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Production Planning & Control: The Management of


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A conceptual model for measuring supply chain's


performance
a a
A. Najmi & A. Makui
a
Department of Industrial Engineering, Iran University of Science and Technology, Tehran,
Iran

Version of record first published: 05 Jul 2011.

To cite this article: A. Najmi & A. Makui (2012): A conceptual model for measuring supply chain's performance, Production
Planning & Control: The Management of Operations, 23:9, 694-706

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Production Planning & Control
Vol. 23, No. 9, September 2012, 694706

A conceptual model for measuring supply chains performance


A. Najmi* and A. Makui
Department of Industrial Engineering, Iran University of Science and Technology, Tehran, Iran
(Received 16 November 2009; final version received 1 May 2011)

In this article, a conceptual model for measuring supply chain (SC) performance is proposed which can be used
for most organisations with the same class at various industries. The model has been developed according to
performance metrics interdependencies and some existing shortcomings in the available literature of performance
models. Furthermore, it has tried to see the key features of a performance evaluation model. The methodology
which is used for solving and integrating the model is a combination of the analytical hierarchy process (AHP)
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and Decision Making Trial and Evaluation Laboratory (DEMATEL) methods. The DEMATEL and AHP are
used for understanding the relationship between comparison metrics and integration to provide a value for
performance, respectively.
Keywords: supply chain; performance measurement; metrics interdependencies; analytical hierarchy process;
DEMATEL

1. Introduction As SC performance crosses both functional and


Measurements are the key. If you cannot measure it, company boundaries, it is always a challenge to
you cannot control it. If you cannot control it, you manage and improve the SC. In order to perform it,
cannot manage it. If you cannot manage it, you cannot many companies have implemented various initiatives
improve it. (Harrington 1991). The concept of perfor- such as enterprise resource planning (ERP) and SC
mance measurement is progressing and in recent years, optimisation solutions to gain more competitive
many research studies have been done regarding the advantages against their competitors. After making
nature and the methodologies of measuring perfor- such a big investment in resources or even before the
mance in organisations. A very valuable point in the commitment, companies should ask themselves in what
supply chain (SC) environment for organisations is aspects of performances they are trying to improve and
that they know where they are now, how they got here how performances should be measured (Laura et al.
and what the future will be (Morgan 2004). 2007). Measuring SC performance can facilitate a
Performance measurement systems have been on better understanding of the SC, positively influencing
the top of business research list which are performed SC players behaviour and improving its overall
during the recent years. Business companies realised the performance (Chen and Paulraj 2004). In order to
importance of the balanced performance measurement achieve the SC goal of fulfilling customer orders more
system as a tool to promote the organisation. The quickly and efficiently than other competitors, an SC
shortcomings of traditional performance measurement needs continuous improvements (Hausman 2002).
are well expressed in the literature and include failing to It needs that effective performance measurements to
conduct strategies and priorities within an organisa- be established and therefore, a performance measure-
tion, and imbalancy in the use of criteria and perfor- ment system is required. Many researchers have
mance metrics of the chain (Najmi and Rigas 2005). suggested different measurement systems using the
This has led to the development of innovative perfor- metrics of performance from different aspects (Laura
mance measurement frameworks such as the balanced et al. 2007). However, a holistic and helpful approach,
scorecard (BSC; Kaplan and Norton 1992) and the which can simply be implemented and compare differ-
European Foundation for Quality Management model ent organisations performances, was not found.
which viewed the performance of businesses through For effective SC management, measurement goals
more than one aspect (Najmi and Rigas 2005). should determine the overall scenario and the metrics

*Corresponding author. Email: a_najmi1363@yahoo.com

ISSN 09537287 print/ISSN 13665871 online


2012 Taylor & Francis
http://dx.doi.org/10.1080/09537287.2011.586004
http://www.tandfonline.com
Production Planning & Control 695

which are used. In addition, the approach should be operational levels in SC. This framework deals with
balanced and its metrics classified into three levels supplier, delivery, customer service, inventory and
strategic, tactical and operational (Bhagwat and logistic costs. Sodhi and Son (2009) have modelled
Sharma 2007) so that the metrics are in the the strategic as well as the operational dimension of
framework of SC evaluation criteria. performance of supplierretailer partnerships in terms
The outline of this article is as follows: Section 2 of five factors, including: information exchange, trust,
reviews the literature of measuring SC performance. joint partnership management, relationship-specific
Section 3 talks about the balance and its importance at assets and partner asymmetry.
all model levels. Section 4 presents a conceptual model Hausman (2002) claimed that an SC needs to be
for measuring SC performance based on Supply Chain evaluated by three criteria including service, asset and
Operations Reference (SCOR) and BSC models with speed. He also emphasises that the metrics must be
minor changes. Finally, the proposed model has been suitable for the value proposition of the SC. Felix et al.
applied to an automotive company. (2003) used a systematic process-based approach to
build a model for measuring the overall performance of
complex SCs. They applied fuzzy set theory in the
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process of measuring performance. Stefan (2000)


