trol at three levels: strategic, tactical, and operational. In previous discus-
sions of supply chain planning in this book (especially Chapters 2 and 3),
these three levels were diferentiated by their time horizon: long run, in-
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termediate, and short run, respectively. In our supply chain performance
measurement (SCPM) framework, the scale of an operation or activity
that a particular performance measure monitors determines where it fts
in the hierarchy. Within each of the three levels of the SCPM framework,
we further diferentiate performance measures as either external or in-
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ternal. External measures focus on the efectiveness of a frm’s shipments

or fows across a supply chain, while internal measures evaluate a frm’s
efciency in producing its outputs and services. Typical external perfor-
mance measures are order and line item fll rates on customer orders. For
example, when a mass merchandiser places an order to a product supplier,
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these measures track whether the supplier delivers the total order and the
individual items, respectively, on time and complete as ordered. However,
these measures do not evaluate the supplier’s order delivery cost, such as
whether the order was delivered on time by expensive air freight rather
than normal surface transportation. In this instance, the order delivery
was efective, but it was not efcient. Internal performance measures such
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as “distribution cost per case” and “freight cost per pound” would be ad-
versely afected by using the more expensive delivery mode.

1
Tis section draws upon concepts originally introduced in Miller (2002).

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copyright. [email protected] or 617.783.7860

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Figure 6.1 Example of a supply chain dashboard2

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2
Tis supply chain dashboard focuses on inventory and asset turnover. Screen shot from https://www.slideteam.net/supply-chain-management-kpi-dash-
board-showing-quarterly-inventory-and-asset-turnover.html.
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is an infringement of
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 134 SUPPLY CHAIN PLANNING, SECOND EDITION

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S
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Firm’s Customer Retail

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• External Suppliers Firm’s DCs
A Plants Locations Consumers
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E Manufacturing Sales
Distribution
G
I • Internal Customer
Demand Marketing
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Management

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T
A
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T
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• External Warehouse
Transportation
C • Internal Operations
A
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E
R
A
T • External Receiving Putaway Storage Picking Shipping
I • Internal
O
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A
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Figure 6.2 A hierarchical supply chain performance measurement

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framework

Figure 6.2 displays the hierarchical SCPM framework, showing the

three levels (strategic, tactical, operational), and the two measurement
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perspectives (external and internal; no measures are shown). At the strate-

gic level from an external perspective, this framework spans the entire sup-
ply chain, from suppliers, through plants, distribution centers, customers,
and consumers. From the internal perspective at the strategic level, we in-
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clude the frm’s top-level functions related to supply chain, such as distri-
bution. At the tactical level, performance measures are required for such
activities as warehouse operations and transportation, since these are the
key functions of distribution. Drilling down into warehouse operations,
we see from Figure 6.2 that it has fve major subfunctions or processes at
the operational level: receiving, putaway, storage, picking, and shipping.
Internal and external performance measures are required at each level in
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this framework.
Figure 6.3 indicates how internal and external performance measures
are set across the three levels of the SCPM hierarchy, continuing with
distribution as our example. For the distribution organization (strategic
level), the percentage of scheduled customer shipments delivered on time,

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 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 135

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Distribution

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Measure:
Level: Type:
External Percentage of scheduled customer shipments delivered on time
Order cycle lead time: from release to distribution to customer delivery
Strategic time in days - variability
Internal Total distribution cost per unit delivered

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Warehouse Operations
External Percent of lines/orders picked correctly
Tactical Percent of orders picked on scheduled day

Internal Total warehouse costs per unit of throughput

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Receiving
External Percent of cases/lines received correctly
Operational
Internal Total receiving costs per unit

Figure 6.3 Illustrative hierarchical performance measures for

distribution function
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and the average and variance of order cycle lead time represent external
measures, since they help measure fows across the supply chain. Tey
are strategic since they address the mission of the distribution function,
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ensuring delivery of products and services to customers in a timely man-

ner. Te total distribution cost per unit delivered is an internal, strategic
measure since it measures the efciency of distribution at the highest or-
ganization level.
At the tactical level, the percentage of lines or orders picked correctly
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and the percentage of orders picked on the scheduled day represent exter-
nal measures because they evaluate the impact of warehouse operations
across the supply chain. When a warehouse picks an order correctly, it
contributes to the ultimate successful delivery of products to a customer
who has placed an order. Similarly, when a warehouse picks an order on
the scheduled day, this contributes toward a successful on-time delivery
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of products to a customer. Te third tactical measure shown in Figure 6.3,

total warehouse costs per unit of throughput, represents an internal mea-
sure, since it ofers a summary view of the internal cost (and efciency) of
the warehouse operation.
Focusing on the warehouse receiving function at the operational level,
the percentage of cases (or lines) received correctly (i.e., accurately) is an

