Using KPI to improve operating system performance in Government Depertment
Performance Measurement System or Balanced Scorecard
The Next generation Managerial Tool - for Corporate and Governemtn
Background
"How to develop an effective performance measurement system for supply network" has now become a high priority for many manufacturing companies. The objectives of this research are to explore and understand performance measurement used in supply network; to develop a framework that can capture the above findings; and to test a practical tool to facilitate the process of evaluating and identifying key performance measures for different supply networks. The methodological approach adopted here is a combination of distilling best practice through case study research and thorough testing of the supply network performance measurement tool using process approach. This will generate empirical evidence on the used of a performance measurement tool for supply network and for the construction of a framework. The major deliverable will be a workbook on supply network performance measurement. The workbook will incorporate a detailed description of the framework and tool, examples of its application and detailed advice on how it should be applied in industry. As the objective is to make a contribution to both academic knowledge and industrial practice in the field, the following sections will review the perceived gap in the literature from academic and industrial practice perspectives
Academic literature
In the academic literature, much has been written about the development of extending performance measurement research in a supply network context (Lee and Billington, 1992; Mason-Jones and Towill, 1997). Many researchers had proposed performance measures used in a supply network by a firm. Among the benefits of using these supply network performance measures are: to acquire competitive advantages; to reduce transaction cost; to cultivate relationships and understanding among members in the chain for performance improvement (Bullinger et al., 2002; Gunasekaran et al., 2001; Lai et al., 2002). However, the research in this field has been focused on the design and implement a performance measurement system for an individual business unit (Neely et al, 1996). Two examples of performance measurement tools in the literature that have received considerable attention are the Balanced scorecard and Cambridge’s performance measurement process. Balanced scorecard developed by Kaplan and Norton (1996) from Harvard Business School is particularly preferred among the American’s executives and is being widely promoted in the Asia Pacific region. Recently, many researchers have proposed the use of the balanced scorecard in supply networks (Brewer and Speh, 2000; Bullinger et al., 2002). The Cambridge’s performance measurement process: Getting the measure of your business (Neely et al., 1996); have proved to be a useful way of assessing business performance. The tool is used mainly in western companies in Europe, and thus their use does not appear to be wide spread. In general, the performance measurement tools discussed above have been focused on an individual business unit, they have been criticised for lack of network perspective. Consequently, their advance in the supply network is limited. Future work needs to build upon this by extending the work in the context of supply networks
However, without a clear direction for improvement and common companies’ goals in a supply network, testing the relevance and viability of performance measures would be highly difficult. In an actual situation, firms in different parts of a supply network tend to work on improving performance in those areas within their interest (Lai et al., 2002). Their impact on the performance of other network members is usually ignored. It is not difficult to understand and believe that a supply network does not focus on a single firm. Firms are embedded in relationships; and thus strategic actions are not limited to any single firm within a network. Rather it involves part or even most of the networks to which a firm is linked (Hakansson and Ford, 2002). Under this circumstance, firms are not completely free to choose their performance measures without taking into consideration the interdependency among network members. Consequently, the ability to act is constrained by the existing network structure and no company is likely to have complete control over it (Hakansson and Ford, 2002). Unfortunately, many researchers had fail to recognise this network perspective of a balanced performance measurement system (Bullinger et al., 2002; Gunasekaran et al., 2001; Lai et al., 2002) and thus effective supply network performance measurement systems are still in their infancy
Industrial practice
Recently, interviews were carried out on this subject with two senior managers from industrial companies. The report is attached (refer to paper for Asian Finance Conference, 2005). From the interviews, high on the managers’ priority list of concerns was their inability to effectively implement a supply network performance measurement system throughout their supply networks. During the discussions, many factors were discovered and the managers expressed their interest in the development of a management tool to incorporate these factors. Their initial conclusion was that existing tools for performance measurement were inappropriate as long as the network issues were not taken into consideration. They are making this subject of high importance for future research.
Current experience and initial discussions with these practitioners suggest that effective strategy may well require both the use of a specific tool as well as a thorough understanding of performance measurement systems in supply network environment. If this is the case, the tool may be very sensitive to the environment in which they operate. Therefore, the research proposed here needs not only to explore and understand the current use of performance measures (and identify a suitable best practice tool) in supply network, but also to prove its utility by successfully reapplying it in a new environment.
Therefore, the objective is to identify, document, develop and empirically test a tool which will be useful to practising managers. As a result of the tool application, new knowledge will be generated and used as a basis for framework development. The tool will serve as a management tool to facilitate the process of evaluating and identifying key performance measures for different supply networks. The framework provides explanations of the data captured by the tool and serves as a guideline with practical advice on the tool application in industry. In general, the framework and tool will help managers to understand supply network performance measurement better
References
Brewer, P.C. and Speh, T.W. (2000), "Using the balanced scorecard to measure supply chain performance", Journal of Business Logistics Vol. 21 No. 1, pp. 75-93.
Bullinger, H-J., Kuhner, M. and van Hoof, A. (2002), "Analysing supply chain performance using a balanced measurement method", International Journal of Production Research Vol. 40 No. 15, pp. 3533-3543.
Gunasekaran, A., Pater, C. and Tirtiroglu, E. (2001), "Performance measures and metrics in a supply chain environment", International Journal of Operations & Production Management Vol. 21 No. 1/2, pp. 71-87.
Hakansson, H. and Ford, D. (2002), “How should companies interact in business networks”, Journal of Business Research 55, pp. 133-139.
Kaplan, R. S. and Norton, D. P. (1996), The balanced scorecard - translating strategy into action, Harvard Business School Press, Boston, MA.
Lai, Kee-hung, Ngai, E.W.T., and Cheng, T.C.E. (2002), "Measures for evaluating supply chain performance in transport logistics", Transportation Research Part E 38, pp. 439-456.
Lee, H.L. and Billington, C. (1992), "Managing supply chain inventory: pitfalls and opportunities", Sloan Management Review Spring, pp. 65-73.
Mason-Jones, R and Towill, D.R. (1997), "Enlightening suppliers", Manufacturing Engineer August, pp. 156-160.
Neely, A. D., Mills, J. F., Gregory, M. J., Richards, A. H., Platts, K. W., and Bourne, M.C.S. (1996), Getting the measure of your business, Findlay, London
* Related research
Neely, A. D., Mills, J. F., Gregory, M. J., Richards, A. H., Platts, K. W., and Bourne, M.C.S. (1996), Getting the measure of your business, Findlay, London.
Yee, C.L., (2004), “Developing a framework and tool for understanding supply network strategy”, Unpublished Ph.D. thesis. Centre for Strategy and Performance, Manufacturing and Management Division, Department of Engineering, University of Cambridge.
