Module 10: Performance Metrics
Reading Assignments - e-Notes (Supply Chain Management Fundamentals: Module 10)
Performance metric (PM)- a single performance
measurement used to evaluate, motivate, and
improve performance. Temperature, time, weight,
speed, length, etc.
System of metrics- group of metrics that collectively
attempt to provide a multidimensional view of a
resource or outcome. You probably don’t want to rely
on only one metric.
Reasons organizations use PMs- help establish
and support standards, motivate good behavior,
identify trends, manage from afar (top execs have
intel on many locations), manage large numbers of
resources, performance data can facilitate decision
making and planning.
Importance of Goals and Stakeholders- who are
the stakeholders? What do they want? How do they
interact? How will their actions impact one another?
Consequences of poor metrics- SC goals not met,
poor output, waste, undesirable employee behavior,
mgr’s may make poor decisions, employee
victimization, undeserved winners, lack of
contentment.
Requirements of a good metric- measurable, easily
understood, attainable, strategically oriented, easy to
measure, provides value, provides guidance, cheater
proof,
SMART metrics(SPECIFIC, MEASURABLE,
ATTAINABLE, RELEVANT, TIMELY)- Slimmed down
version of the requirements of a good metric
3 Key measurement system attributes- effective
(were goals met?), efficient (resources used),
adaptable (conditions under which tasks were
completed).
Keys to designing a system of metrics-
stakeholders and goals, good metrics, simplicity,
completeness, redundancy, continuous improvement,
leadership
KPI (Key performance indicators)- individual
performance metrics identified by the company as
being imperative to achieving the organizations most
important goals.
Executive dashboards- comp-generated visual
representation of a co.’s performance that is often
available to executives on nearly any of their digital
devices. (data likely includes but not limited to KPI’s)
Managerial paralysis- situation where mgr’s are
inundated with data. Overflow of data slows decision
making, or even cause them to stall or avoid it. (like
having a large data set)
Common measurement pitfalls- mgr’s fail to use
the data, blind belief in metrics, incomplete
measurements, utilizing too many metrics, driving
toward perfection may waste resources, what do
numbers really mean?
Shared metrics- metric that is impacted by 2 related
parties.
Balanced scorecard- performance mgmt tool that
focuses on strategic activity and outcome. Usually
tracks 4 outcomes. Financial results, customer
related results, internal business process results,
learning and growth results.
SCOR Model (Supply chain operations reference)-
enables SC partners to track performance,
communicate progress, and develop opportunities for
improvement. Connects SC activities from suppliers
at one end of the SC to customers at the opposite
end.PLAN, SOURCE, MAKE, DELIVER, RETURN.
Total SCM Costs- Cost of every process, material,
fee, defect, etc. that runs through the SC.
Cash-to-cash cycle- number of days between the
time a co. pays their supplier for inventory and when
they are paid by customer for the same inventory.
Capacity utilization- a ratio of the amount of product
produced by a manufacturing process vs. the max
cap of that facility.
Process Velocity- how long a unity sits in a process
vs. the amount of work time that is expended on the
unit. Throughput time = time unit spent in the system.
Value added time is how long item was worked on
during the process.
Perfect Order fulfillment- percentage of orders that
are full, arrive on time, and are damage free.
Also, be sure to read all introductory sections.
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SCM 300 – MODULE 10
Study Packet
SCM 300 – MODULE 10
Study Packet
Basics of Metrics
Know the primary performance measurement terminology.
Difference between a single metric and a system of metrics
Primary reasons people, especially business people, utilize metrics
Results of utilizing poor metrics
Developing a Single Metric
Requirements of good metric
Other considerations in developing/using metrics
Consequences of utilizing poor metrics
Types of metrics
Use your answers to the previous questions and the in-class examples to identify poor metrics utilized in
business, education, sports, life, etc. This will help test your knowledge of why some metrics are poor
indicators of good performance, poor motivators, and/or incomplete.
Systems of Metrics
Keys to developing a good system of metrics
Relationship between accuracy and speed
Six-step evaluation of a system of metrics
Business and Supply Chain Metrics
KPIs
Executive dashboards
Balanced scorecards
SCOR Model
Capacity utilization, Cash to Cash Cycle, Process velocity: Calculations. Also, is it better to have high
or low numbers for these metrics?
AS ALWAYS, BE ABLE TO RECALL THE LECTURE EXAMPLES. Some of these examples were very in-
depth, so I would hope you took some notes on the key points made in these lengthy examples.
FORMULAS FOR MODULE 10
Process Velocity = Throughput Time/Value Added Time
Capacity Utilization = Actual Output/Design Capacity
Cash to Cash Cycle = (Days of Inv) + (Days A/R) - (Days A/P)
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