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BIJ
16,5 Supply chain performance
measurement framework
for small and medium scale
702
enterprises
Jitesh Thakkar
Mechanical Engineering Department, A.D. Patel Institute of Technology,
Vitthal Udyognagar, India
Arun Kanda
Mechanical Engineering Department, Indian Institute of Technology Delhi,
New Delhi, India, and
S.G. Deshmukh
Mechanical Engineering Department, Indian Institute of Technology Delhi,
New Delhi, India and
IIITM Gwalior, Gwalior, India

Benchmarking: An International
Journal
Vol. 16 No. 5, 2009
pp. 702-723
q Emerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770910987878
Abstract
Purpose – The purpose of this paper is to propose an integrated supply chain performance
measurement framework for the case of small and medium scale enterprises (SMEs) using set of
qualitative and quantitative insights gained during the case study research.
Design/methodology/approach – This paper develops the supply chain performance
measurement framework using the facts revealed through case study analysis, secondary data
specific to various SME clusters in India and detailed contemporary studies reported on supply chain
management in SMEs. It integrates the salient features of balanced scorecard (BSC) and supply chain
operation reference (SCOR) model to deliver a comprehensive performance measurement framework
for SMEs.
Findings – This paper reports set of performance indicators for the supply chain processes
like “source,” “make,” and “deliver” in SMEs. It also relates the measures with various supply
chain cycles like “procurement,” “manufacturing,” “replenishment,” and “customer order.” As a result,
paper delivers an integrated performance measurement framework for supply chain evaluation and
planning in SMEs. It also outlines the detailed guideline for the implementation and use of the
framework.
Practical implications – This paper is expected that the developed framework: will help SME
managers to improve the visibility of their supply chain amongst interacting partners; and will
help SME firms to explain the basis of their decisions to the other supply chain partners and
specifically, origingal equipment manufacturer organizations where less bargaining power exist.
Originality/value – This paper integrates the spirit of two well-known contributions in the field of
performance measurement namely BSC and SCOR. The proposed framework is deduced using the
findings of real life case study research and hence establishes an adequate platform for its application.
It would help the managers or decision makers in SMEs to gain a systematic insight into their supply
chain problems and hence undertake the necessary improvements.
Keywords Supply chain management, Small to medium-sized enterprises, Performance measures
Paper type Research paper
1. Introduction Supply chain
This paper develops a supply chain management (SCM)-based performance performance
measurement system (PMS) for the case of small and medium scale enterprises
(SMEs). It is expected that such framework may help SME managers to diagnose their measurement
supply chain function and strategically plan improvements for weak areas. In addition,
it may remain helpful for benchmarking current practices with industry
norms/requirements. 703
Quite often companies dealing with large number of performance measures derived
and expanded based on the suggestions from employee and consultants and past
experiences (history) forgets to realize that performance measurement and monitoring
can be better addressed using trivial few which are not really trivial in reality but
instead are those few areas most critical to success. In light of this, it is necessary to
narrate that the metrics that are used in performance measurement:
.
should have the capability to capture the essence of organizational performance;
. measurement system should ensure an appropriate assignment of metrics to the
areas where they would be most appropriate;
.
minimum deviations should exist between the organizational goals and
measurement goals;
.
metrics should reflect an adequate balance between financial and nonfinancial
measures; and
.
measures should reflect their clear linkages with various levels of decision
making such as strategic, tactical, and operational.

A summary of select views reported on PMS is provided in Table I.

The growth and development of SCM is attributed to number of factors such as
increasing globalization, reduced barriers to international trade, improvement in
information availability, and environmental concerns. For any supply chains, the
general processes and structure can be integrated into six core processes that are
linked; supplier, inbound logistics, manufacturing, outbound logistics, marketing and
sales, and end customers. The supply chain performance measurement is a difficult
proposition because it is affected by, and in turn affects, many aspects of the firm’s
operations, and environment. In light of the arguments and views reported in the
literature, Table II intends to summarize select key characteristics of traditional PMS
vs supply chain PMS.
There is very little literature available on performance measurement in SCM,
especially dealing with system design and measures selection, though various theories
and practices have been addressed in the past papers (Beamon, 1999). There are
number of conceptual frameworks and discussion on characteristics, hierarchy and
structure of performance measurement frameworks in the literature; however, there is
a lack of investigation on understanding the supply chain measures which relates the
objectives and motivations of various entities in the supply chain. Lee and Billington
(1992) reported that the discrete sites in supply chain do not maximize efficiency if each
pursues goals independently. SCM is perceived as a tool to ensure continuous
improvement by many firms in the competitive market. However, occurrences reported
in the literature on maximization of overall supply chain profit through a collaborative
efforts of the chain members are rare. This is mainly because of their failure to develop
BIJ
Reference Views on performance measurement
16,5
Bititci et al. (1997) The performance management process should be seen as a closed loop
control system which deploys policy and strategy, and obtains feedback
from various levels in order to manage the performance of the business
Atkinson et al. (1997) Company’s strategy and structure define the breadth of the PMS
704 Kaplan and Atkinson The measurement system should make the relationships (hypotheses)
(1998) among objectives (and measures) in the various perspectives explicit so
that they can be managed and validated
Brown (2000) Performance measures should provide information that you would not
have discovered without the hard data
“Many things in life are done well without requiring formal data. Measure
only those factors that will provide you with information you didn’t know
already and help you improve performance or make better decisions”
Neely et al. (2000) The process of deciding which measures of business performance to adopt
is a valuable one, not least because it forces management teams to be very
explicit about their performance priorities and the relationship between
them, thereby exposing, and offering an opportunity to resolve, any
hidden differences of opinion
Neely et al. (2002) Performance measurement can be defined as the process of quantifying
the efficiency and effectiveness of past actions
A performance measure can be defined as a parameter used to quantify
the efficiency and/or effectiveness of past action
A performance metric is the definition of the scope, content and
component parts of a broadly-based performance measure
A PMS enables informed decisions to be made and actions to be taken
because it quantifies the efficiency and effectiveness of past actions
Table I. through the acquisition, collation, sorting, analysis and interpretation of
Summary of views appropriate data
reported on performance Hammer (2007) Reports seven deadly sins of performance measurement: vanity;
measurement provincialism; narcissism; laziness; pettiness; inanity; frivolity

the measures and metrics needed to fully integrate their supply chain to maximize
effectiveness and efficiency (Gunasekaran et al., 2004). This demands certain initiatives
such as:
.
Measurement should be understandable by all supply chain members and
should offer minimum opportunity for manipulation (Schroeder et al., 1986).
.
Performance studies and models should be created so that organizational goals
and achievement of those goals can be measured, thus allowing the effectiveness
of the strategy or techniques employed to be accessed.