2. Literature review
explained common measurement problems from a
With continuous changes happening in the world, in system perspective. The author also presented a
the new business environment, such as integration, and performance model to reflect the systemic structures
new technologies like the Internet, many organisations of SC and a potential integrator.
are forced to focus on the SC rather than their internal Laura et al. (2007) developed a framework in
operations. Therefore, measuring SC performance which the reliability, responsiveness, flexibility, re-
plays an important role in SC management and configurability and cost criteria have been proposed
improvement, and has received a lot of attention for measuring SC performance. They also used ana-
from the research community so that measuring it can lytical hierarchy process (AHP) to link the company
improve the understanding and the cooperation performance measures to SC strategy, and identify
between SC partners (Brewer and Speh 2001, Chan some important attributes and metrics in the SC.
et al. 2003) and increases SC integration (Gunasekaran Ou et al. (2010) investigated the relationships among
et al. 2001). SC measures can be used in the decision- SC management practices and their impacts on firm
making process, help to define, test and implement new financial and non-financial performances. In this
strategies (Gunasekaran et al. 2001, Chan et al. 2003) regard, they considered seven factors, namely, human
and other development and improvement opportuni- resource, quality data and reporting, design manage-
ties, such as targeting profitable sectors of the market, ment, process management, internal operational per-
service differentiation and cost reduction (Lambert and formance, customer satisfaction and firm financial
Pohlen 2001). Regardless of providing a view of the performance.
performance of an individual SC member, measure- Agarwal et al. (2006) employed a framework in
ment also provides the possibility of considering the which the market sensitiveness, process integration,
performance of the whole SC and the impact of a single information driver and flexibility are used for mea-
organisation on the whole SC. suring SC. They explored the relationship among
Beamon (1998) categorised performance measures lead-time, cost, quality and service level with the
in the literature into two groups of qualitative and leanness and agility of an SC in the fast-moving
quantitative measures in which customer satisfaction consumer goods business. In their framework, lead-
and responsiveness, flexibility, supplier performance, time, cost, quality and service level are the major
cost and other things for modelling SC are discussed. determinants of the proposed framework. Soni and
Beamon (1999) identified three types of performance Kodali (2010) used the facilities, transportation,
measures as necessary components for SC performance information, inventory, sourcing and pricing catego-
measurement system including resources, output and ries of measurement which are proposed by Chopra
flexibility. The author also mentioned that since each and Meindl (2004), for comparing the performance
of the above types is vital for the overall performance of various SCs and pointing out the poorly perform-
success of the SC, and the result of each affects the ing functions.
others, SC performance measurement system must The SCOR model (Supply Chain Council 2006)
measure each of these three types. Gunasekaran et al. was introduced in 1996 and includes five basic
(2001) developed a framework for measuring the processes including plan, source, make, deliver and
performance according to strategic, tactical and return. Also, it represents thousands of performance
696 A. Najmi and A. Makui

metrics characteristics in reliability, responsiveness, 3.2. Coordination with performance criteria


flexibility, cost and asset. These attributes are charac- As it was discussed above, investigation of the orga-
teristics of SC that permit it to be analysed and nisation strategies using an individual aspect is not
evaluated against other SCs with competing strategies. appropriate. Similarly, assessing SC performance and
Cai et al. (2009) developed a methodology which used efficiency, in achieving the chain goals, should not be
a process-oriented SCOR model to identify basic done uni-dimensionally. According to the patterns like
performance measures and key performance indica- SCOR, chain goals express the balanced needs of SCs
tors. Their proposed measurement system includes five stakeholders. These stakeholders include suppliers,
categories of measures: resource, output, flexibility, manufacturers, distributors and retailers in different
innovativeness and information. levels.
Kaplan and Norton (1992) have proposed the BSC
approach as a tool for performance evaluation through
four perspectives of financial, internal business pro- 3.3. Coordination with metrics
cess, customer, and learning and growth. Using the
Coordination between performance measures and
BSC, the mission and organisation strategies can be
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metrics can be evaluated from two viewpoints includ-


