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Supply Chain Performance Measurement Approaches: Review and Classification
Supply Chain Performance Measurement Approaches: Review and Classification
Supply Chain Performance Measurement Approaches: Review and Classification
Abstract
Interest in the topic of supply chain performance measurement has notably increased in the last
two decades and considerable research has been conducted in this area. The objective of this paper
is not just to review the advancements in theory on supply chain performance measurement per se,
but rather to provide a taxonomy with which research in the field can be mapped and evaluated.
The need for a structured topological approach to the development of supply chain performance
measurement frameworks and methods is addressed. Findings are based on the analysis of a huge
number of publications including the most recent reviews conducted in the contemporary
literature (books, theses, journal articles and conference papers). The researchers believe that
currently existing supply chain performance measurement frameworks can be classified into nine
different types grouped according to the key criteria of measurement. This research reveals that
most of the already existing approaches are static, inflexible and lack continual improvement which
constitutes a gap between the theory and their potential application. Thus, future contributions to
the topic are essential and possible.
Copyright © 2012 Nedaa Agami, Mohamed Saleh and Mohamed Rasmy. This is an open access article
distributed under the Creative Commons Attribution License unported 3.0, which permits unrestricted use,
distribution, and reproduction in any medium, provided that original work is properly cited. Contact author:
Nedaa Agami E-mail: n.agami@fci-cu.edu.eg
Journal of Organizational Management Studies 2
Holmberg (2000) and Eccles and Pyburn et al., 2002; Dasgupta , 2003; De Toni and
(1992) define SCPM as a system that Tonchia, 2001; Gunasekara et al., 2005;
provides a formal definition of supply chain Gunasekaran, and Kobu, 2007; Harrison and
performance model based on mutually New, 2002; Kaplan and Norton, 2006;
agreed on goals, metrics and measurement Kennerley and Neely, 2002; Kennerley and
methods that specify procedures, Neely, 2003; Kim, 2006; Kleijnen and Smits,
responsibilities and accountability of supply 2003; Koh et al., 2007; Landeghem and
chain participants and the regulation of the Persoons, 2001; Li et al.,2005; Li et al., 2007;
system by them. Lummus et al.,2003; Maskell, 1992; Martinez
and Kennerley, 2005; Melynk et al., 2004;
As the vehicle to organizational change, the Najmi et al.,2005; Petroni and Panciroli ,
design and development of a SCPM system is 2002; Ren , 2008; Sahay, 2006; Shepherd and
a critical issue. It has been tackled and Gunter , 2006; Stewart, 1995; Suwignjo et al.,
discussed in numerous researches in which 2000; Talluri and Sarkis , 2002; Tian et al.,
authors and experts in the field suggested 2003 ; Vereecke and Muylle , 2006; Zhaofang
various desirable characteristics. However, et al., 2006; Venkata,, 2007; Öztaysi and Uçal,,
they all (Beamon, 1999; Keebler, 2001; 2009; Agami et al., 2011.; Cirtita and Glaser-
Gunasekaran et al., 2004; Tangen,, 2004; Segura, 2012; Tan et al., 2011; Hall and
Ramaa et al., 2009; Akyuz, and Erkan, 2010; Saygin, 2012; Agarwal and Shanka, 2005;