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 136 SUPPLY CHAIN PLANNING, SECOND EDITION

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example of an external performance measure. We categorize this mea-

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sure as external because the accuracy with which this function receives
inbound shipments will impact the next stage of the supply chain. For
example, suppose that the receiving area miscodes an inbound receipt as
product A, when in fact it received product B upon delivery. If this error

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remains undetected, the shipment will then be put into inventory classi-
fed as product B and at some future point could be picked and delivered
to a customer who ordered product A. Terefore, the percentage of lines
or cases received correctly is classifed as an external measure. In contrast,
total receiving cost per unit has an internal orientation and will be of

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most immediate concern to receiving and warehouse personnel.
As another brief example, consider manufacturing, which is slotted
at the strategic level in Figure 6.2. A major manufacturing function such
as fabrication would be at the tactical level, with fabrication subfunc-
tions such as machining placed at the operational level (not shown in
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Figure 6.2). Manufacturing cost/per unit would be an example of an
internal performance metric at the strategic level, processing cost/unit
would be an internal measure at the tactical level, while item defect rate
would be an external measure at the operational level.
Te hierarchical SCPM framework ofers a number of important
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benefts. First, it provides a unifed framework for aggregating perfor-

mance measures across an organization. It enables a frm to organize its
key performance measurements into a structure that leads to a relatively
few, high-level, strategic measures (e.g., between 10 and 25) that moni-
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tor overall frm performance. Tese are sometimes referred to as KPIs.

Second, this structure facilitates having additional performance measures
that monitor smaller components of a frm’s operation that align with
overall frm objectives. In this way, all functional areas can develop and
maintain their own measures and contribute to an overall measurement
system. In addition, each function can then focus on a few key measures
to help improve its performance. Finally, the SCPM framework can con-
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tribute toward aligning the collective activities of a frm to meet a desired

mission and set of objectives. For example, if a frm has a comprehen-
sive measurement system in place that covers its major functional areas,
managers can view the system in its entirety to identify any potential
misaligned activities or objectives.

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 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 137

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The SCOR Model

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Te APICS (Association for Supply Chain Management, originally
known as the American Production and Inventory Control Society)
SCOR model available through the Association for Supply Chain Man-
agement3 provides another useful framework for identifying supply chain

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metrics and KPIs. SCOR links supply chain processes, performance met-
rics, best practices, and people into a unifed hierarchical framework. It
was designed to support communication between supply chain partners
and improve the efectiveness of supply chain management and is based
on six supply chain processes: plan, source, make, deliver, return, and en-

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able, as shown in Table 6.1.
Tese processes constitute level 1 of the SCOR model, which describes
the scope and top-level supply chain confguration. Level 2 processes de-
termine the capabilities within the level 1 processes. For example, make
level 2 processes include make-to-stock, make-to-order, engineer-to-order,
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and retail. Level 3 processes describe the steps performed to execute the
level 2 processes. For example, make-to-stock level 3 processes include such
activities as process inquiry and quote; receive, enter and validate order;
reserve inventory and delivery date; consolidate orders; build loads; and
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route shipments. Every organization that implements supply chain im-

provements using SCOR will need to extend the model, at least to level 4,
using industry, organization, and/or location-specifc processes, systems,
and practices.
SCOR incorporates fve supply chain performance attributes: reli-
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ability, responsiveness, agility, costs, and asset management efciency

(assets). Te importance of these attributes is tied to the organization’s
strategy. Linking back to supply chain strategic planning discussed in
Chapter 2, among our supply chain objectives were cost efciency, de-
livery efectiveness, and fexibility, which are closely aligned with selected
SCOR attributes. In Table 2.1, we provide a set of metrics that can in-
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dicate achievement of each of these objectives. Similarly, SCOR includes

metrics to monitor the achievement of the fve attributes at each level of

3
For a description of SCOR, see http://www.logsuper.com/ueditor/php/upload/
fle/20190530/1559181653829933.pdf.

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 138 SUPPLY CHAIN PLANNING, SECOND EDITION

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Table 6.1 Supply chain operations reference (SCOR) management
processes4