translated and converted into the goals and measures
ing: (1) strategic, tactical and operational levels and
in the above four perspectives. Their BSC is designed
(2) financial and non-financial. In the first view, levels
to complement financial measures of past performance
of strategic, tactical and operational, are hierarchical-
with their measures of the drivers of future perfor-
based tasks in which the policies and trade-offs are
mance (Bhagwat and Sharma 2007). The BSC model
distinctive and appropriate control is applicable
can provide a base for companies strategy manage-
(Ballou 1992). According to Rushton and Oxley
ment system.
(1989), such a hierarchy is based on the time horizon
for activities and the pertinence of decisions and
influence of different levels of management. Strategic
3. Coordination of the performance measure with measures affect the top-level management decisions,
different aspects of SC often reflecting extensive studies of policies, pro-
grammes, corporate financial plans, competition and
Coordination means considering the different aspects conform to the organisational goals. The tactical level
of a case in a balanced manner and avoiding uni- deals with resource allocation and performance mea-
dimensional approach. In other words, coordination is, surement of goals which should be achieved regarding
paying attention to every aspect, according to their access of the results specified at the strategic level.
importance. For measuring SC performance, coordi- Measuring performance in this level provides valuable
nation is a key factor to measure performance of feedback for mid-level management decisions. Metrics
different levels including coordination in SCs strategy and measurements of operational level require accurate
definition, coordination in measurement criteria and data and evaluation of low-level managers decisions
the coordination in metrics to measure the perfor- results. Superintendents and staffs are moving towards
mance criteria. achievement of the operational objectives, which, if
fulfilled, will lead to achievement of tactical objectives
(Gunasekaran et al. 2004).
The second view includes the main difference
3.1. Coordination with SCs strategic aspects between the new performance measurement models
Although financial indicators help the organisation to and traditional ones. Most companies realise the
monitor their overall success, they are not enough to importance of financial and non-financial performance
indicate the performance and efficiency of organisa- measures, although they have failed to offer and
tions. Therefore, instead of focusing on the financial display them in a balanced framework (Gunasekaran
measures individually, one should establish some et al. 2004). According to Kaplan and Norton (1992),
measures from other perspectives to make a multi- while some companies and researchers focus on the
dimensional evaluation. The strategic goals, according financial performance measures, others have focused
to the patterns such as the BSC, express the balanced on the operational measures. Such non-uniformity
needs of organisation stakeholders. The most impor- prevents a clear picture of organisational performance
tant stakeholders of an organisation are: shareholders, provided by the used metrics. For a balanced
customers, employees, business partners (contractors approach, Maskell (1991) proposed that the companies
and suppliers) and the society. must understand, while financial performance
Production Planning & Control 697

measurements are important for strategic decisions and Determinig the organization
strategy
external reporting, often day-to-day control of
manufacturing and distribution operations is better
with non-financial measures. Determine the impacts of chain attributes in
Another area that is not correctly observed is the achieving to organization strategy
decision on the number of used metrics. Most compa-
nies have a large number of performance measures Metrics extraction based on organization strategy and
which have emerged based on the suggestions from benchmark supply chain
staff and consultants. They fail to realise that perfor-
mance assessment will be better using a trivial few (in
fact not quite partial, but those that are critical for Definition of ideal supply chain
success) (Gunasekaran et al. 2004).
For performance measurement, measurement goals
Performance evaluation based on
should be set in accordance with the organisational comparison with the ideal chain
strategy. They must show the organisation objectives.
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Performance criteria should be coordinated and eval- Figure 1. The process of performance measurement in the
uated based on the organisations strategy. Selected proposed model.
metrics should reflect coordination between financial
and non-financial measures and capable of being
related to strategic, tactical and operational levels. For monitoring the state of each criterion obtained in
In the next section, a model for performance level 2, we must choose and define suitable metrics
measurement of SC is developed. having the potential of converting the criterions states
to measurable values. Therefore, the metrics are
defined in level 3. And finally in level 4, the perfor-
mance of the considered SC can be evaluated in
4. Proposed model comparison with an ideal one, based on metrics defined
The concept of performance will find meaning only in in level 3.
comparison. In other words, performance is a relative
concept and needs judgement and interpretation.
Organisations must know (or guess) that what the 4.1. Level 1
competitors have done in a similar process, or how
much the improvement of a process in the organisation Strategic factors of organisation and consequently the
SC strategy lie at level 1. If there is incompatibility
is, in comparison with competitor organisations. With
between the organisation and SC strategies, it is
regard to this issue, proposed model is used for
unlikely to optimise supply system. The strategy of
evaluation of SC via a series of chain characteristics
each organisation is different from the others due to its
and based on organisation strategies, and comparing
status and conditions.
with another one, following the same strategies, using
Determinants which have been selected for level 1
metrics. Therefore, the most important model pillar is
are the same as BSC criteria. The only difference is that
extraction of organisation strategy and forming the
the environmental determinant has also been added.
model based on it. Based on organisation strategy,
Nowadays, there is a lot of attention on the environ-
appropriate metrics are selected for a chain. So,
mental issues, and governments put a lot of pressure on
necessary prerequisite has been provided for compar-
the organisations to apply these principles. Therefore,
ing the benchmark SC with an ideal one. This
it was decided to add the environmental factor in this
schematic diagram is shown in Figure 1.
level. Description of the given determinants in this level
The proposed model is a hierarchical one with a
is as following:
topdown view to performance measurement via four
levels. The basic concepts of the model are taken from Financial: Financial perspective identifies how the
BSC and SCOR. In the first level, the strategic aspects companies wish to be viewed by its shareholders.
of the organisation are defined as the main goals and Customer: Perspective of customer shows how the
frameworks of the performance measurement model. companies would be seen by customers.
Strategic aspects will be determined according to BSC Internal business processes: Perspective of internal
concepts. In the second level, the SC performance business processes explains the processes that the
criteria and their importance for accessing the strategic company should be particularly adept in order to
objectives is defined according to SCOR attributes. satisfy its shareholders and customers.
698 A. Najmi and A. Makui