Kurien and Qureshi , 2011) agreed that an Sarode et al., 2009). They stated that
effective SCPM system should be performance measures have to be
characterized by: measurable, non-conflicting and clearly
defined across the chain along with many
1. Inclusiveness: Covers all aspects and other characteristics. Gunasekaran et al.
processes of a supply chain (2004) for instance, have recently
emphasized that supply chain performance
2. Universality: Allows for comparison measures should mainly be balanced
under different operating conditions (financial vs. non-financial) and should be
classified at the strategic, tactical and
3. Measurability: Output is quantitative operational management levels.
and can be measured
Evolution of SCPM
4. Consistency: Metrics are compatible
with supply chain goals As stated earlier, measurement is important
as it directly affects the behavior that impacts
The selection of right performance metrics is supply chain performance. Thus, SCPM
another crucial issue. The appropriate provides the means by which a company can
measures do not only offer a means of assess whether its supply chain has
tracking how far an organization is from improved or degraded. Both quantitative and
achieving its objectives, but also provide a qualitative performance indicators were put
means of communicating strategy and forward. However, to track and measure
encouraging its implementation. their performance, companies traditionally
relied solely on financial accounting metrics,
Several researchers have addressed this many of which date back to the 19th century
problem and discussed the features and and even earlier. At that time, performance
requirements of appropriate measures (Lai measures were in the form of: cost per yard,
et al., 2002;, Beamon, 1999; Keebler, 2001; cost per metric ton and so on. Then at the
Gunasekaran et al., 2004; Parker, 2000; beginning of the 20th century, diversification
Lapide, 2000; Chan and Qi, 2003; Chan, 2003; induced the reformation of performance
Simchi-Levi et al., 2002; Basu, 2001; Beamon measurement, and DuPont Company in 1903
and Ware, 1998; Bourne et al., 2000; Bourne had executed the “Rate of Return on
Journal of Organizational Management Studies 4
Investment” (ROI) to appraise the Before the 1980s, traditional cost accounting
performance of different units and developed systems with pure financial orientation were
the “DuPont System Scale” which was widely used. They relied solely on generic
adopted afterwards. Since then, financial quantitative financial metrics, ignoring any
indicators became systematic (Parker, 2000). other important strategic none financial ones
After World War II, the nature of the such as customer loyalty or service quality. In
environments surrounding enterprises the first decade afterwards, those cost
changed and became full of uncertainty and accounting systems were enhanced whereby
variation which called for the necessity to the scope of financial indicators extended to
balance the relations of marketing, research cover different functions and specific
and development, human resources and operations within the supply chain. In the
finance (Kurien and Qureshi, 2011). Hence, early 1990s, Kaplan and Norton (1992)
companies shifted their priorities and started developed the Balanced Scorecards (BSC)
to use financial and non-financial indicators, approach which constituted the introduction
i.e., the mixed approach. of the mixed systems concept for the first
time. Their approach addressed explicitly the
With the evolution and maturity of business importance of monitoring and evaluating
organization concept in the late 1990s, none-financial indicators as well. During the
performance measurement systems have last decade, integrated online systems
changed completely to balanced integrated concept as well as e-commerce has strongly
approach (Parker, 2000). Figure 1 illustrates been evolving in an attempt to enable
the evolution of SCPM systems on a timeline information sharing and facilitate the whole
that is split into four eras. measurement process across the different
supply chain perspectives.
Financial measures are critically important in 2. They do not relate to important strategic,
assessing whether or not operational non-financial performance indicators
changes are improving the financial health of such as customer satisfaction and
an organization. However, as highlighted and product quality,
emphasized in literature (Kurien and
Qureshi, 2011; Lapide, 2000), they are 3. They do not directly tie to operational
insufficient to measure supply chain effectiveness and efficiency.
performance for the following reasons:
In response to the deficiencies of traditional
1. They tend to be short-term, internally accounting methods for measuring the
focused and historically oriented, performance of supply chains, a variety of
5 Journal of Organizational Management Studies
measurement systems and approaches have productivity and costs of a supply chain
been developed as discussed process. However, it still suffered the major
comprehensively in the next section. limitation of relying only on pure financial
metrics.
Common SCPM Frameworks: Review and
Classification Economic Value Added (EVA)
The literature on SCPM is relatively huge The EVA is an approach for estimating a
(Ramaa et al., 2009; Akyuz and Erkan, 2010; company’s return on capital or economic
Kurien and Qureshi, 2011; Estampe and value added. It was developed in 1995 by
Lamouri , 2011; Lauras et al., 2011). Several Stern et al. (1995) in order to correct the
attempts have been made to measure supply deficiency of traditional accounting methods
chain performance using conventional which focused only on short-term financial
approaches. Surveying the literature results providing little insights into the
revealed that there are generally two classes success of an enterprise towards generating
of SCPM systems: Financial and Non- long-term value to its shareholders. EVA
financial. Each class is explained in details approach is based on the premise that the
below. shareholder’s value is increased when a
company earns more than its cost of capital.
Financial Performance Measurement The EVA measure attempts to quantify the
Systems (FPMS) value created by an enterprise basing it on
operating profits in excess of capital
Financial performance measurement systems employed (through debt and equity). Though
are generally referred to as traditional useful for assessing high level executive
accounting methods for measuring supply contributions and long-term shareholder
chain performance. They mainly focused on value, EVA metrics fail to reflect operating
financial indicators and hence were always supply chain performance since it only
criticized for being inadequate because they considers pure financial indicators.
ignore important strategic non-financial
measures as explained in the previous Non-Financial Performance Measurement
section. In literature (Lapide, 2000), two Systems (NFPMS)
FPMS methods highlighted as very popular
are: Upon reviewing the literature in the field of
SCPM (Ramaa et al., 2009; Akyuz and Erkan,
Activity-Based Costing (ABC) 2010; Kurien and Qureshi, 2011; Estampe
and Lamouri, 2011; Lauras et al., 2011;
The ABC approach was developed in 1987 by Cuthbertson and Piotrowicz, 2011), the
Kaplan and Bruns (1987) in attempt to tie researchers believe that currently available
financial measures to operational non-financial SCPM approaches can be
performance. It involves breaking down classified into nine different types grouped
activities into individual tasks or cost drivers according to their criteria of measurement.
while estimating the resources, such as time Very few attempts (Ramaa et al., 2009) were
and costs, needed for each one. Costs are made earlier for the same purpose but were
then allocated based on these cost drivers narrower in scope, limited to certain
rather than on traditional cost accounting approaches and didn’t provide a clear
methods such as allocating overhead either comparison that demonstrates the key
equally or based on less relevant cost drivers. differences between groups. The identified
The approach was designed in such a way to groups are discussed in the next nine sub-
allow for better assessment of the true sections.