The literature has reported set of contributions in the area of supply chain performance
measurement. For example, Chan and Qi (2003) proposed a process-based PMS for
mapping and analyzing complex supply chain networks; van Hoek (2001) emphasizes
upon the importance of performance measurement from the view point of the
third-party logistics alliances in supply chain; Gunasekaran et al. (2001) develops
performance measures and metrics in a supply chain environment; Morgan (2004)
offers nine preconditions necessary for effective and dynamic performance
measurement within supply chains which include cheap and reliable identification
Expected behaviors of PMS at
strategic level (Atkinson et al., 1997) Traditional objectives of PMS
Help the company evaluate whether
it is receiving the expected
contributions from employees and
suppliers, the elements of its internal
stakeholder group, and the expected
returns from customer groups
Help the company evaluate its
planning and the contracts, both
implicit and explicit, that it has
negotiate with its stakeholders by
helping it evaluate the effect of
secondary objectives on its primary
objectives
Help the company evaluate whether
it is giving each stakeholder group
what it needs to continue to
contribute so the company can meet
its primary objectives
Guide the design and
implementation of processes that
contribute to the company’s
secondary objectives
Should focus and coordinate the
decision-making activities of the
knowledge workers to whom a
company has delegated decision-
making responsibility by designing,
monitoring and evaluating coherent,
comprehensive performance
measures
desirable characteristics
of supply chain PMS
Characteristics of
traditional PMS vs
Table II.
Effective internal an external
communications
Facilitate understanding of cause
and effect relationships regarding
performance
Clarity on accountability for results
Intelligence for decision makers, not
just compile data
Link compensation rewards, and
recognition with PMS
It should be positive and not
punitive
Results and progress toward
program commitments should be
openly shared with employees,
customers, and stakeholders
Desirable characteristics of
performance measures
Should provide warning signals
before severely damaging problem
arise
Should offer some new insights
rather than telling about the obvious
or known aspects
It should be controllable by the
measuring entity
It should be meaningful and convey
fruitful information
It should have been linked to
strategic plan and should help to
learn about mistakes and initiatives
for future
It should exhibit a relationship
between leading and lagging
indicators
It should motivate and reward the
employees via feedback about their
performance
It should depict a path-way for
aligning and communicating
objectives and strategies from the
top to the work floor via transitions
into lower level performance
indicators
Desirable characteristics of supply
chain PMS
It should aim to provide
management with a set of actions
that can be taken in improving
performance and planning
competitiveness enhancing efforts
for the chain
It should carry the influence of
position of players in the chain
(supplier, manufacturer, wholesaler,
service supplier), the level of
integration and the strategic
approach
It should be based on strategic trade-
off and planning frameworks in
order to assure executive
commitment and initiate actual
improvement processes in the
supply chain
It should capture the set of measures
based on contribution of
organization to supply chain
competitiveness vs strategy or
strategic sophistication of an
organization
performance
measurement
Supply chain
705
BIJ of units in transition, standard protocols, communication systems that are capable of
16,5 handling the volume of data, hardware and software, multi-layered control systems,
system handshake protocols, routing and re-routing protocols that allow supply chain
cost control, speed and flexibility of delivery response, high velocity electronic cash
transfers instigated automatically; and robust systems with inbuilt automatic recovery
abilities; Thakkar et al. (2007) proposed a balanced scorecard (BSC) framework for a
706 case organization using an integrated approach of interpretive structural modeling
(ISM) and analytic network process (ANP), etc.
A number of experts and practitioners from supply chain strategy recommend four
metrics for executives’ attention which incorporate all the dimensions of supply chain
performance and respond to the factors that external stakeholders, analysts and venture
capital firms take into consideration when evaluating a firm. This mainly includes:
.
Total supply chain cost. The cost of fulfillment as a percentage of revenues or cost
of fulfillment per case ordered.
.
Service level. It includes fill rate (availability- ratio of number of items ordered by
customers and number of items delivered to customers), operational performance
(in terms of average order cycle time, consistency of order cycle time and/or
on-time deliveries. and service reliability (deals with accuracy of work in order
entry, warehouse picking, and document preparation, etc.).
.
Asset management. It focuses on the utilization of capital investments in
facilities and equipment as well as working capital invested in inventory.
Basically, two metrics are important in this regard – capacity utilization and
inventory turn over ratio (ratio of cost of goods sold during a time period to
average unit inventory during the time period).
.
Customer accommodation. It aims to capture measurement of perfect orders (an
indicator of an organization’s commitment to zero-defect logistics), absolute
performance (provides a better indication of how a firm’s logistical performance
really impacts customers) and customer satisfaction.
.
Cash-to-cash cycle time. It is the time required to convert a dollar spent on
inventory into a dollar collected from sales revenue.
.
Benchmarking. It makes the management aware about the state-of-the-art
business practices. It may include: internal benchmarking, competitor
benchmarking and unrestricted benchmarking.