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SCOR
process Scope
Plan The planning activities associated with operating a supply chain
• Gathering customer requirements, collecting information on available

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resources, balancing requirements and resources to determine capabili-
ties and gaps, and identifying actions to close gaps
Source The ordering (or scheduling) and receipt of goods and services
• Issuing purchase orders, scheduling deliveries, receiving, shipment vali-
dation and storage, and accepting supplier invoices
make The activities associated with the conversion of materials or creation of

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the content for services
• materials conversion: assembly, chemical processing, maintenance,
repair, overhaul, recycling, refurbishment, remanufacturing, and other
conversion processes
Deliver The activities associated with the creation, maintenance, and fulfllment
of customer orders
• receipt, validation, and creation of customer orders; scheduling deliv-
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ery; pick, pack, and shipment; and invoicing
return The activities associated with the reverse fow of goods
• Identifcation of need for a return, disposition decision making, sched-
uling the return, shipment and receipt of returned goods
Enable The activities associated with the management of the supply
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chain
• management of business rules, performance management, data
management, resource management, facilities management, contract
management, supply chain network management, managing regulatory
compliance, risk management, and supply chain procurement
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the process hierarchy. At level 1, the measures are strategic and are KPIs.
SCOR lists the processes that infuence the performance of a level 1 KPI
and the level 2 metrics that should be analyzed to identify the factors
contributing to the current level of performance. By examining the level
2 metrics, managers can determine the level 3 processes and metrics that
should be investigated.
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Table 6.2 lists the 10 SCOR KPIs and their defnitions as they relate
to each of the supply chain attributes. Interestingly, the KPIs associated

4
Tis table is based on material found in: http://www.logsuper.com/ueditor/php/
upload/fle/20190530/1559181653829933.pdf.

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copyright. [email protected] or 617.783.7860
 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 139

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with the frst three attributes (reliability, responsiveness, and agility) are

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external and customer focused, while the second two (costs and assets) are
internally focused, supporting the need for a mix of internal and external
KPIs, as previously discussed. We also note that a frm may wish to track
selected level 2 metrics as well depending on their strategy. For example,

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inventory days of supply for fnished goods, a level 2 metric under assets,
may be a KPI for high-volume, consumer goods manufacturers.
SCOR ofers a number of important advantages when applied to
supply chain performance management. It provides a process-oriented
framework for measuring and understanding the drivers of supply chain

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performance and creates a foundation for improvement. In addition, the
SCOR metrics and KPIs are tied to specifc performance attributes, al-
lowing comparison across diferent supply chains and strategies.

Table 6.2 Supply chain operations reference (SCOR) level 1 KPIs

by attribute5
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Supply chain
attribute KPIs
reliability Perfect order fulfllment
• The percentage of orders meeting delivery performance with
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complete and accurate documentation and no delivery damage.

Components include all items and quantities on time using the
customer’s defnition of on time, and documentation—packing
slips, bills of lading, invoices, etc. ([total perfect orders]/[total
number of orders] × 100%).
responsiveness Order fulfllment cycle time
• The average actual cycle time consistently achieved to fulfll
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customer orders. For each individual order, this cycle time starts
from the order receipt and ends with customer acceptance of the
order ([sum of actual cycle times for all orders delivered]/[total
number of orders delivered] in days)
Agility Upside supply chain adaptability
• The maximum sustainable percentage increase in quantity deliv-
ered that can be achieved in 30 days
Downside supply chain adaptability
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• The reduction in quantities ordered sustainable at 30 days prior

to delivery with no inventory or cost penalties

(continued)

5
Tis table is based on material found in http://www.logsuper.com/ueditor/php/
upload/fle/20190530/1559181653829933.pdf.

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 140 SUPPLY CHAIN PLANNING, SECOND EDITION

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Table 6.2 Supply chain operations reference (SCOR) level 1 KPIs

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by attribute. (Continued)
Supply chain
attribute KPIs
Overall value at risk

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• The sum of the probability of risk events times the monetary
impact of the events that can impact any core supply chain
function (e.g., plan, source, make, deliver, and return) or key
dependencies
Costs Total supply chain management cost
• The sum of the costs associated with the SCOr Level 2 processes
to Plan, Source, Deliver, and return. (Cost to plan + cost