Journal of Organizational Management Studies 6
Supply Chain Balanced Scorecard (SCBS) Supply Chain Operations Reference Model
(SCOR)
In 1992, Kaplan and Norton (1992)
introduced the Balanced Scorecard (BSC) as SCOR model was created by the Supply Chain
an indispensible performance management Council (Stephens, 2001; Huang et al., 2004;
tool. Since then, it has been recognized as the Lockamy and McCormack, 2004). The first
leading tool for performance measurement in version was developed in 1996. It is a
both research and industry. It enables framework for examining the supply chain in
managers to observe a balanced view of both detail through defining and categorizing the
operational and financial measures at a processes that make up the chain, assigning
glance. The authors proposed four basic metrics to such processes and reviewing
perspectives that managers should monitor comparable benchmarks. The SCOR model
as follows: Financial, Customer, Internal framework can be found in Huang et al.
Business Processes and Innovation and (2004). It is the only integrated cross-
Learning perspectives. A graphical functional framework that links performance
illustration can be found in Kaplan and measures, best practices and software
Norton (1992). Bearing these four requirements to a detailed business process
perspectives in mind, managers can translate model.
strategies into specific measures that can
monitor the overall impact of a strategy on The SCOR model defines a supply chain as
the enterprise. being composed of five main integrated
processes: Plan, Source, Make, Deliver and
The goals and measures in each perspective Return. Performance of most processes is
are extracted from the enterprise strategy. measured from 5 perspectives: Reliability,
Brewer and Speh (2000) demonstrate how a Responsiveness, Flexibility, Cost and Asset.
supply chain management framework is As the model spans the chain from supplier’s
linked to the balanced scorecard. supplier to customer’s customer aligned with
operational strategy, material, work and
BSC is powerful in providing managers with a information flows, it is considered an
comprehensive picture of the enterprise exhaustive system that requires a well-
performance (Abu-Suleiman et al., 2004; defined infrastructure, fully dedicated
Kaplan and Norton, 1992). However, it managerial resources and continuous
suffers two basic limitations as discussed in business process re-engineering to align the
literature. First, it is a top-down approach. business with best practices.
Therefore, it is not participative and might
fail to detect existing interactions between Dimension-based Measurement Systems
different process metrics. According to (DBMS)
Lohman et al. (2004), BSC is a static approach
which when applied in corporate setting DBMS concept is based on the premise that
does not provide an opportunity to develop, any supply chain can be measured on
communicate and implement strategy. dimensions (Ramaa et al., 2009). Initially in
Second, although powerful and widely used 1999, Beamon (1999) identified three types
in industry, BSC provides a conceptual of measures as necessary components in
framework only. That is, it lacks an supply chain performance measurement
implementation methodology and thus systems, namely: Resources (R), Output (O)
deviates from the merit of concept itself. and Flexibility (F). She believed that each of
7 Journal of Organizational Management Studies
located in the second stage, where a namely: EBMS and GPMS. The first refers to
performance measurement grid is created in the performance measurement systems that
order to give the system its basic design. aimed at measuring the efficiency of supply
Little guidance is given in this stage and the chains and groups them into one category,
grid is only constructed from six competitive while the latter is composed of the common
priorities whereas performance measures performance measurement frameworks
can be divided into many other categories available in literature that can be used for
(Kurien and Qureshi, 2011; Medori and SCPM, however not specifically developed for
Steeple, 2000). this purpose. Exceptionally excluding the BSC
which Ramaa et al. (2009) considered as one
distinct category because of the numerous
In an earlier literature survey on SCPM, researches conducted on its use for SCPM. A
Ramaa et al. (2009) have previously summary of the Non-Financial Performance
classified SCPM systems into seven distinct Measurement Systems (NFPMS) with their
types. However in this review, other two criteria of measurement is given in Table 1.
novel groups are added to their classification,
(Bhagwat and Sharma., 2007; Akyuz, and 8. Insufficient focus on customers and
Erkan, 2010; Lapide, 2000; Estampe and competitors; and
Lamouri , 2011; Chan and Qi, 2003; Chan,
2003; Van and Remko, 1998; Tracey and Tan, 9. Large number of metrics, making it
2001; Simchi-Levi et al., 2002; Bernard and difficult to identify critical few among
Gianni , 2003; Ren et al., 2004; Fynes et al., trivial many.