A lot many efforts are reported in the literature like various supply chain performance
measurement matrices/frameworks and mapping or audit/assessment tools to support
the large units (Neely et al., 1995). For example, a notable contribution in this regard is
supply chain operation reference (SCOR) model developed by the Supply Chain Council
which provides a framework for characterizing supply chain management practices
and processes that result in best-in-class performance with five planning needs –
source-make-plan-deliver-return. The other popular of these is the BSC (Kaplan and
Norton, 1992), which emphasizes upon a balance between the use of financial and
nonfinancial measures to achieve strategic alignment. These approaches have been
designed primarily for use in a medium to large company context. Small- and
medium-sized enterprises exhibit distinct characteristics that differentiate them from
the majority of their larger counterparts (Storey, 1994). Therefore, there is a need to
identify an appropriate process for the design and implementation of SCM-based PMS Supply chain
in this context. In response to this, present research aims to deliver an integrated
SCOR-BSC framework for enhancing the effectiveness of supply chain function in
performance
SMEs. measurement
The resource limitations associated with SMEs indicate that the dimensions of
quality and time are critical to ensure that waste levels are kept low, and that a high
level of productivity performance is attained. The financial dimension of performance 707
is critical for both large and small companies, but given the lack of a monetary safety,
net to absorb the impact of short-term fluctuations resulting from change is paramount
in SMEs (Hudson et al., 2001). The implications of this for PMS development for SMEs
are threefold:
(1) The measures should be strategically aligned and should provide an explicit
link back to operations and PMS would provide data that could input directly
into the strategy formulation process.
(2) Given the resource and time constraints imposed on SMEs, performance
measures should be clearly defined, have an explicit purpose, be relevant and
easy to maintain and be simple to understand and use.
(3) The flatter structure of SMEs means that employees often have a greater
number of job roles and more responsibility. In these circumstances, a well
trained and motivated workforce is also paramount and necessitates effective
monitoring of the human resource dimension.
The utility of performance measures cannot be realized in isolation. SCOR provides an
opportunity to include the measures which can capture the performance of many
overlapping activities of the various entities in supply chain. In this regard, the
application of such framework in SMEs can force the organization to change their
focus from internal to external performance measures and activities. In addition, the
select issues pertinent to the development of SCM-based PMS for SMEs are
summarized in Table III.
This paper reports a performance measurement framework for the case of SMEs,
specifically, in manufacturing segment. The salient features of the framework which
justifies its applicability for the context mainly include:
.
It emphasizes more on the measurement of internal processes and its linkages with
external network. For example, how the closeness of procurement function could be
maintained with other departments (internal customers) as well external suppliers?
. It emphasizes more upon the select measures, critical for the context of SMEs, for
example, stock-outs, net profit vs productivity ratio, total cycle time, order
lead-time, manufacturing lead-time, etc. at planning level of SCOR model, etc. at
the planning level of SCOR model.
.
The present status of Indian SMEs dictates that the SCOR activity “return”
cannot be considered within the scope of planning and hence reported PMS
framework excludes the metrics related to it.
.
It emphasizes more upon the closeness of various SME’s business functions
(procurement, manufacturing, marketing, etc.) with the customer and supplier
organization. This is specifically important for Indian SMEs which are working
in a chaotic situation where demand and supply uncertainties are very high.
BIJ
Extended scope
16,5 (requirements of supply Needed depth and
Functions of PMS Traditional scope chain-based PMSs) breadth in SMEs

Indicate deviation from A process of Activities not under the Key user involvement
objectives and its quantifying direct control of an Strategic objective
708 probable reasons effectiveness and individual company (i.e. identification
Enhancing learning efficiency of action manufacturer) have to Performance measure
about process More focused on be measured and development
characteristics, human internal functions controlled (by the Clear linkages between
behavior and the instead of overall manufacturer and its intra and inter
influence of external company performance supply chain partners) organizational
actors and customer needs System should aim for processes
Aligning and overall optimization Top management
communicating Should direct involvement and
objectives and management attention support
strategies from the top and effort to the areas Full employee
to the work floor via for improvement in the involvement and
translation into lower modern supply chain support
level performance operating format Clear and explicit
indicators Measures should be objectives
Supporting decision cross functional and can Set timescales
making about be applied to the entire
performance-based process
rewards Should support
innovative strategies
like team work and
nonfinancial measures
Should assist processes
such as monitoring,
improving,
communications and
diagnosing problems
Table III. Should be based on a
Identifying process approach
characteristics Should define
of SCM-based PMS responsibility and
for SMEs function of each process

2. Supply chain operation reference model and balanced scorecard

The SCOR council (www.supply-chain.org) defines SCOR as: “the only supply chain
framework that links performance measures, best practices, and software
requirements to a detailed business process model.” The scope of SCOR model
includes all elements of demand satisfaction beginning with the initial signal of
demand (the order or forecast) and ending with the final signal that demand has been
satisfied (final invoice and payment). In this regard, SCOR helps in two ways as
narrated by Stephens (2001):
(1) A supply chain model promised a structure that would provide insight into the
linkages between business objectives (strategic and tactical) and supply chain
operations (e.g. interpreting the quantitative impact of perfect order fulfillment
statistics on revenue and cost financial performance).
 (2) The practitioners were driving toward a systematic approach for identifying, Supply chain
evaluating, and monitoring supply chain performance. performance
Figure 1 shows a comprehensive understanding on various levels of SCOR. Level 1 measurement
defines the scope and content of the core management processes for the
above-mentioned decision areas. For example, the SCOR plan process is defined as
those processes that balance aggregate demand and supply for developing actions 709
which best meet sourcing, production, and delivery requirements. Level 2 describes the
characteristics associated with the process types deployed within the core processes:
planning, execution and enable. The SCOR model also contains Level 2 process
categories defined by the relationship between a core management process and
process type. Level 3 provides detailed process element information for each Level 2
process category. Inputs, outputs, description and the basic flow of process elements
are captured at this level of the SCOR model. Although the SCOR model acknowledges
the need for an implementation level (Level 4) for effective SCM, this level lies outside
of its current scope. Thus, firms must implement specific supply chain management
practices based upon their unique set of competitive priorities and business conditions
to achieve the desired level of performance.

