Academic journal article Journal of Business Economics and Management

Supplier Performance Measurement in Discrete Manufacturing Industry-Empirical Study on Indian Manufacturing Sector

Academic journal article Journal of Business Economics and Management

Supplier Performance Measurement in Discrete Manufacturing Industry-Empirical Study on Indian Manufacturing Sector

Article excerpt

1. Introduction

"If you cannot measure it, you cannot manage it" (Garvin 1993). Thus, the ways and means of accurately measuring the performance has been perceived as being an increasingly important field of research for both industry and academics alike. Performance measurement is an essential element of management and also used as a management tool to understand current status of performance and directs to change if required (Amaratunga, Baldry 2002; Tangen 2004). It drives the performance of the elements present in the supply chain, motivates the stake holders, helps in taking decisions, supports better communications, provides feedback and governs behavior. Stainer (1997) believes that the performance measure, or a set of performance measures, is used to determine the efficiency and effectiveness of an existing system, or to compare competing alternate systems, by determining the values of the decision variables that yield the most desirable levels of performance. Performance Management (PM) is defined as the use of performance measurement information to effect a positive change in the organizational culture, systems and processes, by helping to set agreed-upon performance goals, allocating and prioritizing resources, informing managers to either confirm or change current policy or program directions to meet these goals, and sharing the results of performance in pursuing these goals (Amaratunga, Baldry 2002).

Current practices of business forced manufacturers for product customization, quality improvement, innovativeness and high responsiveness in order to satisfy the customer demands which are increasing day by day. For sustainability of business, competitiveness and profitability organizations are developing long term partnerships with key suppliers (Shepherd, Gunter 2006; Beamon 1999; Gunasekaran et al. 2004). Key and competent suppliers provide profitability, delivery improvement improved quality, and innovation. So it is important to have correct and effective suppliers within the supply chain. This means an organization has to select high performing suppliers, regularly judge the performance of the suppliers and to review the performance parameters in regular intervals (Dyer 2000; Dyer, Singh 1998; Gulati et al. 2000). Performance parameter and index may change from time to time depending upon the nature of business and business scenario.

Through this research we have tried to focus on the current practices of the discrete manufacturing industries of eastern parts of India, bridging the gap between existing practices and desired performance measurement attributes through literature review and expert opinions, providing an alternate model for performance measurement and testing the additional factors suggested for including in the performance measurement system through regression analysis.

2. Literature review in brief

It has been said that, "the design of supplier performance measurement systems is possibly one of the final structural areas of business in which significant savings can be made". It is becoming an increasingly important strategic tool as trade is getting globalized (Morgan 2004). Performance Measurement Systems (PMS) have been at the top of the research and business agenda over the past few years. According to Neely et al. (1995), performance measurement is defined as the process of quantifying effectiveness and efficiency of action. Effectiveness is the extent to which customers' requirements are met while efficiency measures how economically a firm's resources are utilised.

In the current business practice supply chain compete with each other not the firms. So it is more important to measure the performance of the supply chain, more precisely to judge the performance of the supply chain partners. One of the major contributors to the supply chain performance is supplier. Supply chain management has become common practice across industries since it addresses long-term strategic alliance, supplier buyer partnerships, cross-organizational logistics management, joint planning, control of inventory, and information sharing (Banomyong, Supatn 2011). …

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