Learning and growth: The organisational learning and that the metrics should be selected in a balanced
growth perspective includes changes and improve- manner, and cover the three levels of strategic, tactical
ments which the company needs to understand to and operational.
achieve its vision (Nerreklit 2000).
Environmental: Environmental perspective identifies
how the company is seen from the viewpoints of 4.4. Level 4
conformance with environmental requirements and
Performance comparison prerequisite of two organisa-
reaching related objectives.
tions or two SCs is the similarity of their classes or
strategies. Thus, the SCs which are in this level must
have similar strategies. Ideal SC can be a virtual chain
4.2. Level 2
which is determined based on the benchmark SC
SCs performance is measured by criteria which are objectives. In other words, benchmark SC is compared
specific for the SC, and achieving them will help the to the ideal SC.
chain to achieve goals. In other words, the measures
which a SC must encompass to achieve strategic
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objectives, are placed at this level. In the proposed


4.5. Mutual dependence of metrics
model, available items at this level are the same as
SCOR model attributes, with the difference that the The overall objective of this study is to provide a model
cost attribute has been replaced with quality attribute. to calculate the performance of a SC with respect to
Since the topic of financial is considered in BSC model another chain as an ideal pattern, with regard to the
which has been employed in the strategic level, and interaction of comparable criteria. Financial, cus-
strategic level factors are dominant on the criteria level, tomer, internal business processes, environmental,
it has been removed from performance criteria level. and learning and growth are the major determinants
Also, due to the importance of the quality criterion for of the proposed model. These determinants have
evaluating SC performance which has been given in the dominance over the identified criteria in the model.
literature and the weakness of SCOR model in this The impact of one determinant on SC performance is
regard, the quality criterion was added to the model at affected by the influence of the other determinants.
this level. Description of the given criteria in this level This can be obtained using pair-wise comparison
is as following: matrix with a scale of one to nine. The metrics of the
model are those which help to access the controlling
Flexibility: The chain agility in responding to changes criteria of SC performance. Therefore, these are
in the market to gain or maintain competitive dependent on the criteria. However, there is some
advantage. interdependency between the metrics. Dotted line
Reliability: The chain performance in delivering the shown in Figure 2 depicts this issue. Values of this
correct product to the correct place at the correct time interdependency are extracted using Decision Making
in the correct condition and packaging in the correct Trial and Evaluation Laboratory (DEMATEL)
quantity with the correct documentation to the correct method and experts opinions.
customer.
Responsiveness: The speed at which a SC provides
products to the customer.
5. Combined methodology for solving the model
Asset management: The effectiveness of an organisa-
tion in managing assets to support demand satisfac- For comparing the benchmark chain and the ideal one,
tion. This includes the management of all assets such as and providing a numeric comparative performance, the
fixed and working capital (Supply Chain Council composition of AHP and DEMATEL methods is used.
2006). AHP allows a set of complicated issues, to be
Quality: Fulfilling the product standards related to compared with the importance of each issue relative
customer desirability level. Quality is not only related to its impact on the solution to the problem. The AHP
to product but also related to services (Chan 2003). (Saaty 1980) is a tool used for solving multi-criteria
decision-making problems and develops a framework
for coping with the palpable and non-palpable, quan-
4.3. Level 3 titative and qualitative aspects. It consists of three
main steps:
Metrics of this level are selected based on existing
groups in the level 2 and their selection is different for (1) Decomposing the problem into a hierarchy of
various chains and organisations. It should be noted different levels of elements.
Production Planning & Control 699

Supply chain
performance

Internal business Learning and


Financial Customer Environmental Level 1
processes growth (Strategic determinants)