Level 1
Defines the scope and content for the SCOR model
Here basis of competition performance targets are set

Level 2
A company’s supply chain can be “configured to order”
at level 2 from 26 core “process categories”. Companies
implement their operation strategy through the
configuration they chose for their supply chain

Level 3
Defines a company’s ability to compete successfully in
its chosen markets, and consists of:
• Process element definitions
• Process element information inputs and outputs
• Process performance metrics
• Best practices, where applicable
• System capabilities required to support best practices
• Systems/ tools
Companies “fine tune” their operations

Level 4
Companies implement specific supply-chain management
practices at this level. Level 4 defines practices to achieve
competitive advantage and to adapt to changing business Figure 1.
conditions Levels of SCOR model
BIJ Kaplan and Norton (1992) have advocated the use of BSC which relates the different
classes of business performance – financial and nonfinancial, internal and external.
16,5 Here, the prime intention for proposing an integrated approach of SCOR and BSC is to
ensure the greater effectiveness of PMS system on following ground:
.
BSC does not provide a mechanism for maintaining the relevance of defined
measures. SCOR adopts a building block approach and offers complete
710 traceability.
.
BSC fails to integrate top level, strategic scorecard, and operational level
measures potentially making execution of strategy problematic. SCOR clearly
defines the type of process (planning, execution and enabling) and configures
them to suit the supply chain requirements.
.
BSC fails to specify a user-centered development process. A detailed exercise on
SCOR generates sufficient information to even develop tailor-made soft-ware
system.

A skeleton of the proposed SCOR-BSC framework is shown in Figure 2. The process

begins with an initial understanding on SME’s business objectives, role players,
external expectations and performance measures. These were related to various
decision areas of SCOR model in Level 1. For each SCOR decision area various supply
chain planning processes (Lockamy and McCormack, 2004) were considered. These
processes were then classified based on their type – planning, execution, or enabling.
The processes pertaining to execution category should be related to most appropriate
Level 2 SCOR category and an appropriate plan-source-make-deliver configuration
should be decided by an individual organization. The processes determined at Level 2
are now decomposed to sub-processes at Level 3 and process element definition,
inputs-outputs, process, and performance metrics are summarized.
The performance measures are related to various categories of BSC and further
classified into strategic, tactical, and operation level. Finally, a gap analysis is carried
out to understand difference between the present scope of performance measurement
and proposed scope of SCOR-BSC framework to derive a suitable implementation plan
(at Level 4).

3. Development of SCOR-BSC model for SMEs

The findings reported for ten SME case organizations (ORGs) and insights gained from
the other contemporary studies are utilized for the development of performance
measurement framework.
The study was conducted for ten manufacturing SME ORGs. ORG1 manufactures
variety of hitech-wood (35-1,000 liters), gas (50-700 liters), oil, diesel fired, and solar
water heaters. ORG2 manufactures heat treatment furnaces of smaller volume and
induction furnaces of heavy volumes in a variety of 800-2,300 kilogram. ORG3
manufactures plants, systems, and equipments required for chemical and allied
process industries. For all the three case ORGs managing their upstream supply chain
and financial flows are critical. ORG4 carryout the manufacturing of permanent
magnet direct current (DC) motors for origingal equipment manufacturers (OEMs)
and retail markets. This organization is a typical example of SME experiencing varying
kind of customers’ and suppliers’ expectations at the upstream and downstream side
of supply chain. ORG5 manufactures valves for various applications of dairy and
 Implementation plan Supply chain
performance
Strategic Tactical Operational measurement

Finance Customer service Innovation and learning Internal business 711

Relate to BSC category

Process element Process I/P & O/P Process Best practices

definition performance metrics

Decompose processes at element level

Gap analysis
Planning
Relate to most appropriate
Execution
Level II SCOR category
Enabling

Identifying SCM planning processes for each SCOR decision area

process types

Planning Collaboration Teaming Process metrics Process credibility Process integration IT

Critical supply chain planning areas

Plan Source Make Deliver

Scor decision areas

Role players
Present set of
Business motives performance
Figure 2.
measures
Skeleton of SCOR-BSC
External expectations framework for SMEs

process industries. The prime challenges for this organization are to maintain the
export quality, reduce delivery lead-time and improve upon work-in-process
inventories. ORG6 manufactures cast iron surface plates to provide a precision
reference for spotting, tool making and inspection of parts, checking of accuracy of
other surfaces and for many types of gauging and marking out operations. This
organization purchase core raw material – granite from a distant supplier and hence,
managing procurement lead-time and build-up inventories in the raw material status
are the key issues. ORG7 manufactures copper wires for large transformer
manufactures as first tier supplier. This organization is operating on a very small
BIJ scale and survival is mainly dictated by the large customer. The focus of this
16,5 organization is mainly to improve upon yield and liberate the cost tied-up in product
inventory and raw material inventory, specifically, a packaging material which is
generally imported. ORG8 manufactures positive displacement pumps and it is a
typical example of a SME organization which is involved in high variety, distribution
and complex design, and manufacturing activities. ORG9 manufactures precision
712 components for sophisticated applications like aerospace, injection molding, etc. This
organization is mainly faced with the challenge such as to meet the quality expectations
of foreign counter-part through local poorly developed supplier base. ORG10 caters to
the industries like dairy, food, brewery, beverages, confectionery, fermentation,
chemical, healthcare and pharmaceutical industries, and other related process sector.
This organization offers complete system/equipment for the allied processes in these
industries.
The set of issues reported in Table IV and business information provided in the
Appendix (Table AI) form a necessary basis for gaining an overall insight into the
surveyed units. In general, the units investigated are relatively small and highly
unorganized to moderately organized. The principal raw material used by sample
ORGs is metal in different forms and kinds. All units produce discrete parts or
complete equipment. It should be noted that turnover of the different units is probably
not entirely comparable, as the units differ in the value of the raw materials, scope of
business, opportunities under globalization, and other purchased supplies.
The mapping of case ORGs for their present orientation towards performance
measurement (Table V) has drawn attention into the following issues:
.
SMEs are presently more focusing on internal business and profit maximization
measures. The importance of innovation and learning measures is mainly
realized by those SMEs which are forced by their OEMs or large buyers to
improve upon their product design or process capabilities.
.
Measures related to market responsiveness, flexibility in delivery schedules, and
complete order delivery are the few which have received maximum attention.
.
SMEs working with limited finance and technological capabilities and poor
negotiation power in value chain put more emphasis on return on investment and
return on assets while considers concern for total supply chain cost beyond their
immediate purview.
.
SMEs working with larger product portfolio and buyers put more emphasis on
innovation and learning perspectives, specifically, product and process
innovation, vendor development and information sharing among supply chain
players.

