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Metrics for SCM
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Metrics for SCM
Cost Measures
- Cost: "The money spent to acquire a raw material, a product, or a service." (Elrod,Murray & Bande, 2013)
- Total Costs
- Total Costs: "Refers to all the costs incurred to manufacture a product. This includes costs of raw materials, labor, transportation, distribution, marketing, administrative, overhead, as well as fixed costs such as acquisition of property, machinery, and other longterm investments." (Elrod,Murray & Bande, 2013)
- Identifies overall costs
- Difficult to obtain
- Distribution Costs
- Distribution Costs: "Costs incurred when products are transported from one place to another." (Elrod,Murray & Bande, 2013)
- Isolate a important cost
- Difficult to classify
- Information Processing Costs
- Information Procesing Costs: "Costs incurred when orders are taken, when invoices are prepared, and when discounts are given" (Elrod,Murray & Bande, 2013)
- Isolate a important cost
- Not disclosed to public
- Inventory Costs
- Inventory Costs: "Costs associated with storing all elements of a product, from raw materials to finished goods." (Elrod,Murray & Bande, 2013)
- Bring low inventory levels
- Cannot be extinguish 100%
- Manufacturing Costs
- Manufacturing Costs: "Costs incurred in production of a product" (Elrod,Murray & Bande, 2013)
- Measures a key cost
- Difficult to classify
- Inventory Obsolescence
- Inventory Obsolescence: "Costs associated with inventories that are obsolete, or those products whose value has depreciated over time" (Elrod,Murray & Bande, 2013)
- Identifies costs to extinguish
- Cannot be extinguish 100%
- Finished Goods Inventory
- FGI Cost: "Cost of finished products that are present in inventory, warehouse, or in-transit." (Elrod,Murray & Bande, 2013)
- Critical performance measure
- Higher overhead cost = Higher total cost
- Return On Investment
- ROI: "Ratio of net profit in relation to the investment on total assets."(Elrod,Murray & Bande, 2013)
- Higher ROI=Higher investment
- Difficult to measure
- Warehouse Costs
- Warehouse Costs: "Costs associated with the maintenance of storage spaces; key contributors to this cost are rent, utilities, maintenance, and labor costs." (Elrod,Murray & Bande, 2013)
- Identifies storage costs
- Varies widely with industry
- Incentive Costs
- Incentive Cost: Incentives give to employees, managers, executives and new products.
- Identifies sale incentives costs
- Difficult to identify
- Intangible Costs
- Intangible Costs: "Non-quantifiable costs and costs not associated with one particular product" (Elrod,Murray & Bande, 2013)
- Identifies critical cost factors
- Difficult to measure
- Financial Cost
- "Financial performance measures are used to track and manage costs." (Elrod,Murray & Bande, 2013)
- Direclty measure
- Difficult to obtain
Quality Measure
- Quality: "The perception that the product or service meets the consumer’s demand." (Elrod,Murray & Bande, 2013)
- Perceived Value of the Product
- "It is crucial to know their satisfaction level using the product. This measure helps the company understand how the product satisfies the market." (Elrod,Murray & Bande, 2013)
- Identifies desires and demand from customers
- Difficult to obtain
- Buyer-Supplier Relationship
- "Supply chain management can be improved with increased coordination among different departments, as well as healthy relationships between buyers and suppliers." (Elrod,Murray & Bande, 2013)
- Improved relationship supplier-company
- Not always a healthy relation
- Shipment Errors
- "Determining the location and severity of shipping errors" (Elrod,Murray & Bande, 2013)
- Identifies and assist errors
- Difficult to isolate the root cause
- Accuracy
- "Measuring accuracy considers the ratio of correctly produced products to incorrectly produced products." (Elrod,Murray & Bande, 2013)
- Identify accuracy with minimal waste
- Difficult to isolate
- Number of Faulty Notes Invoiced
- "This measure helps determine the frequency of incorrect invoices. Errors include improper condition of the shipment, late shipments, shipment of incorrect items, or damage to the products" (Elrod,Murray & Bande, 2013)
- Identifies trends and rectified errors
- Difficult to identify faulty invoices
Time Measures
- Time: duration of a specific events
- Order Lead Time
- Order Lead Time: " This is the period of time beginning with the customer placing an order until the time the order is delivered" (Elrod,Murray & Bande, 2013)
- Customer can know the waiting time
- Measure can be wrong
- Customer Order Path
- Customer Order Path: "The time spent traversing different processes before completing the order." (Elrod,Murray & Bande, 2013)
- Helps identify the idle time
- Difficult to carry out
- Effectiveness of Scheduling the Tecniques
- " Scheduling decides when an activity should start and when it should end, depending on the availability of the resources." (Elrod,Murray & Bande, 2013)
- Helps using resources efficiently
- Not equitative with products or tasks
- Product Development Cycle Time
- " Product development cycle time refers to the time consumed by raw materials to go through various assemblies to design a new product." (Elrod,Murray & Bande, 2013)
- Introduce products quickly
- Varies greatly
- Product Lateness Time
- Product Lateness Time: "The difference between the delivery date and the due date." (Elrod,Murray & Bande, 2013)
- Identifies delays and task consuming time
- Solution may not alter
- Average Lateness Time
- " This measure captures late deliveries. The average lateness time is calculated by summing all the late times, followed by dividing by the total number of late orders" (Elrod,Murray & Bande, 2013)
- Results used for scheduling decision
- Not identify errors
- Average Earliness Time
- " The average earliness time is determined by averaging the times of all early deliveries" (Elrod,Murray & Bande, 2013)
- Factor in customer satisfaction
- Not identify specific problems
- Manufacturing Lead Time
- " The time from point of order release until order shipped is manufacturing lead-time" (Elrod,Murray & Bande, 2013)
- Identifies overall manufacturing time
- Could mask errors and lag times
Flexibility Measures
- Flexibility: "ability to adapt to change by the company" (Elrod,Murray & Bande, 2013)
- Range of Products and Services
- " Useful to evaluate the company’s ability to introduce new products in the market" (Elrod,Murray & Bande, 2013)
- Less products = More rapid reaction
- More products = Less flexible
- Capacity Utilization
- " It is calculated as the ratio of total actual capacity to the designed capacity" (Elrod,Murray & Bande, 2013)
- Determinate equipment utilization
- High utilization in wrong products
- Volume Flexibility
- " This measure determines the ability to change the level of production in response to market demand."(Elrod,Murray & Bande, 2013)
- Identifies response rate
- Difficult to calculate
- Plant Volume Flexibility
- "This measure captures the ability of a company to change the volume produced, depending on demand" (Elrod,Murray & Bande, 2013)
- Output volume change measurement
- Equipment and process design unflexible
- Delivery Flexibility
- "This measure assesses the company’s ability to schedule delivery dates" (Elrod,Murray & Bande, 2013)
- Identifies rate on guarantees
- Difficult to measure
- Labor Flexibility
- " This measure defines the number of tasks an employee can perform" (Elrod,Murray & Bande, 2013)
- Take tasks in case of emergency
- Working saturation
- Modification Flexibility
- "Modification flexibility refers to company’s ability to modify a product or product line without incurring high transition penalties." (Elrod,Murray & Bande, 2013)
- Customner have products quickly
- It could be expensive
- Expansion Flexibility
- " Ability of a firm to expand rapidly" (Elrod,Murray & Bande, 2013)
- Easily if demand increase
- It could be overhead costs