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Supply Chain Performance Measurement a Research of Occurring Problems and Challenges

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Supply Chain Performance Measurement a Research of Occurring Problems and Challenges J ÖNKÖPING I NTERNATIONAL B USINESS S C H O O L JÖNKÖPING UNIVERSITY Supply Chain Performance Measurement A research of occurring problems and challenges Author: Christoph Lindner Tutor: Lianguang Cui Susanne Hertz Jönköping June 2009 Abstract Master thesis within Business Administration Title: Supply chain performance measurement – A research of occurring problems and challenges Author: Christoph Lindner Tutors: Lianguang Cui Susanne Hertz Date: 2009-06-03 Subject: Supply chain management, performance measurement, supply chain relationships, communication, supplier selection, qualitative research Introduction: A major challenge in supply chain management is the coordination of the different activities taking place between all the involved participants. Un- derstanding the interdependencies and the complexity of these activities in a supply chain is elementary to actually managing it (Holmberg, 2000). Considering the philosophy “What you cannot measure, you cannot man- age”, measuring the supply chain performance becomes tremendously im- portant for companies and their supply chains in order stay competitive. So far only a small number of performance measurement systems exist that can help to understand and improve a supply chain’s overall perfor- mance. Purpose: The purpose of this master thesis is therefore to analyze supply chain per- formance measurement systems and identify problems and challenges when measuring the performance of a supply chain. Research Method: Since this thesis aims at finding problems and challenges which highly dif- fer and depend on individual companies and branches, a qualitative ap- proach has been chosen because of the variety of expected results. In most cases, qualitative research is based on different kinds of data collec- tion methods (Patton, 2002), but due to the lack of access to resources and time limitations, only interviews have been used in this thesis. Conclusion: The found theoretical and practical problems and challenges were com- bined and a final list of challenges for supply chain performance mea- surement was developed. The developed list included the following nine challenges: communication, trust, strong cost focus, willingness to share information, learning and collaboration among the supply chain partici- pants, reduction of complexity, transparency of processes, advantages and disadvantages, handling of new management approaches and that tech- nology is a supporting tool only. This thesis therefore offers the basis of further research by providing a list of challenges which need to be consi- dered to successfully measure supply chain performance. i Table of Contents Table of figures……………………………………………………………………………iii Table of table………………………………………………………………………..........iii 1 Introduction .................................................................................. 1 1.1 Purpose ................................................................................................... 1 1.2 Disposition ............................................................................................... 2 2 Supply chain performance measurement .................................. 3 2.1 Definition and scope ................................................................................ 3 2.1.1 Differences to supply chain controlling .................................................... 3 2.1.2 Differences to supply chain monitoring .................................................... 4 2.2 Internal and external supply chain performance measurement ............... 5 2.2.1 Internal supply chain performance measurement .................................... 5 2.2.2 External supply chain performance measurement ................................... 5 2.3 Supply chain performance measurement systems .................................. 6 2.3.1 SCOR-model ........................................................................................... 6 2.3.2 Modified balanced scorecard (Brewer and Speh) .................................... 9 2.3.3 Advantages and disadvantages of the models ...................................... 12 2.4 Metrics of external supply chain performance measurement ................. 13 3 Problems and challenges of supply chain performance measurement ............................................................................. 15 3.1 Supply chain information sharing ........................................................... 15 3.2 Supply chain learning............................................................................. 16 3.3 Supply chain relationships ..................................................................... 18 3.4 Supply chain complexity ........................................................................ 20 3.5 Supply chain flexibility ............................................................................ 21 3.6 Summary of occurring problems and challenges ................................... 24 4 Research method ....................................................................... 27 4.1 Qualitative research ............................................................................... 27 4.2 Sampling and collection of empirical data .............................................. 27 4.3 Interviews ............................................................................................... 28 4.4 Analysis of empirical data ...................................................................... 30 4.5 Trustworthiness ..................................................................................... 30 4.6 Method evaluation ................................................................................. 31 5 Results of the empirical study ................................................... 32 5.1 Findings of the empirical study .............................................................. 32 5.2 Summary of the empirical findings ......................................................... 38 6 Analyses of supply chain performance measurement challenges .................................................................................. 42 7 Conclusion .................................................................................. 47 8 References .................................................................................. 49 9 Table of appendices ................................................................... 53 ii Table of figures Figure 1.1: Disposition of the master thesis 2 Figure 2.1: SCM level and the different measurement approaches 4 Figure 2.2: Scope of the SCOR-model 7 Figure 2.3: The hierarchy of the SCOR-model 8 Figure 2.4: Linking supply chain management to balanced scorecard 10 Figure 2.5: A supply chain balanced scorecard framework 11 Table of tables Table 2.1: Advantages and disadvantages of the SCOR-model and modified balanced scorecard 12 Table 3.1: Flexibility dimensions and elements 22 Table 3.2: Theoretical problems and the arising challenges for supply chain performance measurement systems 24 Table 5.1: Practical problems and the arising challenges for supply chain performance measurement systems 38 Table 6.1: Theoretical and practical challenges of supply chain performance measurement 42 iii 1 Introduction For about three decades, the increasingly competitive environment of efficient cost man- agement and quicker customer responsiveness has forced firms to develop new strategies and technologies to reach and sustain competitive advantages (Chan, Chan, & Qi, 2006). This constantly changing competition creates enormous challenges for the individual firms themselves and for the supply chains they are part of (Lee, 2002). A major challenge in supply chain management is the coordination of the different activities taking place be- tween all the involved participants. Understanding the interdependencies and the complexi- ty of these activities in a supply chain is elementary to actually managing it (Holmberg, 2000). Considering the philosophy “What you cannot measure, you cannot manage”, mea- suring the supply chain performance becomes tremendously important for companies and their supply chains in order stay competitive. What is challenging is that only a small num- ber of performance measurement systems which can help to understand and improve a supply chain’s overall performance exist (Chan et al., 2006). It can rather be found that the supply chain performance measurement theory is often not considering the evaluation of the whole supply chain (Holmberg, 2000; Lambert & Pohlen, 2001; van Hoek, 1998). Gen- erally it is believed that a well organized system of supply chain metrics can help to im- prove processes across multiple companies, target promising markets and gain competitive advantages through better service and lower costs. Many companies which refer to their metrics as “Supply chain metrics” use primarily internal logistic measures such as lead time or complete fulfilled orders. Often these measures focus on financial values, instead of pre- senting information of how key business processes perform or how well customer re- quirements are met within the supply chain (Lambert & Pohlen, 2001). In order to develop effective and efficient supply chain performance measurement systems there is a high in- terest in the problems and challenges which might occur when trying to measure the per- formance of the whole supply chain. 1.1 Purpose The purpose of this master thesis is therefore to analyze supply chain performance mea- surement systems and to identify problems and challenges in measuring the performance
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