Flexibility Reliability Responsiveness Quality Asset Level 2


management (SC criteria)
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Strategic Downside SC adaptability Perfect order fulfillment Lead time Customer service level Cash flow
Raw materials inventory Total order value Level 3
Tactical On-time delivery Communication Stock rotation
level according to orders (SC metrics)
Produce and test cycle time
Operational Operational flexibility Waiting times Rate of customer complaint Capacity utilization
Total order value according
Downside SC adaptability

Raw materials inventory

Customer service level


Perfect order fulfillment

Produce and test cycle


Operational flexibility

Capacity utilization
On-time delivery

Rate of customer
Communication

Stock rotation
Waiting times

Cash flow
Lead time

complaint
to orders
level

time

Ideal supply chain Benchmark supply chain Level 4


(SCs)

Figure 2. Proposed model.

(2) Application of a measurement methodology for weakness of AHP is that it cannot deal with intercon-
extracting the elements priority. nections between the decision factors at the same
(3) Combination of elements priority to extract the levels, because the decision framework in the AHP
final decision. assumes a one-way hierarchical relationship between
The AHP helps to rank and decide in a systematic decision levels. In many issues where interdependencies
and rational way. AHP also enables the analyser to between the decision variables exist, AHP is not
evaluate the goodness of judgement with the consis- effective to use (Isik et al. 2007). By combining this
tency rate (CR). A CR of 0.10 or less indicates a method and DEMATEL method, we can solve the
consistent and acceptable judgement (Kim 2006). above problem.
Although AHP is a powerful and flexible decision- DEMATEL method (Fontela and Gabus 1974)
making technique that helps decision makers to set that has been created by the Battelle Geneva
priorities and select the best alternative, the remarkable Association is based on the concept of pair-wise
700 A. Najmi and A. Makui

Table 1. Pair-wise comparison matrix for the relative importance of the determinants (CR 0.0764).

Internal process Innovation


Strategy Financial Customer perspective Environment and learning e-Vector

Financial 1 0.143 0.2 4 3 0.111


Customer 7 1 4 9 8 0.544
Internal process perspective 5 0.25 1 6 5 0.253
Environment 0.25 0.111 0.167 1 1 0.044
Innovation and learning 0.333 0.125 0.2 1 1 0.048

comparison of decision characteristics such as solu- the combined methodology of AHP and DEMATEL,
tions alternative, criteria, etc. These attributes are to solve the conceptual model given in Section 4, are as
compared by the relative influence. In this article, follows:
discrete assessment scale 04 is applied. Zero means no
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influence and 4 indicates extreme influence of the first


attribute compared to the other one. Scales between Step 1: Model construction and problem structuring
these two numbers indicate intermediate states between The top elements of model hierarchy are decomposed
the two extremes. Numerical representation of direct into sub-criteria and attributes. To develop the model,
influences can be displayed as matrix A. The number of it is necessary to identify the attributes at each level
rows and columns of this matrix is equal to the number (determinant, criteria and metrics) and provide a
of compared attributes (n). The ith row of A shows definition of them and communications between
direct influence of ith attribute on all attributes them. The ultimate objective of this hierarchy is to
including itself. This influence can indicate the relative provide a score for a SC performance with respect to
importance of attributes. Furthermore the jth column another one. In order to do this, five hierarchies should
indicates the influence of all attributes on jth attribute. be evaluated and then a performance-weighted index
Matrix A can be normalised by the following formula: for SC performance should be calculated.
A
N Pn i, j 1, 2, . . . , n 1
max j1 aij
i
Step 2: Pair-wise comparison matrices between the
levels of attributes
T N N2    NI  N1 2
The relative weights in the pair-wise comparison
where operator max denotes the maximum row-wise matrices of AHP are achieved through discussion in
sum of matrix A and I the identity of matrix n  n. a group of experts at benchmark SC. The group
Matrix T shows direct and indirect relations of includes people having extensive experience in SC
elements. Therefore, by calculating matrix T, we can management. For obtaining the relative weights, a
extract the interdependency between the metrics. scale of 19 provided by Saaty (1980) is used.
Why is this combination approach used? (1) Many To get the relative weights in Table 1, different
metrics in decision environment are interdependent questions are asked by researchers. A sample question
from one another; (2) some criteria and metrics are is as follows: What is the relative impact of customer
subjective and measuring them is difficult; and (3) this satisfaction on the organisation strategy and conse-
composition provides a numerical measure for quently on the SC performance when the customer
performance. determinant is compared to the internal business
processes determinant? 4 is the answer which is given
in the second row and third column of Table 1.
Through pair-wise comparisons between the exist-
6. Application of combined methodology for solving ing criteria in level 2 (SC performance criteria level),
the model the weight priority is calculated under the selected
In this study, the proposed model is solved via an determinant from level 1 (strategic level). For example,
example of an automotive industry in Tehran with the to obtain the relative weights in Table 2, the following
capacity of 300,000 products per year. Then, it is used question is raised by the researchers: What is the
to explain the mutual dependency between different relative impact of reliability criterion on customer
metrics under customer determinant. Steps related to determinant when it is compared to flexibility?. The
Production Planning & Control 701

Table 2. Pair-wise comparison matrix for the relative importance of the criteria under the customer determinant
(CR 0.0196).

