Chapter 14 - SCMA

Functional Silos

Occur when business functions in the same firm operate independently with little cooperation, communication, or appreciation for other functions

Given the following information, calculate the labor productivity growth rate from period 1 to period 2: Units produced in period 1 = 1,800 units, using 200 labor hours Units produced in period 2 = 1,840 units, using 220 labor hours

- 7.07%

Companies consider customer segment needs such as:

- the variety of products required - the quantity and delivery frequency needed - the product quality desired -the level of sustainability sought - the pricing of products

Problems - use of organization costs, revenue, and profitability measures

- windfall profits that occur when prices rise due to sudden demand increases or supply interruptions - is the difficulty in attributing any financial contributions to the various functional units or underlying process of the organization. - difficulty to split out costs and revenues equitably - Using costs alone as a departmental or business unit performance measure can result in action that actually hurt organization.

Using the following information, calculate the total productivity: Output = 25,000 units; 400 labor hours @ $15.00 per hour Material cost = $625,000; Utilities cost = $1,400

0.0395 units/$

SCOR Performance Category: Asset Management

1. Cash-to-cash cycle time 2. Inventory days of supply 3. Asset turns

SCOR Performance Category: Reliability

1. On-time delivery performance 2. Order fill rates 3. Order accuracy rates

SCOR Performance Category: Responsiveness

1. Order lead times or speed

SCOR Performance Category: Agility

1. Response times for unforeseen events 2. Production flexibility

SCOR Performance Category: Cost

1. Supply chain management and logistics costs 2.Cost of goods sold 3. Warranty and returns processing costs

Approximately how many performance measures does the BSC recommend?

2 dozen

Carbon footprints

A firm's or supply chain's total carbon emissions.

balanced scorecard (BSC)

A management system developed in the early 1990s by Robert Kaplan and David Norton that helps companies to continually refine their vision and strategy. The balanced scorecard uses a set of measures to provide feedback on internal business performance in order to continually improve strategic performance. Also referred to as scorecarding.

total productivity measures

A measure of total outputs divided by total inputs outputs/costs of (labor + capital + energy + material)

Score carding

A performance measure design technique such as the Balanced Scorecard that uses the score card model

green supply chain management (GSCM)

An organizational approach that extends the concept of green logistics to include activities related to environmentally responsible product design, acquisition, production, distribution, use, reuse and disposal by partners within the supply chain.

Most performance measures used by firms today:

Are traditional cost-based and financial statistics.

Establishing standards for performance comparison purposes:

Can be troublesome, particularly when the standards are unrealistic

SCOR Model: Plan

Demand and supply planning including balancing resources with requirements; establishing/communicating plans for the supply chain; management of business rules, supply chain performance, data collection, inventory, capital assets, transportation, and regulatory requirements

The BSC framework consists of four perspectives

Financial perspective Internal business process perspective Customer Perspective Learning and Growth Perspective

Good performance measurement systems:

Help to eliminate non-value-creating activities

Creating an effective performance measure system involves the following steps

Identify the firm's strategic objectives. Develop an understanding of each functional area's set of requirements for achieving the strategic objectives. Design and document performance measures for each functional area that adequately track each required capability. Assure the compatibility and strategic focus of the performance measures to be used. Implement the new performance monitoring system. Identify internal and external trends likely to affect firm and functional area performance over time. Periodically reevaluate the firm's performance measurement system as these trends and other environmental changes occur.

SCOR Model: Make

Make-to-stock, make-to-order, and engineer-to-order production execution including scheduling production activities, producing, testing, packaging, staging, and releasing product for delivery, finalizing engineering for engineer-to-order products, managing work-in-process, equipment, facilities, and the production network.

SCOR Model: Deliver

Order, warehouse, transportation, and installation management for stocked, make-to-order, and engineer-to-order product including all order management steps from order inquiries and quotes to routing shipments and selecting carriers, warehouse management from receiving and picking to loading and shipping product, invoicing customer, managing finished product inventories, and import/export requirements.

When utilizing performance standards, the difference between the standard and the actual performance is called a:

Performance Variance

SCOR Performance Categories and Attributes

Reliability Responsiveness Agility Cost Asset Management

SCOR Model: Return

Returns of purchased materials to suppliers and receipt of finished goods returns from customers including authorizing and scheduling returns, receiving, verifying, and disposition of defective or excess products, return replacement or credit, and managing return inventories.

According to the SCOR model, which of the following is NOT one of the supply chain operations process categories? a. Sell b. Enable c. Return d. Plan

Sell

SCOR Model: Source

Sourcing stocked, make-to-order, and engineer-to-order products including scheduling deliveries, receiving, verifying, and transferring product, authorizing supplier payments, identifying and selecting suppliers, assessing supplier performance, and managing incoming inventory and supplier agreements.

Environmental sustainability

The need to continually protect the environment and reduce greenhouse gas emissions

single-factor productivity measures

The output measure divided by a single input measure, such as labor cost. outputs/cost of labor

SCOR Model: ENABLE

The processes associated with establishing, maintaining, and monitoring information, relationships, resources, assets, business rules, compliance, and contracts required to operate supply chains. Enable processes support the design and management of the planning and execution processes of supply chains.

Which of the following is most associated with world class performance measurement systems? a. Productivity measures are heavily upon b. Firm success is guided by financial and economic measures c. They link firm strategies and operating decisions to customer requirements d. None of these choices are correct.

