supply chain final

Right to work laws

state legislation that provides employees w/ the right to decide whether to join or support a union financially. 24 states in U.S.(AL, AZ, ARK, FLA, GA, ....). A right to work law secures the right of of emps to decide for themselves whether or not to join or financially support union. (Automakers shifting to right to work southern states)

The silo mentaility

"I win, you lose" organizational issue that causes a firm to be reactive and short-term goal oriented. No internal functional integration occurs at this stage. Evidenced when using cheapest suppliers, no attention to customers etc. Can crop up as a result of cultural differences. Lack of eternal collab will create quality, cost, delivery timing, and other customer service problems. Internally, silo efffect can be found b/t personnel. To overcome, firms must align supply chain goals and their own goals/incentives, decisions made while considering impact on firm's overall profits.

Quality of life issues

"general well-being of individuals and societies", no definitive set of factors but reports contain the following: -Achieving educational excellence -Growing a vibrant economy -Preserving natural environment -Promoting social well being and harmony -Enjoying arts, culture and recreation -Sustaining a healthy community -Maintaining responsive gov't -Moving around efficiently and safely(transportation stats) -Keeping community safe(crime rate, murder rate)

Obstacles to process integration along supply chain

# of factors can impede external process integration causing loss of visibility, information distortion, longer cycle times, stockouts, and the bullwhip effect. Obstacles include, silo mentality, lack of visibility, lack of trust, lack of knowledge

Adjusting supply chain member capabilities

- SC members can audit their capabilities and those of their trading partners to determine if what they do particularly well is consistent with the needs of end customers and other sc members. Matching sc member capabilities w/ end customer requirements can be difficult if communication levels are not good or if company is serving multiple supply chains. Dominant companies can often leverage buying power to get suppliers to conform w/ requirements. SC members can reassess ad redesign strategies for meeting end customer requirements(use of internet). Firms must continually reeasses performance w/ respect to end customer reqs, making PERFORMANCE MEASURES important b/c they relay info regarding the performance of SC members. Best supply chains today are more responsive to customer needs, quicker to anticipate changes, and much better at controlling costs.

Key supply chain processes

1. Customer relationship mgmt(identifying key customer segments, tailoring products to meet needs, measuring profitability and firm impact) 2. Customer service mgmt(providing info to customers like product availability, dates, order status) 3. Demand mgmt (balance customer demand w/ firm's output capacity, forecasting/coordinating) 4. Order fulfillment (meeting customer requirements by synchronizing firm's marketing, prod. and dist. plans, provide required levels of service, lowest possible cost) 5. MFG flow mgmt ( determining mfg process requirements to enable right mix of flexibility & velocity, set of activities responsible for making the product) 6. Supplier relationship mgmt(close relationships w/ key suppliers) 7. Product development & commercialization(integrate suppliers and customers) 8. Returns mgmt(product disposition, recalls, packaging req, minimizing returns), great opportunity for maintaining acceptable levels and identifying improvement areas

6 process categories of SCOR

1. Plan - demand/supply planning including balancing resources w/ requirements, communicating sc plans, mgmt of business rules, inventory, transportation 2. Source = sourcing stocked, make-to-order, scheduling deliveries, receiving, verifying, authorizing supplier payments, assessing suppliers 3. Make = make-to-stock, make-to-order, scheduling production activities, producing, testing, packaging, manging WIP 4. Deliver = order, warehouse, transp, installation, order mgmt steps, selecting carriers, warehouse mgmt, receiving/pickup 5. Return = returns of purchased materials to suppliers and receipt of FG from customers including authorizing/scheduling returns 6. Enable = processes associated w/ establishing, maintaining, and monitoring info, relationships, resources, assets, business rules, compliance, enable processes support planning and exec. phases.

