Academic journal article Journal of Transportation Management

A Framework for Evaluating Supply Chain Performance

Academic journal article Journal of Transportation Management

A Framework for Evaluating Supply Chain Performance

Article excerpt

The ability to measure supply chain performance remains an elusive goal for managers in most companies. Few have implemented supply chain management or have visibility of performance across multiple companies (Supply Chain Solutions, 1998; Keebler et al. 1999; Simatupang and Sridharan, 2002). Supply chain management itself lacks a widely accepted definition (Akkermans, 1999), and many managers substitute the term for logistics or supplier management (Lambert and Pohlen, 2001). As a result, performance measurement tends to be functionally or internally focused and does not capture supply chain performance (Gilmour, 1999; Supply Chain Management, 2001). At best, existing measures only capture how immediate upstream suppliers and downstream customers drive performance within a single firm. Development of supply chain metrics measures requires extensive collaboration and trust between companies due to the sensitivity of the exchanged information (Kirby, 2003). In many instances, performance information is not exchanged or linked to the attainment of supply chain outcomes due to this sensitivity. Despite these obstacles, managers have continued to pursue performance measurement as a means to exert control or provide direction across the supply chain (Reese, 2001).

Effective management of the supply chain requires a framework capable of measuring the performance of multiple companies from source of supply to the final end user (Holmberg, 2000; Ramdas and Spekman, 2000; and Supply Chain Management, 2001). These measures enable managers to better evaluate which initiatives will be best for the overall corporation (Ellram and Liu 2002) and assess how each firm contributes to achieving supply chain objectives. However, managers lack an adequate framework for designing suitable metrics and developing incentives to align behavior (Narayanan and Raman, 2000). Most companies are only at the "tip of the iceberg" in terms of examining cost drivers, building cross-enterprise strategies, and sharing cost and performance results (Monczka and Morgan, 2000). Measures are required to obtain an understanding of how well the supply chain is performing and where to focus management attention to improve performance and plan competitive-enhancing efforts (Supply Chain Solutions, 1998; van Hoek, 1998; Lapide, 1999); Lummus and Vokurka; 1999; Reese, 2001; Stank, Keller, and Gloss, 2001). Managers need measures that depict a cause-and-effect relationship between performance and strategic outcomes at the supply chain and corporate levels. The linkage between cause and effect enables the development of measures that align corporate and functional performance with the objectives for the supply chain (Walker, 1999).

The purpose here is to present a framework for evaluating supply chain performance. The framework provides a technique for evaluating how collaborative action drives shareholder value across multiple firms and for developing performance measures that are aligned with supply chain objectives. A combined economic value added (EVA[R]) (1) analysis is used to determine how supply chain collaboration simultaneously creates value in the supplier and customer firms. Activity-based costing (ABC) is employed to develop operational performance measures that are aligned with overall supply chain objectives and to translate nonfinancial into financial performance and shareholder value. The framework incorporates the results of several previous research efforts examining supply chain costing and performance including La Londe and Pohlen (1996), van Hoek (1998), Lambert and Pohlen (2001), Dekker and van Goor (2000), and Dekker (2003). The first section reviews the existing literature and what is needed to evaluate supply chain performance. In the second section, the framework is presented and applied to the supplier-customer interface within the supply chain. The article concludes with a summary of the framework, implications for supply chain managers, and potential directions for future research. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.