They link firm strategies and operating decisions to customer requirements

To achieve the type of performance alluded to in this chapter, specific measures must be adopted by supply chain trading partners such that performance can be further aligned with supply chain objectives. A number of these are listed below.

Total Supply Chain Management Costs: Supply Chain Cash-to-Cash Cycle Time: Supply Chain Production Flexibility: Supply Chain Delivery Performance: Supply Chain Perfect Order Fulfillment Performance: Supply Chain e-Business Performance: Supply Chain Environmental Performance:

The world's largest green supply chain management initiative is being implemented by:

Walmart

Good performance measurement systems: a. Help to eliminate non-value-creating activities b. Use primarily financial performance measures c. Are purchased form software providers d. Assist in pricing of products

a. Help to eliminate non-value-creating activities

A good performance measurement system should include measures that ...

access what is important to customers

Labor and machine utilization can be shown as:

actual units produced/standard output level actual hours utilized/total hours available

Which of the following is a problem with a company establishing labor and machine utilization standards for performance? a. Encourages the firm to reduce labor levels until everyone is overworked b. Less time is spent doing preventive maintenance, training, and projects that can lead to greater performance c. There is a tendency to continue producing and adding to inventory just to keep machines and people busy d. all of these are correct

all of these are correct

Most performance measures used by firms today continue to be the traditional cost based and financial statistics reported to shareholders in the form of

annual report, balance sheet, and income statement data

Which of the following was designed in 1992 by Kaplan and Norton as a way to align a firm's performance measures with its strategic plans and goals? a. The top-down reliance model b. The SCOR model c. Balanced scorecard approach d. The supply chain alignment model

c. Balanced scorecard approach

Check My Work Which of the following would be considered a good starting point for building a green supply chain strategy among supply chain partners? a. Calculating the supply chain cash-to-cash cycle times b. Measuring the Supply Chain Carbon-to-Carbon Cycle Time c. Obtaining ISO 14000 certifications d. Created a director of environmental sustainability for supply chain members

c. Obtaining ISO 14000 certifications

Companies typically like to design scorecards that fit their business and industry. As a result, there are software applications that can help companies design scorecards that link via the web to a firm's enterprise software system. These web-based balanced scorecard applications are often referred to as:

c. Performance dashboards

Which of the following is NOT a characteristic of supply chain performance measurement systems? a. The focus of the system is on value creation for end customers b. The measures must overlay the entire supply chain such that firms are all contributing to the supply chain strategy c. Their goal is to achieve cost minimization for each supply chain member d. They link supply chain trading partners to achieve breakthrough performance

c. Their goal is to achieve cost minimization for each supply chain member

Successful supply chains are those that can continue to deliver the right combination of

cost, quality, sustainability, and customer service

Which of the following is NOT a step in creating an effective performance measurement system? a. Identify the firm's strategic objectives b. Design and document performance measures for each functional area that adequately track each required capability c. Assure the compatibility and strategic focus of the performance measures to be used d. Identify costs, revenues, labor hours, and capacities used each period

d. Identify costs, revenues, labor hours, and capacities used each period

Which of the following is NOT one of the SCOR model's five categories of performance attributes? a. Asset Management b. Reliability c. Agility d. Profitability

d. Profitability

Which of the following is NOT one of the four perspectives of the BSC framework? a. Customer b. Financial c. Internal Business Process d. Reliability

d. Reliability

Which of the following is NOT one of the specific measures listed in the text that must be adopted by supply chain trading partners such that performance can be further aligned with supply chain objectives? a. Total Supply Chain Management Costs b. Supply Chain Cash-to-Cash Cycle Time c. Supply Chain e-Business Performance d. Supply Chain Marketing Performance

d. Supply Chain Marketing Performance

Which of the following supply chain performance metrics measures the average percentage of orders among supply chain members that arrive on time, complete, and damage-free? a. Supply chain cash-to-cash cycle time b. Total supply chain management costs c. Supply chain delivery performance d. Supply chain perfect order fulfillment performance

d. Supply chain perfect order fulfillment performance

Internal Business Process Perspective

focuses on performance of the most critical internal business processes of the organization including quality, new product development, flexibility, innovative elements of processes, and time-based measures.

Learning and Growth Perspective

measures concentrating on the organization's people, systems, and external environment and including retaining and training employees, enhancing information technology and systems, employee safety, and health and environmental sustainability issues.

Financial perspective

measures that address revenue and profitability growth, product mix, cost reduction, productivity, asset utilization, and investment strategies. Traditional financial measures are typically used.

Customer Perspective

measures that focus on customer requirements and satisfaction including customer satisfaction ratings, reliability and responsiveness, customer retention, new customer acquisition, customer-valued attributes, and customer profitability.

The SCOR model separates supply chain operations into six process categories:

plan, source, make, deliver, return, and enable

Companies generally use SCOR-based benchmarking to:

set reasonable performance goals based on the SCOR model, calculate performance gaps against a global database, and develop company-specific roadmaps for supply chain competitive success.

Performance variance

the difference between standard and actual performance

An effective performance measurement system should consist of

the traditional financial information for external reporting purposes along with tactical level performance criteria used to assess the firms competitive capabilities while directing its efforts to attain the desired capabilities

Performance Dashboard s

web-based scorecard applications