Specific performance measures

1. Total SCM costs(costs to process orders, purch. mats, energy, comply with reg., manage inventories etc) 2. Cash-to-cash cycle time(avg. # days b/t paying for raw mats and getting paid for product, shows impact of lower inventories) 3. Supply chain production flexibility(avg. time required for sc members to provide 20% production increase) 4. SC Delivery performance(avg % of orders for sc members filled on or before requested deliv date) 5. SC perfect order fulfillment performance(avg % of orders among sc members that arrive on time, and damage free) 6. SC e-business performance(avg % of electronic orders received for all sc members) 7. SC Environmental performance(% of SC trading partners that have become ISO 14000 certified)

Supply chain mgmt integration model

1. identification of key trading partners 2. development of supply chain strategies 3. Aligning the strategies w/ key process objectives 4. Developing internal process performance measures 5. Internally integrating key processes 6. Developing external supply chain performance measures for each process 7. Externally integrating key processes w/ supply chain partners 8. Extending process integration to 2nd tier supply chain participants, and then reevaluating the integration model periodically. *Trading partners should revisit integration model and modify annually.

Developing world class performance measures

1. identify firm's strategic objectives 2. Develop understanding of each functional area's set of requirements for achieving strategic objectives 3. design and document performance measures for each functional area that adequately track required capability 4. assure compatability/strategic focus of performance measures to be used 5. Implement new performance monitoring system 6. Identify external trends likely to affect firm over time 7. Reevaluate firm's performance measurement system as trends/changes occur. 4 CAPABILITY AREAS include quality, cost, customer service(flexibility, dependability, innovation), sustainability

6 location types

1. offshore factory = manufacturers products at low cost w/ minimum investment in technical and managerial resources in low labor cost countries, then exports all of its FGs(objective = take adv of low labor costs) 2. Source factory = mfg facility that has a broader strategic role that an offshore factory, with plant mgmt heavily involved in supplier selection and production planning(location dictated by low production cost, fairly developed infrastructure and availability of skilled workers) 3. Server factory = take adv of govt incentives, minimize exchange risk, avoid tariff barriers, and reduce taxes and logistics costs to supply regional market where factory is located 4. Contributor factory = plays greater strategic role than server factory by getting involved in product development, production planning and developing suppliers. 5. Outpost factory = set up in a location with an abundance of advanced suppliers, competitors , research facilities to get access to most current info on mats, components, tech and products(secondary role of server or offshore) 6. Lead Factory = source of product and process innovation and comp advantage for entire organization, it translates market/competitor/customer knowledge into new products

Regional Trade agreements

423 under WTO today, better known ones include 1. European Union(european int' trade org designed to reduce tariff and nontariff barriers among member countries, set up after ww2 launched in 1950, britain exited) 2. NAFTA(U.S. Canada and mexico 1994, created worlds largest free trade area, many tariffs eliminated w/ immediate effect while others phased out over periods ranging from 5-15 years) 3. Southern common market(argentina, brazil, paraguay, uruguay and Venezuela formed in 1991. created with the goal of forming a common market/customs union) 4. Association of southeast nations(1967 in bangkok comprised of 10 countries in southeast asia. Goal is to accelerate economic growth, cultural progress and development) 5. Common market for eastern and southern africa

Managing supply chain security

A method that is concerned with reducing the risk of intentionally created disruptions in supply chain operations including product and information theft and activities seeking to endanger personnel or sabotage supply chain infrastructure. Must manage your own security and that of your partners, but security is a very complex problem involving all participants. Supply chain security system responses = 1. Basic initiatives(physical security measures, personnel security, standard risk assessment, continuity plan, freight protection, security badges and guards) 2. Reactive initiatives(larger security organization, supply base analysis, limited training) 3. Proactive initiatives( venture outside the firm, director of security, personnel with military or gov't experience, formal security risk assessment, advanced computing security) 4. Advanced initiatives(industry leaders, customer/supplier collab, learning from the past, formal security strategy, supply chain drills, simulations and exercises, emergency control center)

Assess and improve internal integration of key supply chain processes

Achieving process integration w/in the firm requires a transition from functional silos to teamwork. Effective internal operations can result in reduced cycle time/fewer stockouts. Must have mgmt support, resources and empowerment, and cross-functional teams for internal integration. Primary enabler of integration is ERP SYSTEM b/c provide view of entire org, enabling decision makers to have info regarding customer orders, prd. plans etc...ERP systems allow firms to become process oriented.