Asset
Customer Flexibility Reliability Responsiveness Quality management e-Vector

Flexibility 1 0.167 0.5 0.2 2 0.078


Reliability 6 1 1 1 8 0.318
Responsiveness 2 1 1 1 7 0.256
Quality 5 1 1 1 9 0.312
Asset management 0.5 0.125 0.125 0.111 1 0.036

Table 3. Pair-wise comparison matrix for flexibility under the customer determinant (CR 0.0089).

Downside SC Raw material Operational


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Flexibility adaptability inventory level flexibility e-Vector

Downside SC adaptability 1 2 3 0.539


Raw material inventory level 0.5 1 2 0.297
Operational flexibility 0.333 0.5 1 0.164

answer is 6 which is given in the second row and first Table 4. Pair-wise comparison matrix for raw material
column of Table 2. There are five matrices, one for inventory level under the customer determinant.
each determinant. The results for customer determi-
nant are given in second column of Table 7. Raw materials
Another pair-wise comparison matrix is required to inventory level Ideal SC Benchmark SC e-Vector
extract the relative importance of the existing metrics Ideal SC 1 2 0.667
in each performance criterion. For example, Table 3 Benchmark SC 0.5 1 0.333
shows the pair-wise comparison matrix of metrics
under flexibility criterion and control hierarchy net-
work of the customer. Question for obtaining the
chain compared to benchmark chain?. The answer is 2
relative weights in this table is as follows: Aiming to
that is shown in the first row and the second column.
maximise customer satisfaction, what is the relative
Calculations for the chains have been done under
impact on flexibility criterion by metric of raw material
the other metrics and customer determinant and are
inventory level when compared to the metric of
given in fifth and sixth columns of Table 7. Total
operational flexibility? The answer is 2 which is
number of the pair-wise comparisons matrices for this
displayed in the second row and third column of
study depends on the number of determinants used in
Table 3. Similarly, comparison matrices for other
the level 1 and the number of metrics used in each of
metrics in the customer hierarchy are provided and the
them. In the benchmark SC, there are 15 pair-wise
results are given in the third column of Table 7. Total
comparisons matrices for each determinant. In other
number of necessary matrices of these categories is
words, there are 75 matrices of this kind.
calculated by multiplying the number of determinants A graphical summary of the combined model and
by the number of criteria available for each determi- its decision environment related to performance of the
nant which is equal to 25. SC is shown in Figure 2.
The last assessment required to do AHP analysis is
pair-wise comparison to obtain the relative predomi-
nance of ideal chain to benchmark chain. Table 4
shows the comparison of the chains under raw Step 3: Matrices of pair-wise comparisons to extract
material inventory level metric. The relative weights interdependencies
of this table is determined through answering the To reflect the interdependencies between the metrics,
following question: With the aim to maximise cus- information of the influences of metrics on each other
tomer satisfaction, with regard to raw materials will be collected. For performing these comparisons,
inventory levels, what is the excellence of the ideal the scale of 04 is used. In this scale, zero implies no
702 A. Najmi and A. Makui

Table 5. Pair-wise comparisons matrix for metrics under the customer determinant.