The Level 1 of SCOR for the issue under investigation was mainly deduced based on
the review of metrics adopted by studied SME ORGs and need for new metrics, linking
the business objectives/motives of SME ORGs with various categories of BSC. In
addition the facts reported by Lcokamy III and McCormack (2004) are also employed.
They have investigated the relationship between nine key supply chain management
planning practices (includes planning processes, collaboration, teaming, process
measures, process credibility, process integration, information technology (IT) support,
process documentation and process ownership) and four decision areas in SCOR model

List of issues (I) emerged
I1. Demand-forecast mismatch
I2. Higher employee turnover
I3. Vendor rating based on quality and
price and less importance to
flexibility and responsiveness
criteria
I4. Ad hoc forecastsI5. Opportunistic
behavior of owner
I6. Lack of strategic approach in
procurement
I7. Lack of understanding on
partnerships
I8. Communication gaps leads to
confusion about product
specifications and delivery schedules
I9. Use of internet/IT only for inquiring
on the status of order and not for joint
planning
I11. More internal focus and lack of
knowledge on supply chain
I12. Lack of standardization
I13. Erratic changes for quantity
and schedule
I14. Outsourcing to take care of
excess production loads and not
with an intention to focus on core
activities
I15. Changing financial priorities at
customer ends leads to delay in lifting
of consignments
I16. Customer demands for single/
few units makes it difficult to
work with economic order quantity
level
I17. Small purchase volumes
deprives from receiving equity
in business transactions
I18. Bulk purchases are preferred to
receive benefit of quantity
discounts/full truck load/
ensure material availability
I19. Lower use of IT solutions
I20. Multiple supplier strategy
I21. Disturbed accounts receivables
I22. Disturbed accounts payables
I23. Rush orders
I24. Disturbed material allocation
during crunch time
I25. Lower facility utilization due to
lack of skill/ worker absenteeism
I26. Higher inventory levels due to frequent
changes in demand, higher
procurement/manufacturing lead-time
Supply chain
Organization specific
Organization issues (I) performance
ORG1: variety of hitech-wood I1, I2, I4, I9, I19, I11, I14,
measurement
(35-1,000 liters), gas (50- I22, I25
700 liters), oil, diesel fired/solar
water heaters
ORG2: electric furnaces – heat I3, I6, I8, I9, I12, I15, I20, 713
treatment furnaces of smaller I21, I24, I25
volume and induction furnaces of
heavy volumes
ORG3: plants, systems and I2, I5, I6, I7, I9, I11, I18,
equipments for chemical and I19, I20, I25, I26
allied process industries
ORG4: permanent magnet DC I1, I9, I13
motors for OEMs
ORG5: valves for various I3, I6, I13, I16, I17, I19,
applications of dairy and process I23, I26
industries
ORG6: cast iron/granite surface I2, I6, I9, I10, I11, I15, I18,
plates I21
ORG7: welding rods I1, I2, I4, I6, I13, I18, I23,
I25, I26
ORG8: positive displacement I16, I18, I20, I23, I24, I26
pumps
ORG9: precision components/ I10, I16, I18, I25, I26
machine parts for medical,
aerospace
ORG10: systems/equipments for I3, I8, I9, I10, I15, I20, I21,
process industry I24, I25, I26
Table IV.
Snapshot of some issues
in case ORGs (for the
technical reasons, names
are concealed)
BIJ
Measures Organizations Current PMS orientation
16,5
Customer service ORG1 C1, C2, C3, C6, F1, F4, F7, F8, F9, F10,
C1. Service quality I3, II5, I6, IL1, IL2, IL5, IL7
C2. Product quality ORG2 C2, C5, C6, C7, F1, F4, F5, F7, F8, F9,
C3. Timely delivery F10, I2, I3, I4, IL1, IL2, IL3, IL6, IL7
714 C4. Responsiveness ORG3 C1, C2, C3, C4, C6, F1, F9, I4, I5, IL1,
C5. Order fill rate IL2, IL3, IL6, IL7
C6. After sales service ORG4 C1, C2, C3, C4, C5, C6, C7, FF1, F4, F5,
C7. Perfect order fulfillment F6, F7, F8, F9, F10, I1, I2, I4, I5, I6, IL2,
Finance and marketing IL3, IL4, IL5, IL6, IL7
F1. Profit margins ORG5 C2, C3, C4, F1, F9, I1, I2, I3, I5, I6, IL2,
F2. Pretax return on assets IL3, IL6, IL7
F3. After tax return on investment ORG6 C2, C3, F1, F4, F5, I3, I6, IL2, IL3, IL7
F4. Return on investment ORG7 C2, C3, C4, F1, F4, F5, F7, F8, F9, I1, I2,
F5. Return on assets I3, I5, I6, IL1, IL4, IL7
F6. Total supply chain cost ORG8 C1, C2, C3, C4, C6, F1, F7, F9, F10, I1,
F7. Growth in market share I4, I5, I6, IL1, IL2, IL3, IL6, IL7
F8. Return on capital employed ORG9 C2, C3, C4, C5, F1, F3, F4, F5, F7, F8,
F9. Improved cash flow IL1, IL2, IL5, IL6, IL7
F10. Warranty/returns processing cost ORG10 C1, C2, C3, C5, C6, C7, F1, F2, F5, F6,
Internal business F7, F8, F10, I1, I2, I3, I4, IL1, IL2, IL3,
I1. Inventory turnover ratio IL4, IL5, IL6, IL7
I2. Throughput time
I3. Percentage scrap
I4. Accuracy of documentation
I5. On-time delivery
I6. Unit cost reduction
Innovation and learning
IL1. Flexible work force
IL2. Product innovation
IL3. Process innovation
IL4. Information sharing across supply chain
Table V. IL5. Training to managers and workers
Mapping the case ORGs IL6. Vendor development initiatives
for their present PMS IL7. Design modification based on customer
orientation requirements

(plan, source, make, deliver). The outcomes of this study are considered applicable for
the present context for three reasons:
(1) the outcomes are based on a thorough investigation of literature;
(2) diversity of sample – consisted the respondents from 11 distinct industry types
and could be considered free from the effects of factors specific to a particular
industry; and
(3) the profile of respondent was mainly representative of supply chain
practitioners rather than consultants.