The balanced Scorecard

Also referred to as score-carding Approach to performance measurement developed in 1992 by Kaplan and Norton as a way to align an org's performance measures w/ its strategic plans and goals, BSC thus allowed a firm to move away from reliance on merely financial measures improving managerial decision making. Scorecards can be problematic/ineffective if the basic rules are not followed(must use 20-30 measures). Also, information systems may have to be modified at great expense to supply necessary info for scorecards, another weakness is inability to show what competitors are doing, exclusion of employee/supplier/partner contributions, and reliance on top-down measures. Process of developing a BSC starts w/ defining firm's strategy, then translating strategy's goals into a system of relevant performance measures

Green supply chain mgmt(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. Carbon footprint = A firm's or supply chain's total carbon emissions.

Price fluctuations

Cause of bullwhip effect, when suppliers offer promotions or discounts it prompts forward buying(stocking up to take adv. of low prices), all contributing to erratic buying patters, lower forecast accuracies, and bullwhip effect. Way to reduce this problem is to eliminate price discounting and offering uniform wholesale prices to customers or EDLP strategies eliminating promotions

Utility availability and cost

Critical location factor, availability and cost of electricity, water and gas. Sometimes supply of electricity cannot keep pace with high speed of development.

Business Clusters

Geographic concentrations of interconnected companies and institutions in a particular field, they encompass an array of linked industries and other entities important to competition. Markets increasingly globalized b/c of trade liberalization, tech advances and more demand, more business clusters being crated globally, research parks and econ/industrial zones are magnets for clusters. Concept of clusters challenges conventional logic and locating R&D, mfg, assembly, marketing and other businesses in one area can improve the supply chain. Ex = high tech clusters in sillicon valley, 2.factor endowment clusters,(comp. advantage from geographic location) 3. also knowledge service clusters(concentrations of lower cost tech skills ), there are also low cost mfg clusters. Clusters are successful due to close cooperation, coordination and trust among clustered companies in related industries as well as fierce competition for customers among rival companies located in cluster(companies are more productive in local operations because of access to local supplier base). Companies are able to recruit from the local pool of skilled and experienced workers, thus reducing hiring costs. Due to intensity of comp within cluster, companies tend to respond quicker to customer needs. THEY PROVIDE COMPETITIVE ENVIRONMENT THAT PROMOTES INNOVATION AND PROFITABILITY. (can lead to groupthink)

Lack of knowledge

Getting a network of firms and employees to work together requires managers to use subtle persuasion and education to get their own firms and their trading partners to do the right things. Training of supply chain partner employees known as collaborative education and can result in more successful supply chains and higher partner returns. Pressure to extended software training to partners increases as tech changes, outsourcing increases and foreign expansion. People using the systems must be involved early on in terms of the purchase decision, implementation process, and training.

Additive manufacturing and impact on facility location

It is a process of making a 3-d solid object of virtually any shape from a digital model(3D printing), first developed by MIT. Applicable to industries like defense, aerospace, automotive, medical and metals mfg. Initially used for rapid prototyping but now its possible for production. Benefits include: shorter lead times, customization, reduced parts count, more complex shapes, parts on demand, efficient mat use, lower energy. Affordability of 3D printers could prevent businesses going overseas for mfg. Another aspect of 3D printing is speed(create and customize in real time), also helps reduce waste by using only raw mats needed. Boeing was early adopter of 3d printing

Labor issues

Labor availability, productivity, & skill. Unemployment & underemployment rates. Wage rates; turnover rates; labor force competitors, and employment trends are key in making location decisions. CHEAP LABOR IS not a sustainable adv. , as these advantages depend on productive use of inputs and continual product and process innovations

Access and proximity to markets

More and more companies stating that main reason for being in china is access to local markets rather than export reasons. Especially important in the service industry. Ashley furniture building a plant in NC b/c speed is important. In the age of instant gratification and fast turnaround, it might be better to manufacture domestically. Proximity to customers is crucial.