according to orders

Capacity utilisation
Total order value

Rate of customer
Produce and test
On-time delivery

Communication
inventory level

Stock rotation
Raw materials

Waiting times
Downside SC

Perfect order
adaptability

Operational

service level

Cash flow
Lead time

complaint
cycle time

Customer
fulfilment
flexibility
Customer

Downside SC adaptability 0 4 0 3 0 0 0 0 0 0 0 0 0 0 1
Raw materials inventory level 3 0 0 2 0 0 1 2 1 0 0 0 0 3 0
Operational flexibility 2 0 0 3 0 1 1 3 0 0 0 0 0 0 3
Perfect order fulfillment 0 4 0 0 0 2 1 2 0 4 0 4 0 0 0
Total order value 0 0 3 3 0 1 1 3 4 1 0 1 0 0 1
according to orders
Waiting times 0 1 0 2 0 0 4 3 3 2 1 3 0 0 1
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Lead time 2 1 0 3 0 2 0 4 0 3 0 4 0 1 0
On-time delivery 0 1 0 2 0 0 0 0 0 4 1 4 0 0 2
Produce and test cycle time 0 2 0 3 0 1 4 3 0 3 0 3 0 0 1
Customer service level 0 0 0 2 2 1 0 1 0 0 3 4 2 1 2
Communication 4 3 1 3 0 1 3 3 1 4 0 2 1 2 2
Rate of customer complaint 0 0 0 0 0 1 2 1 1 1 0 0 0 0 0
Cash flow 3 3 2 2 0 1 1 1 1 3 2 0 0 0 0
Stock rotation 2 3 1 2 0 2 0 2 0 2 0 0 0 0 1
Capacity utilisation 4 2 3 3 0 1 0 0 0 0 0 0 0 0 0

influence, whereas 4 shows the extreme influence of the criterion j and under determinant a for interde-
row element with respect to column element. The pendencies of metrics, Sikja the relative impact of chain
number of necessary matrices depends on the number i under the metric k criterion j and the network
of determinants used in the level 1. One matrix for each hierarchy a, Kja the total number of metrics for
determinant is required, so the number of required criterion j and determinant a and J the total number
matrices is 5. One of them, which is related to customer of criteria.
determinant is shown in Table 5. Table 7 shows the required calculations for the
desirability indices of chains which are based on the
customer hierarchy and obtained using the weights
Step 4: Using DEMATEL for calculation of from the pair-wise comparisons of the chains, criteria,
interdependencies metrics and weights results from interdependencies of
The matrix of direct and indirect relationships T is metrics by DEMATEL method.
obtained through the formulas (1) and (2). The values The second column in Table 7 is obtained from the
of this matrix for customer determinant are given in results of Table 2 which is based on relative impact of
Table 6. criteria under the customer determinant. The pair-wise
comparison matrix for the relative impact of metrics
under SC criteria is displayed in column 3. The fourth
Step 5: Extract a comparison performance value column values shows the interdependent weights
Desirability index equation for chain i and determinant related to metrics. Relative weights of two chains for
a is defined as formula (3): each metric are given in the fifth and sixth columns of
Table 7. These weights are achieved by comparing two
J X
X Kja
chains for each performance metric. The last two
DIia Dja MD I
kja Mkja Sikja 3 columns show the desirability index of each SC for
j1 k1
each metric. For each SC under customer determinant,
where Dja is the relative importance weight of criterion the summation of these results is calculated in the final
j under the determinant a, MD kja the relative importance row of Table 7. The results show that from customer
weight of metric k under the criterion j with respect to determinant perspective, performance of the bench-
determinant a, MIkja the relative weight of metric k of mark SC with respect to the ideal SC is 21.9%.
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Table 6. Matrix of direct and indirect relationships under the customer determinant.

Downside SC
Adaptability
Raw materials
Inventory level
Operational
Flexibility
Perfect order
Fulfilment
Total order value
According to orders
Waiting times
Lead time
On-time delivery
Produce and test
Cycle time
Customer service
Level
Communication
Rate of customer
Complaint
Cash flow
Stock rotation
Capacity utilisation
e-Vector

Customer

Downside SC adaptability 0.025 0.161 0.005 0.127 0.002 0.015 0.015 0.028 0.008 0.027 0.004 0.029 0.002 0.018 0.040 0.0256
Raw materials 0.121 0.054 0.007 0.115 0.003 0.025 0.052 0.104 0.040 0.051 0.010 0.050 0.004 0.109 0.022 0.0490
inventory level
Operational flexibility 0.095 0.052 0.013 0.152 0.004 0.057 0.055 0.135 0.010 0.053 0.012 0.060 0.004 0.010 0.121 0.0454
Perfect order fulfilment 0.033 0.166 0.007 0.062 0.013 0.095 0.074 0.124 0.025 0.188 0.027 0.207 0.013 0.027 0.030 0.0611
Total order value 0.033 0.058 0.110 0.178 0.008 0.072 0.086 0.173 0.149 0.117 0.020 0.131 0.009 0.014 0.074 0.0807
according to orders
Waiting times 0.042 0.095 0.012 0.151 0.011 0.046 0.184 0.180 0.119 0.162 0.058 0.211 0.013 0.025 0.069 0.0822
Lead time 0.093 0.092 0.008 0.166 0.012 0.102 0.044 0.191 0.024 0.178 0.028 0.225 0.013 0.052 0.037 0.0698
On-time delivery 0.032 0.072 0.014 0.115 0.012 0.030 0.032 0.043 0.016 0.178 0.054 0.191 0.014 0.018 0.090 0.0544
Production Planning & Control

