A performance management approach involves implementing a process, a method, a metric, and a technology that will create a consistent relationship between supply chain strategy, planning, implementation, and controlling. In the SCM cycle, performance management represents the final element. However, the monitoring processes often take place concurrently with all the other elements. It involves a retrospective analysis to determine whether the correct process was followed and whether the desired results were achieved. The SCM Performance Management System should be developed and implemented according to departmental policies and procedures and applicable legislative requirements. Member companies of a supply chain must be able to evaluate the overall performance of the supply chain against the needs of the end customer. Further, member companies within the supply chain must be able to assess their relative contributions. To accomplish this goal, there is a need for a performance measurement system that is not only capable of operating at several levels but also capable of linking or integrating the efforts of these levels . Measurement methods and tools will need to be developed for measuring, monitoring, and managing supply chain processes in order to meet this requirement.
Academics and industry have been focusing on supply chain management (SCM) since the last decade; however, there is still no integrated system to integrate SCM and performance management. The majority of performance measurement models and frameworks have been developed for single organizations or have focused on a specific performance type, for example financial performance. In the supply chain management domain, several performance measurement approaches have been developed . Metrics dealing with sourcing, making, delivering, and customer service are critical to measuring performance at strategic, tactical, and operational levels.
Standard metrics allow companies to join benchmarking databases and use benchmarking services to compare with best in class companies. By identifying weak spots in the supply chain, improvements can be made through process redesign or reengineering. In addition, standardized metrics facilitate collaboration and integration within the supply chain and with 3rd party logistics providers. This type of collaboration model specifies clearly what partners and service providers should be expected to do in terms of process performance. Collaborating in the supply chain creates synergies and enables partners to create superior products and services, increasing competitive advantage.The use of advanced technologies and tools to monitor and evaluate the performance of supply chains is necessary for achieving supply chain agility and adaptability. In order to stay competitive, companies must use business intelligence (BI) technologies and tools to better manage their businesses and plan for the future. With the optimization of decision-making process based on monitoring the key performance indicators, the combination of business intelligence and performance management systems can improve supply chain efficiency and accountability. So that performance management can be more predictable, these systems should also provide actionable information to the right decision makers.
Companies should pursue the goal of providing all stakeholders with the right information at the right time using the appropriate tools as a result of the increased demand for business intelligence. As a means of achieving this objective, BI solutions and applications should be used for tracking, analyzing, modeling, forecasting, and delivering information for performance management and decision-making.In addition to BI, Performance management (PM) links processes, people, and technology. Using the PM system, supply chain operations can be made more efficient. A report typically explains what happened, why something happened, and what to do next. Through monitoring and analysis of key performance indicators (KPIs), supply chain PM systems aim to optimize business processes. Supply chain companies can align activities and processes with strategic objectives by using these performance measures.
BI systems use KPIs to measure the progress of various metrics against business objectives.They have become very popular for BI analysis because they provide a quick and visual insight into measurable objectives. KPIs are customizable business metrics that present an organization’s status and trends toward achieving predefined goals in clear and user friendly format. After a supply chain or member company defines its strategy and objectives, KPIs can be defined to measure its progress toward those objectives. KPIs are becoming essential elements of supply chain performance management software, balanced scorecards, and analytical dashboards.