Align Supply chain Strategies w/ key supply chain objectives

Once primary strategy identified for a SC's end product, mgrs need to identify the important processes linking each trading partner & establish process objectives assurting that resources are deployed to support end strategy. Processes/methods used to integrate process links among SC partners will vary based on internal structure of each firm, economic conditions, degree to which functional silos exist, and the nature of existing relationships within each supply chain. 8 key supply chain processes identified, a process is a set of steps to accomplish a task or get work done. Consistent objectives within each functional area of the firm fro each process, help to integrate the processes internally, as well as focus efforts and resources on supply chain strategy.

Rationing and shortage gaming

Rationing = strategy that occurs when demand exceeds suppliers FG's available so the supplier may allocate product in proportion to what buyers ordered and when buyers figure this out, they inflate their orders to satisfy their real needs a strategy known as shortage gaming. This exacerbates supply problem, when shortages occur because of shortage gaming, suppliers can no longer discern their customers true demand resulting in unnecessary additions to production capacity, warehouse space and transp. costs. One way to eliminate shortage gaming is for sellers to allocate supplies based on demand histories/purchase histories of customers.

The SCOR model

Supply chain operations reference model developed in 96 by Pittiglio, Rabin, Todd & McGrath and AMR research. Managed by APICS today, it helps to integrate the operations of sc members by linking delivery operations of a seller to the sourcing operations of a buyer. Used as a supply chain mgmt diagnostic, benchmarking, and process improvement tool by mfg and service firms. Implementing SCOR model is not easy requiring time investment and open communication. SCOR uses 5 categories of perf. attributes such as: reliability, responsiveness, agility, cost, and Asset mgmt. SCOR Model helps mgmt focus on mgmt issues, serving internal and external customers, and instigating improvements along the sc. Any SC can be benchmarked using SCOR.

Process integration

The primary means to achieving successful supply chain mgmt. To create value, firms in the supply chain must integrate their process activities internally & then w/ their trading partners. Process integration(also called collaboration), means sharing information and coordinating resources to jointly manage a process or processes. Time consuming and daunting task. Process integration remains a significant problem for many organizations today. Process integration b/t departments considered to be the necessary foundation for successful external integration b/t trading partners, problems w/ internal integration make external inte. more difficult. External process integration can be an extremely difficult task b/c it requires proper training/preparedness, willing and competent trading partners, trust, compatible info systems, potentially a change in one or more org. cultures, and as mentioned above, successful internal process integration. Benefits of collab and info sharing b/t trading partners can be significant(reduced sc costs, flexibility, fewer problems less safety stock, higher quality levels).

4 perspectives of BSC

Used in helping org's track performance and identify areas of weakness, designed to provide managers with a formal framework for achieving a balance b/t non-financial and financial results over short-term and long-term horizons. BSC framework consists of 4 perspectives: 1. Financial(measures address revenue, profitability, product mix, costs etc..) 2. Internal Business Process(performance of most critical internal business processes of org. like quality, flexibility and time based measures) 3. Customer(focus on customer req. and satis.) 4. Learning and Growth(concentrate on org's people, systems, external environment, training employees etc.) Properly constructed scorecard should support firm's strategy and consist of linked series of measures consistent and reinforcing allowing firms to detect problems early/trace to root cause. Each perspective requires 4-7 MEASURES

World Trade Organization (WTO)

