Documente Academic
Documente Profesional
Documente Cultură
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
This article may be used for research, teaching, and private study purposes. Any substantial or systematic
reproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in any form to
anyone is expressly forbidden.
The publisher does not give any warranty express or implied or make any representation that the contents
will be complete or accurate or up to date. The accuracy of any instructions, formulae, and drug doses should
be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims,
proceedings, demand, or costs or damages whatsoever or howsoever caused arising directly or indirectly in
connection with or arising out of the use of this material.
Production Planning & Control
Vol. 23, No. 9, September 2012, 694706
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)
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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
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
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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.
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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
Downloaded by [North Carolina State University] at 00:33 11 October 2012
Supply chain
performance
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
Capacity utilization
On-time delivery
Rate of customer
Communication
Stock rotation
Waiting times
Cash flow
Lead time
complaint
to orders
level
time
(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).
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
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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
Table 3. Pair-wise comparison matrix for flexibility under the customer determinant (CR 0.0089).
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
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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%.
Downloaded by [North Carolina State University] at 00:33 11 October 2012
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
Chartered Surveyors, Proceedings of the COBRA 2007 Nerreklit, H., 2000. The balance on the balanced scorecard-a
Conference, 6-7 September, Paper Number 32, Georgia critical analysis of some of its assumptions. Management
Institute of Technology, Atlanta, Georgia, USA. Accounting Research, 11, 6588.
Kaplan, R.S., and Norton D.P., 1992. The balanced Ou, C.S., et al., 2010. A structural model of supply
scorecard measures that drive performance. Harvard chain management on firm performance. International
Business Review, January/February, 7179. Journal of Operations and Production Management, 30 (5),
Kim, Y.H., 2006. Study on impact mechanism for beef 526545.
cattle farming and importance of evaluating agricultural Rushton, A. and Oxley, J., 1989. Handbook of logistics and
information in Korea using DEMATELT PCA and AHP. distribution management. London: Kogan Page Ltd.
Agricultural Information Research, 15 (3), 267280. Saaty, T.L., 1980. The analytic hierarchy process. New York,
Lambert, D. and Pohlen, T., 2001. Supply chain metrics. NY: McGraw-Hill.
International Journal of Logistics Management, 12 (1), Sodhi, M.S. and Son, B.G., 2009. Supply-chain partnership
119. performance. Transportation Research Part E: Logistics
Laura, X.U., et al., 2007. AHP based supply chain and Transportation, 45, 937945.
performance measurement system. Singapore: Singapore Soni, G. and Kodali, R., 2010. Internal benchmarking for
Institute of Manufacturing Technology. assessment of supply chain performance. Benchmarking:
Downloaded by [North Carolina State University] at 00:33 11 October 2012
Maskell, B.H., 1991. Performance measurement for world An International Journal, 17 (1), 4476.
class manufacturing. Portland, OR: Productivity Press. Stefan, H., 2000. A systems perspective on supply chain
Morgan, C., 2004. Structure, speed and salience: perfor- measurements. International Journal of Physical
mance measurement in the supply chain. Business Process Distribution and Logistics Management, 30 (10), 847868.
Management Journal, 10 (5), 522536. Supply Chain Council, 2006. Supply chain operations
Najmi, M. and Rigas, J., 2005. A framework to review reference model: overview of SCOR Version 8.0 [online].
performance measurement systems. Business Process Available from: www.supplychain.org [Accessed 18 May
Management Journal, 11 (2), 109122. 2011].