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to source + cost to make + cost to deliver + cost to return +
mitigation costs).
Cost of goods sold
• The cost associated with buying raw materials and producing
fnished goods ([direct material costs] + [direct labor costs] +
[indirect costs related to production])
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Assets Cash-to-cash cycle time
• The time it takes for an investment made to fow back into a
company after it has been spent for raw materials ([inventory
days of supply] + [days sales outstanding] − [days payable
outstanding] in days)
return on supply chain fxed assets
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• The return an organization receives on its invested capital in

supply chain fxed assets ([Supply chain revenue] – [total costs to
serve])/[supply chain fxed assets]
return on working capital
• Assesses the magnitude of investment relative to a company’s
working capital position versus the revenue generated from a
supply chain ([supply chain revenue] – [total costs to serve])/
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([inventory] + [accounts receivable] – [accounts payable])

Linking Performance Management to Strategy

Te frameworks for performance management previously presented difer

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in that the frst hierarchical SCPM system has a functional and planning
orientation, while SCOR is a process reference model. However, both
highlight the need for internal and external KPIs that cover the various
components of the supply chain and the importance of linking these mea-
sures to the frm’s mission and strategy. Either of these frameworks can be
applied in developing a set of performance measures and KPIs. A third

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 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 141

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approach is to link the selection of KPIs directly to supply chain strategy

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and is now discussed.
In Chapter 2 we showed how to align specifc supply chain strategies
with the mission through the achievement of objectives, and to select
supply chain projects that will help achieve the strategies. Our challenge

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for performance management is similar, in that we wish to link the KPIs
to the mission through the achievement of the supply chain strategies.
Returning to our example of Zenith Corporation in Chapter 2, our ap-
proach is to modify Figure 2.2 and replace projects with KPIs, as shown
in Figure 6.4. We begin by identifying a set of potential KPIs, and then

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from that broader set, select those KPIs that are best linked with the strat-
egies. Te selected set of KPIs will be monitored, and managerial inter-
ventions may be initiated to improve supply chain performance.
We begin by placing the level 1 SCOR KPIs defned in Table 6.2
in our set of potential KPIs. We should also consider including some
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level 2 metrics from SCOR, and the types of measures discussed in the
SCPM system. Each of the metrics identifed would then be evaluated
with respect to its achievement of the supply chain strategies, with those
having the most impact included in the set of KPIs to be monitored and
tracked. We note that a given metric may support one or more strategies.
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For example, perfect order fulfllment supports both the customer and
consumer strategies. Te customer strategy is directly supported since this
KPI promotes great customer service, while the consumer strategy is indi-
rectly supported, since this KPI will lead to improved product availability.
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Level 1 Mission: Position the firm’s supply chain to support the overall firm objectives
as efficiently and effectively as possible.
Mission

Level 2 REGULATORY COST DELIVERY

FLEXIBILITY SECURITY
COMPLIANCE EFFICIENCY EFFECTIVENESS
Objectives

Level 3
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GOVERNMENTAL/
CONSUMER CUSTOMER SOCIETAL FINANCIAL SUPPLIER /PARTNER INTERNAL
Strategies

Level 4
Key Performance KPI1 KPI2 KPI3 KPI4 KPI5 KPI6 KPI7 KPI8 KPI9 KPI10 KPI11 KPI12
Indicators

Figure 6.4 Linking KPIs to the supply chain mission, objectives, and
strategies

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 142 SUPPLY CHAIN PLANNING, SECOND EDITION

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An illustrative set of KPIs that support the strategies shown in

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Figure 6.4 are given in Table 6.3. A frm using this approach in practice
would substitute its KPIs for those shown in Table 6.3. In the “Strat-
egies Supported” column, the strategy most directly supported by the
KPI is listed frst. Te “Orientation” column indicates whether the KPI

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has an internal or external focus. Te composition of KPIs in Table 6.3
includes four SCOR KPIs from Table 6.2 (nos. 1, 2, 5, 7), one modi-
fed SCOR KPI (no. 8), two fnancial/internal KPIs often monitored in
practice (nos. 9, 10), two product-oriented KPIs supporting the customer
and consumer strategies (nos. 3, 4), and three KPIs needed to monitor the

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Governmental/societal and Supplier/partner strategies (nos. 6, 11, 12).
As shown in Table 6.3, it is necessary to have at least one KPI tied to each
strategy. Te set of KPIs is balanced to include an equal number of inter-
nal and external measures. Tese KPIs can be incorporated into a supply
chain dashboard or scorecard for ongoing monitoring of performance.
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Table 6.3 Key performance indicators supporting Zenith’s strategies
Orientation
Strategies (internal/
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No. KPI supported external)