WTO = int'l org dealing with the rules of trade b/t nations, its functions include administering the WTO agreements, providing a forum for trade negotiations, handling trade disputes, monitoring national trade policies, providing tech assistance and training programs for developing countries and cooperating w/ other organizations. Critical to understand this and regional trade agreements becasue they impact tariffs, costs and free flow of goods and services, WTO is successor to general agreement on tariffs and trade(responsible for setting up multilateral trading system after WW2)

Sustainable development and facility location

a development that meets the needs of the present w/o compromising the ability of future generations to meet their own needs. Critical issues are energy consumption/production, air pollution, and climate change. Sustainable development will need fundamental changes in values and principles that influence development strategies and innovation. Similar to term green development except green development prioritizes what its proponents consider to be environmental sustainability over economic and cultural considerations

Knowledge management solutions

a system that uses internet applications tied to desktop applications that enable real-time collaboration and flow of information between supply chain partners. Offer the ability to see into suppliers and customers operations, faster decision making, and the collection of supply chain performance metrics.

Causes of Bullwhip effect

amplified demand levels from bullwhip effect cause problems with capacity planning, inventory control, and workforce and production scheduling/lower service.

Review and establish supply chain strategies

annual basis, mgmt should identify basic sc strategies associated w/ each of its trading partner's goods and services. If an end product is competing based on quality, then supply chain members should also be using strategies consistent w/ delivering high-quality products at competitive price and service levels. Product strategies translate into internal functional policies(types of parts purchased/suppliers used). Policies should be geared toward supporting the overall strategy of the supply chain. If products are competing based on sust. then strategies/policies among each of the supply chain participants must be consistently aimed at environmental impacts.

Land availability and cost

as land and construction rates rise, trend is to locate in suburbs and rural areas, suburbs can be attractive b/c of cost and size of land available, workforce, and transportation networks.

Extend process integration to 2nd-tier supply chain partners

as relationships become more mature and software evolves, the tendency will be to integrate processes to 2nd-tier partners and beyond. Software suppliers are developing systems that integrate easier allowing trading partners to exchange even more complex or detailed info over bigger networks. RFID tags commonly used to make supply chain applications easier to gather data anywhere along a firm's supply chain(Passive RFID = no power source, Active = draw power from internal battery). Inventory accuracy is most widely used RFID metric. Before these applications were developed it was much more difficult and time-consuming to integrate processes beyond 1st tier suppliers and customers.

Managing supply chain risk and security

as sc grows to include more foreign suppliers/customers, corresponding growth in disruptions caused by weather/infrasturcture/politics etc.. These all enhance the need for planning, change mgmt and security to mitigate risk.

World class performance measurement systems

businesses respond to competition by developing competitive advantage which creates the need to develop effective performance measurement systems linking firm strategies and operating decisions to customer requirements. Performance criteria that guides firm's decision making must be easy to implement, understand, and measure; flexible and consistent w/ firm's objectives; and implemented in areas viewed as critical to value creation. Effective performance measurement system consists of traditional financial info, tactical level performance criteria for assessing competitive capabilities. Good measurement system includes what is important to customers

use of performance standards and variances

can be difficult to establish standards for performance comparison. Establishing output standards creates a goal that can drive orgs. to do whatever it takes to reach the goals(cooking the books, shitty quality), and once goals are met there is no further incentive to keep improving. When standards are not met a performance variance(diff b/t standard and actual performance) is created. Managers often feel pressured to make up these variances resulting in poor decisions. At the functional level, standards can reinforce the ideas of FUNCTIONAL SILOS and departments are concerned w/ optimizing their performance not the overall supply chains.

Demand forecast updating

cause of bullwhip effect, whenever a buying firm places an order, suppliers uses that info as a predictor of future demand causing them to update demand forecasts, impacting orders placed w/ suppliers. As lead time grows, fluctuations also grow. Demand forecast updating is when buyers place purchase orders, suppliers use this info to revise their demand forecasts. Solution to this problem is for buyer to make actual demand data available to suppliers, generating less variability. Could also use same forecasting techniques and buying practices. In some cases, buyers allow suppliers to observe actual deamand and create schedule(VMI). Reducing length of supply chain will also reduce bullwhip effect.