At the outset, some of the key results of this study are reproduced as below:
.
The planning process variables in all four SCOR model areas have the strongest
relationship to supply chain performance.
 .
Collaboration variables have a direct impact on supply chain performance in the Supply chain
deliver decision areas. performance
.
Teaming variables have a direct impact on supply chain performance in plan and measurement
source areas.
.
Process metrics variables have direct impact on supply chain performance in the
deliver area and have only indirect impact on other areas of SCOR model.
715
.
Process credibility, process integration and IT support variable have a direct
impact on supply chain performance in deliver area.
.
Process documentation and process ownership have only indirect impact on
supply chain performance in all four SCOR model areas.

Based on these recommendations, for the purpose of present context also, the last two
least important supply chain management planning processes are discarded. The
overall conceptualization of SCOR-BSC based performance measurement framework
for the case of SMEs is shown in Figure 3.
The select notable features of the proposed SCOR-BSC framework for SMEs are
summarized as below:
.
The framework includes both tangible and intangible measures. The hard
measures: cost, time, capacity, productivity, and utilization are tangible and thus
relatively easy to collect data while other soft measures: effectiveness, reliability,
availability, and flexibility are intangible, and thus cannot be directly measured.
These measures need to be transformed to other performance indicators. For
example, production flexibility can be measured by assessing product volume
flexibility and product mix. Delivery flexibility can be measured by assessing
in-time delivery rate and error rate.
.
Each of the metrics describes one critical dimension of performance of the
activity and process. It is impossible for these metrics to cover all the dimensions
of any activity performance and further it is not required to make the PMS bulky
by including more number of measures. The proposed framework makes an
attempt to capture the overall vision of performance in common use from the
standpoints of both suppliers and buyers and mainly derived based on the scope
and requirements of SME business.
.
Instead of proposing a fragmented view, an attempt has been made to interlink
various issues for the complexity of SME business in managing the flow of goods
and information from point of origin to end consumers. This satisfies the need to
develop PMS from system perspective as advocated by many researchers
(Holmberg, 2000) in the area of performance measurement in supply chain.
However, at this stage main emphasize is put on aligning intra and inter
organizational procedures and policies and cultural issues are kept out of the
scope. However, this relaxation will not carry much effect for the ORGs,
specifically, working in the same cluster wherein similar attitudes, practices, and
value system prevail.
.
One important shortcoming of many firms is their inability or unwillingness to
widen the scope of their measurement activities. When limiting their focus to a
single organization and neglecting to consider local measurement activities as
 BIJ
16,5

716

for SMEs
Figure 3.
SCOR-BSC framework
Input
Supplier information MRP and Output
procurement schedules Timely order placement Input
Customer order requirement Selection of right Production plans
Delivery schedules supplier Procurement schedules Input
Forecast accuracy and credibility Timely order receipt Customer requirements Customer requirements Output
Procurement process team Joint planning and Product requirement Early pending order and new order Consignment
Regular meetings of the team development Resource capacity and constraint Product specification confirmation preparation
member Ability to cater evaluation Output Input Confirmation of order commitment Order shipment
Closeness with other functions emergency Updating supplier lead time Weekly planning cycle Past experience Schedule delivery Order confirmation
Sharing of plans/schedules Enhance production Integrating supplier-customer plans Integration of Actual demand v/s forecast Output
with suppliers planning Needs/priority of business shop-floor scheduling Order time frame Consignment preparation
Order shipment Metrics
Integration across business WIP/finished goods Order conditions
divisions inventory Delivery commitment Order confirmation Flexibility of service system to meet
Metrics customer needs
Supplier delivery performance Effectiveness of deliveryinvoice methods
Supplier lead-time against industry Metrics Percentage offinished goods in transit
Norm Metrics % disturbance to existing schedule Deliveryreliability performance–timeliness and
Supplier pricing againstmarket Range of products and services Ability to meet demand from inventory free from error
Efficiency of purchase ordercycle time Percentage of defects Perfect order delivery Quality of delivered goods
Efficiency of cash flowmethod Cost peroperation hour apacity utilization- % defect in order Numberof faultless delivery notes invoiced
Supplier flexibility % space utilization and labour utilization % deviation from order commitment Percentage of urgent deliveries
Lot size supplier cost saving initiatives Utilization of economic order quantity Responsiveness in order information Customer satisfaction

Process elements Process element Process element Process element

Order based on manufacturer’s Order arrival Retailer/distributor order trigger Customer arrival
production schedule Production scheduling Order entry Customer order entry
Information flow Information flow Information flow
Supplier production schedule Manufacturing and shipping Order fulfillment Customer order fulfillment
Component manufacturing and shipping Receiving at distribution, Order receiving Customer order receiving
Order receipt customer or retailer

Procurement cycle Manufacturing cycle Replenishment cycle Customer order cycle

Source Make Deliver

S1. Source planning process M1. Make planning process D1. Deliver planning process
S2. Procurement planning process team M2. Make scheduling process D2. Deliver process credibility
S3. Supplier transactional/operational/ M3. Make collaborative planning D3. IT support and ownership
strategic collaboration D4. Deliver process measures
D5. Deliver process integration