1 Perfect order fulfllment Customer, consumer External
2 Order fulfllment cycle time Customer, consumer External
3 Product availability on shelf Consumer, customer External
4 Product satisfaction survey Consumer, customer External
5 Upside supply chain (SC) Customer, consumer External
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adaptability
6 material recycled/material Governmental/ External
disposed societal
7 Cash-to-cash cycle time Financial, internal Internal
8 SC management cost/$100k Financial, internal Internal
revenue
9 Inventory carrying cost/ inven- Financial, internal Internal
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tory value
10 FTEs in SC planning/$1 billion Internal, fnancial Internal
revenue
11 On-time supplier delivery Supplier/partner Internal
12 Defects/100 supplier shipments Supplier/partner Internal

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 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 143

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If the frm wishes to determine the relative importance of the KPIs,

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they can be scored depending on the extent to which they support the
achievement of strategies. To illustrate this, recall in Chapter 2 that we
introduced a simple scoring system to rate the relative importance of a
set of strategies in a mission, objectives, and strategies (MOS) framework.

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Each strategy was assigned points indicating its relative importance, and
the points of all six strategies had to total to 100.
Now returning to scoring KPIs, assume that the customer strategy
has a score of 20 and the planning team believes that KPI1 (perfect order
fulfllment—from Table 6.3) very strongly supports this strategy. Tere-

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fore, the planning team might elect to score KPI1 at the 95 percent level,
and so allocate it 19 (0.95 × 20) points. Since KPI1 indirectly supports
the consumer strategy, its total score would be obtained by simply sum-
ming the points earned from both the customer and consumer strategies.
Te remaining strategies would be scored in a similar manner.
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Of course, it is not absolutely necessary to use a scoring approach like
the one outlined above, but it is helpful in deciding how much emphasis
to place on the individual KPIs. In some instances, a frm may wish to
use a more formal process to weigh and score the KPIs. Te Analytic
Hierarchy Process (AHP) mentioned in Chapter 2 and demonstrated in
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the Appendix to Chapter 2 for evaluating and selecting projects, can be

applied for this purpose.6

Creating an Index to Monitor Supply Chain Performance

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A supply chain performance index (SCPI) can be used to track the frm’s
progress in achieving its strategies and carrying out its mission. Te ad-
vantage of creating an SCPI is that overall supply chain performance is
represented by a single aggregate measure. Te SCPI is a weighted average
of the points associated with all of the KPIs that comprise the index. Te
weights discussed in the previous section provide the relative importance
Do

6
See Saaty (1996). When using the AHP, all of the KPIs supporting a particular strat-
egy would be pairwise compared to determine their scores, as described in the Ap-
pendix to Chapter 2.

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 144 SUPPLY CHAIN PLANNING, SECOND EDITION

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of the KPIs in contributing to the SCPI. Tese weights can be developed

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through discussions with the supply chain planning and/or management
team. Each KPI begins with 100 points and its points are adjusted from
period to period (e.g., quarter to quarter) based on the change in the value
of its KPI. For our example, we use the KPIs found in Table 6.3 to create

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an SCPI. An explanation of the process of determining the SCPI follows.
Te frst step is constructing a baseline value or score for the index
in an initial or baseline period such as the frst quarter of the year. Te
baseline value provides an index score against which we can then measure
the value of the index in subsequent time periods. Table 6.4 illustrates

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the baseline index that is tied to the achievement of Zenith’s supply chain
strategy. Te “baseline value” represents the actual value of the KPI dur-
ing the initial time period. For example, 85 percent is the baseline value
for perfect order fulfllment. To initiate the baseline index, each KPI is
assigned 100 points. Tat is, an 85 percent value of perfect order fulfll-
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ment is linked to 100 points. To determine the baseline value of the SCPI
we multiply each KPI’s baseline points (100 in all cases) by its weight, and
then sum the results. Note that by construction the baseline value of the
SCPI is always 100 since the weights sum to 100 percent.
We can now compute the SCPI for the next quarter. For each KPI we
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must determine its percentage change (positive or negative) over the base-
line and then multiply the result by the baseline points to determine the
adjustment points required. Te adjustment points are combined with
the baseline points to determine the next quarter’s points. Te calcula-
No

tion is much simpler than it sounds. For example, from Table 6.4 we
see that perfect order fulfllment increased from 85 to 87 percent. We
determine its change over the baseline by using the formula: 100 × (New
KPI value − Baseline KPI value)/baseline KPI value, or 100 × (87 − 85
percent)/85 percent, or a 2.4 percent improvement. Terefore, the perfect
order fulfllment points for next quarter are 100 + 2.4 percent × 100, or
102.4. Te same process can be used for all KPIs where an increase in
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value represents an improvement in performance (specifcally, KPIs 1, 3,