Order batching

cause of the bullwhip effect. It is a type of inventory control that occurs when small orders are combined into one large order amplifying demand variability and adds to the use of safety stock, creating the bullwhip effect. Can occur w/ sales people trying to meet quotas. More info visibility and frequent smaller order sizes will reduce order batching problem. To counteract need to order full truckloads, firms can order smaller quantities of a variety of items from a supplier.

Identify critical supply chain trading partners

critical to identify key trading partners for each of focal firm's products and services. Key trading partners = trusted suppliers providing a large share of firms critical products and services; and repeat customers that buy a sig. portion of firms products. Companies identify these trading partners over time through successful business dealings. Moving out to 2nd/3rd tier suppliers can complicate integration efforts, so only 1st tier primary partners should be identified to allow the firm to concentrate time and resources on mging these more important relationships. Different def of key trading partners = all those autonomous companies or strategic business units who actually perform operational and /or managerial activities in the business processes designed to produce a specific output for a particular customer or market." Structure of the network of primary trading partners will vary based on where the focal firm is physically located. Firms w/ lots of key suppliers and customers might limit # of integrative processes

Understanding end customers

customers segmented based on service needs and production/distribution capabilities are designed to meet each segment's need. Customer segment needs include: -variety of products required -Quantity and delivery frequency needed -product quality desired -level of sustainability sought, and -the pricing of products Ultimate goal of Supply chain = successfully deliver products and services to end customers, and top mgmt must be involved

Functional Silos

departments in a firm that are only concerned with what is going on in their department and not what is in the best interests of the firm

Critical location factors

difficult challenge = where to position assets to create long term comp advantage, questions and concerns needed to be answered for each location are: reaction of shareholders/customer/emps/competitors, where is target market located, will location provide sustainable comp advantage, impact on product/service quality, can right people be hired, effect on supply chain, projected cost, impact on delivery performance, market reaction etc... 3 levels of location decisions = 1. global market or country selection, 2. subregion or state selection, 3. community and site selection

Environmental issues

environmental mgmt and control has a big impact on facility locations.North american agreement on environmental cooperation is supplementary to nafta and objective it provides a framework for 3 NAFTA countries to conserve, protect and enhance North American environment. WTO agreement makes direct reference to sustainable development and the desire to protect and preserve the environment. Global orgs. assessing total environmental footprints by focusing on carbon and life-cycle analysis, life cycle approach looks beyond carbon footprint and focuses on a cradle-to-grave analysis.

Currency Stability

factor impacting business costs and location decisions(instability in currency exchange rates), and any org. involved with international business will be subjected to the risk of currency fluctuation.

Access to suppliers

firms prefer locations close to suppliers b/c of material availability and transp. costs reasons, as this has an impact on delivery of materials and effectiveness of the supply chain.

Performance measures

firms with the best supply chains create hierarchies of precise performance measures at the execution level combined with a distillation of meaning at the strategic level. The strategic goals at the top will only succeed if there is a clear path to performance measures at the transaction level to identify execution problems. Performance measurement systems vary substantially from company to company, w/ many measures concentrating solely on costs and profits but making decisions while relying solely on financial performance gives no indication of underlying causes of financial performance and instead you should monitor the activities indirectly/directly impacting financial performance. Obtaining world class competitive status requires managers to realize that making process decisions to create/purchase products that customers want and then to effectively distribute them requires careful monitoring of cost, quality and customer service performance. Measuring everything is not the answer. Performance measurement systems become complicated from varied relationships, trust, and interactions.