Produce and test cycle time 0.040 0.122 0.011 0.175 0.012 0.076 0.174 0.173 0.022 0.185 0.028 0.206 0.013 0.026 0.066 0.0720
Customer service level 0.052 0.067 0.028 0.143 0.072 0.074 0.053 0.102 0.033 0.082 0.119 0.205 0.076 0.052 0.099 0.1149
Communication 0.200 0.202 0.055 0.223 0.016 0.091 0.155 0.198 0.061 0.241 0.037 0.194 0.051 0.103 0.120 0.1252
Rate of customer complaint 0.012 0.018 0.003 0.031 0.004 0.048 0.084 0.063 0.041 0.065 0.011 0.042 0.005 0.008 0.013 0.0277
Cash flow 0.149 0.169 0.077 0.154 0.011 0.069 0.079 0.107 0.054 0.172 0.091 0.087 0.014 0.031 0.043 0.0855
Stock rotation 0.100 0.148 0.042 0.128 0.008 0.090 0.032 0.115 0.018 0.117 0.019 0.065 0.008 0.021 0.062 0.0571
Capacity utilization 0.159 0.117 0.104 0.151 0.002 0.054 0.025 0.043 0.011 0.037 0.007 0.041 0.003 0.014 0.024 0.0495
703
704 A. Najmi and A. Makui

Table 7. The desirability index for customer determinant.

Relative Weight of Weights of


importance mutual benchmark Weights of
Criteria weight dependence chain for ideal chain Ideal Benchmark
Metrics weight for metrics of metrics each metric for each metric chain chain

Downside SC adaptability 0.078 0.539 0.0256 0.75 0.25 0.0008 0.0003


Raw material inventory level 0.078 0.297 0.049 0.67 0.33 0.0008 0.0004
Operational flexibility 0.078 0.164 0.0454 0.86 0.14 0.0005 0.0001
Perfect order fulfilment 0.318 0.587 0.0611 0.83 0.17 0.0095 0.0019
Total order value 0.318 0.055 0.0807 0.87 0.13 0.0012 0.0002
according to orders
Waiting times 0.318 0.358 0.0822 0.83 0.17 0.0078 0.0016
Lead time 0.256 0.326 0.0698 0.86 0.14 0.005 0.0008
On-time delivery 0.256 0.604 0.0544 0.86 0.14 0.0072 0.0012
Produce and test cycle time 0.256 0.07 0.072 0.67 0.33 0.0009 0.0004
Customer service level 0.312 0.633 0.1149 0.8 0.2 0.0182 0.0045
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Communication 0.312 0.261 0.1252 0.83 0.17 0.0085 0.0017


Rate of customer complaint 0.312 0.106 0.0277 0.86 0.14 0.0008 0.0001
Cash flow 0.036 0.581 0.0855 0.75 0.25 0.0013 0.0004
Stock rotation 0.036 0.309 0.0571 0.86 0.14 0.0005 0.0001
Capacity utilisation 0.036 0.11 0.0495 0.75 0.25 0.0001 0.0001
Sum 0.0631 0.0138

Table 8. SC performance weighted index for chains.

Desirability Desirability Weighted Weighted


Weights of indices for indices index for index for
Determinants determinants benchmark SC for ideal SC benchmark SC ideal SC

Financial 0.111 0.014 0.062 0.0015 0.0069


Customer 0.544 0.0138 0.0631 0.0075 0.0343
Internal process perspective 0.253 0.0172 0.062 0.0043 0.0157
Environment 0.044 0.0163 0.0504 0.0007 0.0022
Innovation and learning 0.048 0.0134 0.0669 0.0006 0.0032
Sum 0.0147 0.0623
Performance index 0.2366

Step 6: Calculation of SC performance- 7. Conclusion


weighted index In this article, firstly key concepts and methods
To finalise analysis, SC performance-weighted index is related to SC performance measurement were dis-
calculated for each chain. The SC performance- cussed and earlier works in this field reviewed. It was
weighted index for a chain is equal to the product of observed that although the large number of research-
the desirability indices and the relative importance ers emphasised on the importance of measuring and
weights of the determinants. providing approaches and methods, there is a lack of
The results in Table 1 show that the customer a comprehensive model to link the strategy to the
determinant has the highest weight in SC performance. performance measures. The proposed model may
Therefore, management should focus more on improv-
have so many advantages for theoretical and practical
ing the customer determinant. This result can be due to
uses such as:
the competitive market and the presentation of cus-
tomers as a key factor of survival and victory in this . Being aligned with organisation strategy
environment. easily.
Final results are given in Table 8. This table shows . The model is balanced in every direction
that the performance of the benchmark SC with (strategic determinant, chain performance
respect to the ideal SC is equal to 0.2366. criteria and metrics level).
Production Planning & Control 705

. Being integrable easily. References


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