4, 5, 6, and 11). However, for the remaining KPIs (indicated by italics in
Table 6.4), our calculation process must change because a decrease in value
is an improvement in performance. For example, KPI2, order fulfllment
cycle time, improved from the baseline to the next quarter since it dropped

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copyright. [email protected] or 617.783.7860
 FrAmEwOrkS FOr SUPPLY CHAIN PErFOrmANCE mANAGEmENT 145

t
Table 6.4 Example of a supply chain performance index

os
Baseline quarter Next quarter
KPI
No defnition Value Points Weights Value Points Weights
1 Perfect order 85% 100 0.14 87% 102.4 0.14
fulfllment (%)

rP
2 Order fulfllment cycle 5 100 0.11 4 120.0 0.11
time (days)
3 Product availability 75% 100 0.08 70% 93.3 0.08
on shelf (% days
above min)
4 Product satisfaction 80% 100 0.07 83% 103.8 0.07

yo
survey (% satisfed)
5 Upside supply 30% 100 0.03 25% 83.3 0.03
chain (SC)
adaptability (%)
6 material recycled/ 15% 100 0.11 16% 106.7 0.11
material disposed (%)
op
7 Cash-to-cash cycle time 30 100 0.12 31 96.7 0.12
(days)
8 SC management 10% 100 0.08 9% 110.0 0.08
cost/$100k
revenue (%)
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9 Inventory carrying 20% 100 0.05 22% 90.0 0.05

cost/inventory
value (%)
10 FTEs in SC 35 100 0.06 33 105.7 0.06
planning/$1 billion
revenue (no.)
No

11 On-time supplier 80% 100 0.07 85% 106.3 0.07

delivery (%)
12 Defects/100 supplier 5% 100 0.08 4% 120.0 0.08
shipments (%)
Baseline index Performance index
100.0 104.8

Note: If a kPI defnition is italicized, improved performance is indicated by a decrease in the kPI
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value.

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copyright. [email protected] or 617.783.7860
 146 SUPPLY CHAIN PLANNING, SECOND EDITION

t
from 5 to 4 days. We determine its change over the baseline by reversing

os
the order of the two terms in the numerator of our formula: 100 × (Base-
line KPI value − New KPI value)/baseline KPI value. Terefore, KPI2
improved by 100 × (5 − 4)/5, or 20 percent over the baseline, and so the
points for the next quarter are 100 + 20 percent × 100 = 120.

rP
Once all of the KPI points for the next quarter are determined, we can
compute the SCPI for the next quarter by multiplying the same weights
used to compute the baseline index by the new points, and then summing
the results. In our example, as shown in Table 6.4, the overall change in
performance was good, increasing from the baseline value of 100 to the

yo
next quarter’s index value of 104.8. Tis 4.8 percent increase indicates
that the frm has made signifcant progress in executing its strategies. Te
individual KPIs comprising the SCPI can be examined to determine the
main drivers to the changes (if any) in its value. Over time, the change
and rate of change in such an index provides a quantitative perspective
op
on overall progress.

Conclusion: Improving Performance

Te frameworks that we have presented are designed to enable a frm to
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monitor and track its supply chain performance and to determine if their
strategies are being successfully executed. Performance management can
help close the loop on the strategy formulation, implementation, and ex-
ecution processes. If performance is not meeting expectations, the issues
impeding performance must be uncovered and appropriate managerial
No

actions taken. Alternatively, expectations could be altered, leading to pos-

sible changes in action plans and strategies.
Firms may wish to embed their KPIs and/or performance index into
a scorecard or dashboard to simplify the monitoring process. Using busi-
ness intelligence software, it is helpful to be able to “drill down” a KPI
from the corporate level down to the product line or stock keeping unit
Do

(SKU) level to better understand the drivers of performance.

This document is authorized for educator review use only by uzma tahira, University of Central Punjab UCP until Jan 2026. Copying or posting is an infringement of
copyright. [email protected] or 617.783.7860