PERFORMANCE MEASUREMENT IN SUPPLY CHAIN
Supply chain management (SCM) is the combination of art and science that goes into improving the way your company finds the raw components it needs to make a product or service and deliver it to customers (,1996). A way for understanding supply chain management is grouping all management activities into three categories: strategic, tactical, and operational. Strategic activities include building relationships with suppliers and customers, and integrating information technology (IT) within the supply chain. Studying competitors and making decisions regarding production and delivery would fall under the tactical category. The operational category includes the daily management of the supply chain, including the making of production schedules.
Furthermore, SCM encompasses the planning and management of all activities involved in sourcing, procurement, conversion, and logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, SCM integrates supply and demand management within and across companies. More recently, the loosely coupled, self-organizing network of businesses that cooperates to provide product and service offerings has been called the Extended Enterprise (2001). SCM can also refer to Supply chain management software which the tools or modules used in executing supply chain transactions, managing supplier relationships and controlling associated business processes is met . Consideration of all possible occurring events and factors that can cause a disruption in a supply chain is certain but solutions can be created and planned.
“Supplying the Chain”
In achieving a well-executed management of supplies, the following steps must be of use:
Plan—This is the strategic portion of SCM. Companies need a strategy for managing all the resources that go toward meeting customer demand for their product or service. A big piece of SCM planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less and delivers high quality and value to customers. Source–companies must choose suppliers to deliver the goods and services they need to create their product. Developing a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships is essential. Processes for managing goods and services inventory, including receiving and verifying shipments, transferring them to the manufacturing facilities and authorizing supplier payments. Make—this is the manufacturing step. It is the scheduling of activities necessary for production, testing, packaging and preparation for delivery. This is the most metric-intensive portion of the supply chain, one where companies are able to measure quality levels, production output and worker productivity. Deliver—this is the part that many SCM insiders refer to as logistics, where companies coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments. Return—this can be a problematic part of the supply chain for many companies. Supply chain planners have to create a responsive and flexible network for receiving defective and excess products back from their customers and supporting customers who have problems with delivered products(1995).
Moreover, organizations that make up the supply chain are “linked” together through physical flows and information flows. Physical flows involve the transformation, movement, and storage of goods and materials. They are the most visible piece of the supply chain. But just as important are information flows. Information flows allow the various supply chain partners to coordinate their long-term plans, and to control the day-to-day flow of goods and material up and down the supply chain.
SCM is all about the good complexity to a firm’s strategy development efforts. Firms could succeed by being particularly good in one functional area, such as marketing, finance, or operations. Then firms recognized that they had to have sufficient capabilities across multiple functional areas in order to survive. Nowadays, much competition occurs between multi-firm supply chains, not just between individual firms. In addition to their debates about functional- and business-level strategies, managers of such must address how they will partner with other firms in order to compete and succeed.