PLAN: Demand planning, SC collaborative planning, operations strategy planning

Inputs: Forecasting process, customer priority, Metrics: Order fill rate, stock outs, variances against budget, order lead Outputs: Accuracy of forecast, forecast creditability,
product priority, participation in customer supplier time, information processing cost, net profit vs productivity ratio, total product demand variability, formal meeting among
relationship, use of customer feed back information, cycle time, total cash flow time, product development cycle time, major business functions and supplier and customers,
development of operations strategy team return on investment, human resource productivity documenting and updating of planning team process
 part of a greater whole. In the present situation, SMEs are working under the Supply chain
direct influence and power dominance of few large players in the supply chain performance
and also trying to improve upon their technological up-gradation and system
improvement. In this situation, it is ambiguous to offer only coordination and measurement
integration based PMS. The developed framework has conceptualized the various
SCOR decision areas – plan, source, make, and delivers in a way that they are
built on a cyclic view of supply chain (procurement cycle, manufacturing cycle, 717
etc.) and hence ensuring the linkage between organization specific performance
measures and SCM-based metrics.
.
The proposed framework clearly defines the inputs and outputs for each
process. This will help managers to diagnose the problem thoroughly and draw
the meaningful inferences from the set of proposed measures before making the
decision about the inclusion of new measures.
.
The framework includes metrics for various categories of BSC and users are
advised to further classify them into strategic, tactical and operational level. This
makes the purpose of a particular measure and associated necessary decisions
more explicit for SME managers.

4. Guidelines for the use of framework

The framework proposed here offers details at each system and sub-system level
components and hence it is self-explanatory in use. However, to make its use more
effective, the select guidelines are outlined as below:
.
SME managers are advised to check the relevance of proposed measure using a
simple logic of “cause and effect” for their context. The proposed version is built
based on the present analysis of issues associated with SME business which are
subjected to change from time-to-time.
. The framework does not define roles and responsibility for various inputs and
outputs of processes and ownership of measures. In case of SMEs, specifically,
this depends on the span and scope of business and kind of relationship and
mutual understanding exist among supply chain partners. It is recommended
that process ownership and responsibilities should be defined on a consensus
of supply chain partners. Further, it is advisable to make the supply chain
players aware about the futuristic long-term benefits of such understanding
and hence a cluster-based groups or teams should be developed which can
accept the challenge of improvement and share their experiences with other
players.
.
It is necessary for the SME managers to make their business objectives and goals
at various strategic, tactical, and operational levels very clear. This is necessary
to derive an appropriate inference from the measures which can further help to
identify the potential areas of improvement.
.
SMEs working under skeptical and tight social environment may find cultural
resistance of the people in adoption of this new thinking. It is necessary to bring
change in attitude and perception of the employee and owner through training
programmes and real life successful case study demonstrations which can
impart greater confidence in the adoption of proposed framework.
BIJ .
SMEs working within financial and capacity constraints and limited managerial
16,5 knowledge can find it difficult to identify causal relationships among business
objectives and their linkages with various process of PMS and metrics. For
the purpose, an integrated use of ISM and ANP (Thakkar et al., 2007) is
proposed.

718 5. Implementation issues

The complexity involved in the implementation of the proposed frameworks is
described in the light of four factors – strategy, leadership, culture, and capability.
Each of these elements is connected in two-way (Figure 4) with each other and
simultaneously exercises the influence on implementation of the suggested
frameworks. The set of arguments are offered to justify the importance of these
factors in the implementation of developed frameworks for the context of SMEs.
For example: SMEs are governed by strategy formulated by its owner/chief executive
officer (CEO) and hence it is necessary to match the expectations of the leader with
needs of strategy formulation for successful implementation of frameworks; SMEs’
strategy implementation fails in absence of needed capabilities and long-term vision
for the development of the same (may be technological or human resource
capabilities) which hampers the effective use of frameworks; a match between culture
and capability is must for SMEs which have highly lucid and flexible work culture to
take the fullest advantage of money and time invested in the development of same;
and the link between culture and leadership is critical in a way that expectations and
vision of owner/CEO in SME ORGs dictate the practices and kind of value system to
be adopted by people and hence influences the development of culture in an
organization:
(1) Strategy. The literature suggests that performance is dependent on strategy
continuously recognizing the changes in the external environment (Shamsie,
2003). Others found that “strategic” small firms are likely to have significant
capability to grow, expand, innovate, and introduce new products to the
market place and achieve greater profitability (Vaaland and Heide, 2007;
Huin et al., 2002). This calls for an acceptance of frameworks at strategic
level.
(2) Leadership. It is defined as “the process of transforming organizations from
what they are to what the leader would have them become” (Dess and Lumpkin,

Strategy

Leadership PMS Capability

Figure 4.
Implementation polygon Culture
 2003). It is a vital ingredient in the formulation and deployment of strategic Supply chain
plans, and in the achievement of strategic competitiveness and above average performance
returns. This is particularly true in the case of SMEs where the CEO tends to
“occupy a position of unique influence, serving as the locus of control and measurement
decision-making.”
(3) Culture. Strategy and culture are inseparable and that firms can retain and
enhance their competitiveness by incorporating a sharing culture into the 719
overall strategic direction of the firm (Morgan, 2004). On the other hand, culture
can also act as an obstacle to the deployment of strategic change, unless it is
managed effectively. This calls for a continuous culture change initiatives and
employee training for the same. It is necessary for the SME managers to surface
out and challenge their old assumptions to become receptive to the
requirements of changing competition.
(4) Capability. The literature largely focuses on organizational capabilities or
competencies in larger ORGs with a dearth of research in smaller firms. It is
necessary for the SME business to strive for a set of capabilities like
involvement of top management, involvement of line managers, flexibility to
adapt to unanticipated changes, advertise/promote the product or service and
make rapid design changes to receive the maximum advantage of proposed
frameworks.

6. Conclusions
The contribution of this research can be considered important for the reasons such as:
.
It is an attempt to develop an integrated SCOR-BSC framework for the context of
small and medium businesses and such evidences are rare in the present body of
literature.
.
It establishes a basis for the development of SME specific SCM computer
package.