Hub and spoke approach

good for a firm that competes on speed of delivery, some companies compete on cost alone

Gov't taxes and incentives

gov't incentives, business attitude, economic stability, and taxes are important location factors and several levels of gov't must be considered. At federal level tariff is tax imposed by gov't on imported goods to protect local industry, support balance of payments or raise revenue(high tariffs discourage imports but encourage multinational corps to set up factories and produce locally). WTO requires reducing tariffs. in U.S. 41 states have broad based personal income tax and 46 w/ corporate income tax(Nevada is business friendly)

Facility location

important decision affecting the efficiency and effectiveness of managing supply chains, the level of service provided to customers, and a firms overall comp. advantage. Location of production facilities, offices, dcs and retail sites determines the efficient flow of goods to and from these facilities, once decision is made it is costly to move or shut down that facility(long term impact on supply chain strategy). Easy to access global markets makes location less important as a source of competitive advantage. Global location decisions involve determining the location of the facility defining its strategic role and identifying markets to be served by facility. Companies are continuing to internationalize.

Lack of visibility

information visibility= the degree that information is communicated and made available to various constituents, typically on the internet. Very important globally w/ changing safety standards, trade agreements and security reqs. Connectivity and visibility becoming much easier with the use of cloud based communication platforms(internet based platform ensures faster time to market, faster responses to change) which provide speed. Need to provide real time information/updates. RFID tags can improve visibility.

12 pillars of competitiveness

institutions(legal and admin framework(, infrastructure(transp, telecomm and power networks), macro environment, health and primary education, higher ed. and training, goods market efficiency, labor market efficiency, financial market development, tech readiness, market size, business sophistication(quality of overall business networks and ind. firms, innovation. top 5 countries are switzerland, singapore, U.S., Netherlands and Germany. Criteria covered in world competitiveness report represent issues that orgs. would like to know about before making a location decision

Weighted factor rating model

method commonly used to compare the attractiveness of several locations along a number of quantitative and qualitative dimensions. Factors, weights and scores are subject to interpretation and bias, so a team approach is recommended and it should include reps from marketing, purchasing, production, finance, and transp. Other method is breakeven model which is useful when you have FC and VC for each location.

Use of costs, revenue and profitability measures

might seem useful at first, but their are problems such as profits that occur when prices rise due to sudden demand. Changes in cost and profit statistics may not accurately reflect the true capabilities of the firm. Another problem is the difficulty in attributing any financial contributions to the various functional units or underlying processes of the org. Using costs alone as a departmental business unit performance measure can result in actions that hurt the org like rewarding purch. department for minimizing purch. costs might result in poor quality.

traditional performance measures

most measures used today by firms continue to be traditional cost based and financial statistics reported to shareholders in form of annual report, balance sheet and income statement data. Unfortunately, financial statements/other cost based info don't reflect underlying performance of productive systems of an org, cost and profit info can be hidden or manipulated to make performance seem far better than reality. Business success depends on a firm's ability to turn internal competencies into products and services that customers want, while providing desired environmental, quality, and customer service levels at a reasonable price. Financial performance measures cannot adequately capture a firm's ability to excel in various process areas

supply chain performance measurement systems

must effectively link supply chain trading partners to achieve breakthrough performance in satisfying end users. At local or interfirm level, measures are required for high-level performance and in a collaborative setting these measures must overlay entire supply chain to ensure that firms are all contributing to the supply chain strategy and end customer satisfaction.

Competitiveness of nations

nations competitiveness defined as a measure of a country's advantage or disadv in selling its products in int'l markets( 2 sources) Competitiveness refers to the objective of how countries, regions and companies manage their competencies to achieve long term growth, generate jobs and increase welfare. Competitiveness is a way towards progress that does not result in winners and losers: when two countries compete, both are better off. Four competitiveness factors: 1. economic performance(macro-economic evaluation) 2. Gov't efficiency(gov't policies conducive to competitiveness) 3. Business efficiency(environment encourage enterprises to perform) 4. Infrastructure(tech and hr meet needs of business) World economic forum defines as "The set of institutions, policies, and factors that determine the level of productivity of an economy

Develop internal performance measures for key process effectiveness

procedures/metrics must be in place to gather internal performance data, so prior to measuring, firms must build good internal performance measurement capabilities across functions that emphasize overall supply chain strategy and corresponding process objectives. Performance should be monitored using a set of metrics designed for each process.