2005; Saad and Patel, 2006; Fabbe-Costes
and Jahre, 2007): The previous deficiencies clearly illustrate
the problems of today’s performance
1. Not connected with strategy; measurement systems. With all these
problems highlighted, there seems to be no
2. Incompleteness and inconsistencies in universal consensus regarding the definition
performance metrics; of appropriate SCPMS; and commonly
implemented ones are still, to a great extent,
3. Lack of balanced approach that fragmented. Many of them lack strategy
incorporates financial and non-financial alignment, a balanced approach and systems
measures; thinking and thus have difficulty in
systematically identifying the most relevant
4. Lack of holistic approach, i.e. a supply metrics (Akyuz, and Erkan, 2010).
chain must be viewed as one whole entity
and measured widely across the whole; In the work done by Cai et al. (2009), they
also state that current SCPM systems do not
5. Being static and short-term, profit- provide definite cause-effect relationship
oriented; among numerous hierarchical individual
performance indicators. The fact that such
6. Encourages local optimization and thus, systems are static is also mentioned and
fails to support continuous improvement. emphasized. McCormack et al. (2008)
compare the traditional and innovative
7. Being too inward looking; Performance Measurement Systems (PMS) as
outlined in Table 2 highlighting the necessary
changes over traditional ones.
T
able 2 – Traditional Vs. Innovative PMS
Several studies also emphasized the need for Parker, 2000; Lapide, 2000; Chan and Qi,
determining the right type of metrics that 2003; Chan, 2003; Simchi-Levi et al., 2002;
clearly reflect the true performance of the Basu, 2001; Beamon and Ware, 1998; Bourne
supply chain (Lai et al., 2002;, Beamon, 1999; et al., 2000; Bourne et al., 2002; Dasgupta ,
Keebler, 2001; Gunasekaran et al., 2004; 2003; De Toni and Tonchia, 2001;
Journal of Organizational Management Studies 12
The findings of this analysis indicate that the actually measuring the most relevant
literature under the topic of SCPM is almost business drivers, and hence enabling not only
balanced between being theoretical and performance measurement and evaluation,
empirical. Related publications are almost but also performance management through
divided equally; 50% for each. However, it is setting strategies for improvement.
worth mentioning that in the last couple of
years, tendency is higher towards empirical Dimension Two: Level
advancements where researchers focus on
reporting the results of real practices in The second dimension of analysis relates to
various application domains. the level on which the developed frameworks
measure performance. Some approaches are
Nature of the Framework – Criterion: designed to measure the performance of
specific individual organizations within the
One of the main challenges while analyzing supply chain.
the literature under a specific topic is how to
address the various aspects of the works These approaches are referred to as entity
done. For instance, one can choose to classify level performance measurement ones. Other
the frameworks available in literature as approaches suggest measuring performance
either quantitative or qualitative. One might of the whole supply chain including all sub
also classify the frameworks and approaches entities. Such approaches are referred to as
developed according to the dimensions based system level performance measurement
on which KPIs are identified and defined. methods.
However, the researchers decided to adopt a
two-dimensional approach for describing the Results are reported in the matrix illustrated
frameworks and methodologies developed in table 3. The researchers summarize the
for SCPM as follows: analysis findings combining the two
dimensions. However, the results of each
Dimension One: Time dimension are also discussed separately. On
the first dimension, 83% of the published
The literature associated with SCPM is huge. researches coming mainly from the SCBS
However in this review, the works done for category discuss static frameworks versus
this purpose are classified as static or only 17% discussing dynamic ones. Whereas
dynamic to simplify the analysis as a first results on the second dimension emphasize
dimension. Static refers to the absence of a that the literature under SCPM topic is
regular feedback component and thus the dominated by entity-level performance
lack of continual improvement. Once systems measurement approaches constituting 90%
are established, they are rooted and remain of the publications. The remaining 10%
unchanged for a long time. While dynamic discussing system-level frameworks mainly
refers to the continuous monitoring of focus on measuring the performance of green
improvement to ensure organizations are supply chains.
LEVEL
Entity-Level System-Level
75% 8%
TIME
Static
Dynamic 14% 3%
Journal of Organizational Management Studies 14
Future contributions to the area of SCPM are It shows that most of the already existing
possible and essential. They may come SCPM systems are inflexible and lack
specifically from further research on the continual improvement. Immaturity of the
following as already initiated by Agami et al. frameworks and models developed for this
(2011): purpose is evident in this survey. And hence,
SCPM is still a flourishing research area since
1. Dynamic, system-level framework a gap still exists between the research and
development efforts on both: theoretical potential application of current systems.
and empirical fronts. Further research development efforts, as
discussed in the last section of this paper,
2. Further elaboration on performance and future advancements are still needed.
measurement to assess the degree of
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