SMEs lack in technology-based planning in absence of adequate organizational,

financial and human resource support. This deprives them from searching new
processes, new materials, new vendors, new shop floor designs, new channels to
deliver products, etc. It is also observed that the poor trust and transparency in
buyer-supplier relationship affects the perceived risk related to a supplier’s investment.
The supply chain complexity for SMEs is different than large enterprises (LEs) in view
of the following arguments:
.
There are three central aspects in which small firms are different from large
firms: uncertainty, innovation, and evolution.
.
SME advantages tend to be behavioral, stressing qualitative differentiation, and
innovation.
.
The characteristics of processes and system at large are different for SMEs
compare to LEs. SMEs are more cash focused, short-term and instill better
communications and incentives for exploiting internal knowledge.
.
The SMEs view of supply chain management seems to be the exertion of power
by customers and consequently is seen by SMEs as a one-way process. Similarly,
BIJ SMEs do not employ supply chain management; rather they are managed at
16,5 arm’s length by large customers.

The proposed methodology is expected to help the selected SMEs in following

manner:
.
It should help SMEs understand their logistical weaknesses, which were
720 considered as routine till now. This can help improve upon the responsiveness of
supply chain with reduced cost and improved quality of product.
.
The strategic fit explored between SCM and SMEs characteristics should assist
practitioners to understand the necessary changes in present practices in the area
of IT, performance measurement, organizational structure, etc.
.
It also establishes a basis for benchmarking the ORGs on a set of complementary
and conflicting parameters.

It is noteworthy to mention that though the findings of present research are based on
the sample of ten SME case ORGs selected from the single cluster of manufacturing
SMEs, the outcomes could be generalized and extended to other contexts for the
reasons such as:
.
Addition of ORGs to the sample was continued till the point no new experiences,
observations or evidences were encountered as advocated by Yin (2003).
.
The selected units could be considered an adequate sample for the reasons that it
presents a considerable variety in their scope of business: using some different
technologies, partly second or first-tier suppliers, delivering to OEM’s for their
process needs, supplying complete equipments/processing units to different
segments. This diversity fits in well with the purpose of deriving theoretical
generalization as opposed to statistical generalization for the research reported in
this paper (Yin, 2003).
.
The select ORGs in the sample are exporting their products to other countries.
Some of them are jointly operating their businesses with their counter part in
foreign origins and hence experience the impact of similar magnitude of select
issues such as: the forces of globalization, emerging requirements for improved
competitiveness, etc. The inputs considered from such ORGs in reaching to the
set of conclusions as reported by this research, further, improve the external
validity and generalizations of the findings.
. Finally, the findings of this research are compared with the other cross-country
studies reported on supply chain management in SMEs. This has further helped
draw a necessary parallel between them.

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About the authors

Jitesh Thakkar is an Assistant Professor in the Mechanical Engineering Department at AD Patel
Institute of Technology, Gujarat. He obtained his Doctoral Degree in the area of Supply Chain
Management from Indian Institute of Technology (IIT) Delhi in 2008. He did his MTech in
Industrial Engineering with 9.157 Cummulative Grade Point Average from IIT Delhi and
Bachelors in Mechanical Engineering with Gold Medal from BVM Engineering College, SP
University, Gujarat. He is a recipient of award “Excellence in Teaching and Research (for Year
2007)” given by Charutar Vidya Mandal – a leading educational trust in Gujarat. He has more
than 25 research publications to his credit, out of which 12 research papers have appeared in
various referred international journals such as: International Journal of Productivity &
Performance Management, International Journal of Six Sigma and Competitive Advantage,
Journal of Manufacturing Technology Management, Journal of Small Business and Enterprise
Development, International Journal of Innovation and Learning, etc. He is presently a reviewer for
select international journals in the area of quality and supply chain management. Jitesh Thakkar
is the corresponding author and can be contacted at: thakkar_jitesh@yahoo.com
Arun Kanda is a Professor in the Mechanical Engineering Department at IIT, Delhi. He has
published research papers in many reputed international journals like International Journal of
Operations and Production Management, Journal of Manufacturing Technology and
Management, International Journal of Six Sigma and Competitive Advantage, etc.
S.G. Deshmukh is a Director of IIITM Gwalior. His papers have published in many reputed
international journals like International Journal of Operations & Production Management,
International Journal of Productivity and Performance Management, Production Planning and
Control, International Journal of Production Research, etc.

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 Specific business characteristics
Average Appendix
Volume Delivery inventory
Turn No. of Core physical No. of No. of Position in (per lead-time levels
Organization overa employee processes Main markets buyers suppliers supply chain month) (in days) (in days)

ORG1 3 80 Fabrication Process 120 120 Equipment 160-180 20-30 60

industries, manufacturer units
home,
restaurants
ORG2 6 75 Fabrication, Foundry, 30-40 260 Equipment 1/4-1/2 180-200 90
assembly melting manufacturer unit
applications
ORG3 30 60 Fabrication, Chemical and No.of fix 170 Equipment 1/2 unit 120-180 60-90
machining allied process number manufacturer
industries
ORG4 7 70 Assembly lines 100% OEM 40-50 80 First tier 2,800 30 30
manufacturers units
ORG5 20 50 Manufacturing, Process and 20-25 160 Component 150-200 15-20 30
assembly dairy industry manufacturer units
ORG6 2 40 Manufacturing All tool room 300 45 Manufacturer of cast 2-3 units 30-60 60-90
applications iron surface plates for
precision referencing
ORG7 1.5 35-40 Wire drawing, Automobile 3-4 25-30 Second tier supplier of 160-170 7-10 5-7
coating transformer wires ton
ORG8 60 200 Manufacturing, 60% OEM and 35-40 OEM 30-35 1st tier supplier of 2,000 15-20 30
Assembly rest retail and 500 positive displacement units
retail pumps
ORG9 7 40 Precision Four OEM Four OEM 25 Second tier supplier of 1,000 45-60 60-90
machining precision instruments units
ORG10 74 300 Fabrication, Dairy, food, 20-30 35-40 Equipment 1/2-1 100-150 45-60
machining brewery, manufacturer unit
pharmaceutical
Note: aFigures in Rs crore (Rs 1 crore ¼ appx. 250,000 US$)
performance
measurement
Supply chain

characteristics of sample
Business specific

units
Table AI.
723
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.