Internal supply chains

organization's network of internal suppliers and internal customers. Can be complex, particularly if the firm has multiple divisions and organizational structures around the globe. Must be assessed to determine the current state of internal integration. Data warehouses can be used to collect data from the various divisions of the firm and firms that are successfully integrating business processes are using global ERP systems and data warehouses to make better, informed decisions.

Assess and improve external process integration and supply chain performance

over time firms will eliminate poor suppliers and unprofitable customres. Building and strengthening relationships w/ beneficial suppliers/customers is maintained through external process integration as it improves among supply chain partners, so too does performance. Integration is MOST SIG. Predictor of competitive position. Trading partners must be willing to share sales and forecast info. The way info is communicated plays a very important role in external process integration. Communication capabilities must deal with handling the flows of goods and information b/t companies, negotiating and executing contracts, all with a high level of security.

Web based scorecards

performance dashboards, available to help design scorecards linked via the web to firm's ERP system. Enable users to retrieve data easily and enable wide access by users at many locations providing desired security. Used to track "big picture" corporate objectives and more tactical data.

Develop supply chain performance measures for the key processes

should also develop external performance measures to monitor links with trading partners regarding the key supply chain processes. Teams composed of members from primary trading partners should be created to design these measures to be consistent w/ overall supply chain strategies. External perf. measures should align with internal perf. measures but may vary based on purchasing, production, distribution, customer service and other variations.

Lack of trust

successful process integration requires trust. Trust develops over time b/t trading partners as each follows through on promises made to others. 6 ways of getting to "yes" = 1. Start small(collaborate on small scale, show benefits of collab) 2. Look inward(first establish trust with internal people) 3. Gather round(face to face) 4. Go for the win-win(create environment optimizing business for all sc members) 5. Don't give away the store(keep some info proprietary) 6. Just do it(start sharing)

Managing supply chain risk

supply chain risk = likelihood of internal or external event disrupting operations causing reductions in service levels, product quality, and sales with increased costs. Increasing globally, risk mgmt activities include: 1. increase safety stocks/forward buying (temporary solutions b/c can dramatically increase inventory carry costs, forward buying might be the only short term solution in some cases) 2. Identify backup suppliers and logistics services(can create ill will w/ currents, requires additional time and relationship building) 3. Diversify supply base(geographically dispersed markets to minimize impacts of disruptions, but increase political and security risks) 4. Utilize a supply chain IT system(collection and sharing of appropriate info w/ partners) 5. Develop formal risk mgmt program(identify potential disruptions, and appropriate response, most proactive risk mgmt activity). Risk mgmt should be an executive level priority

Understanding supply chain partner requirements

supply chain strategies must consider potential trade-offs existing among the cost, quality, sustainability, and service requirements mentioned above. Firms within supply chains must collaborate and decide what combination of customer needs their supply chains can and should provide. For instance to increase responsiveness, companies along the supply chain may have to invest more in capacity and faster transportation, to increase supply chain quality may require investments in newer equipment, better tech/materials

Productivity and utilization measures

total and single factor productivity measures can be useful but problems are that they do not allow the firm to determine actual performance of any of the resources behind these elements. Decisions made to increase productivity can actually increase a firm's costs and reduce quality or output in the long term(reducing productivity). Utilization measures when used as goals can encourage the firm to reduce labor levels until everyone is overworked hurting morale, causing queues and quality levels to drop. Tendency to jeep producing and add to inventory to keep people busy. Emphasis on overall performance in terms of generalized criteria(financial, productivity, utilization) does not tell the entire story and these dont reveal underlying process performance. Traditional performance measures tend to be short term oriented, beneficial improvements will initially worse performance measures but help the firm long term. World class org's understand long term competitive advantage is created when strategies are geared toward exceeding expectations of product service cost, quality, deliverability, flex. and sust.