Supply and Value Chain Metrics

Figure 5.2, also taken from Schwarz et al. [21], illustrates how metrics for ethylene, chlorine, vinyl chloride and poly(vinyl chloride) (PVC) can be stacked to obtain metrics for the production of PVC, beginning with naphtha and brine. The metrics calculated with the mass denominator can be readily combined. Impact per dollar can also be calculated for a supply chain by combining the single values along the chain in... 

Promoting the sustainable development implies the availability of reliable measures. These measures should regard the complete manufacturing-supply chain over the predictable product life cycle. The metrics should be simple and understandable by the large public, useful for decision-making agents, consistent and reproducible. The sustainability measures proposed recently by Schwartz, Beloff Beaver (2002) have these properties. They refer to the same unit of outputs, for example the to the value-added dollar Fy4, defined as Revenues minus Costs of raw materials and utilities. The metrics that will be presented are consistent in the sense that 1) the lower the metric the more effective the process, and 2) all indicate the same direction. 

Beech s (1998) demand-supply chain model, along with Comergent s (2003) demand chain model, have each progressed towards a value chain management model (Mudimigha, Zairi, Ahmed, 2004). Sampson (2000) demonstrated that service supply chains were bi-directional, and that communication between customers and suppliers, and vice versa, must occur. Thus, a partnering between participants occurred (Vokurka, 1998). Sampson also indicated bi-directional supply chains were typically short lived, but had just-in-time implications with inherent value-added expectations. To measure such information, new metrics tools have been devised. New methods to capture online measurement data (or Web... 

Just as an athlete is bom with innate potential, the supply chain s potential is definedby this effective frontier. As the supply chain race progresses, the key decision is how to make sense of all the market data, and make the right choices to trade off these conflicting metrics to drive higher value through the execution of the supply chain strategy. 

The impact of new measures on the collaborative supply chain is contributed less by the new metrics and significantly more by the way they are managed. For example, one new metric is the direct feedback from customers via automatic reply cards in the Internet or CRM systems. However, this new data does not add any value unless appropriate actions are taken with a significant paradigm shift from measurement to management . A six-step cycle is recommended in order to implement and sustain the benefits of a performance management system with new measures. 

If you have a conversation with the finance department or on Wall Street, you will hear different views of what value means. The definition of value from a finance person would include, of course, money. Within this book, we will begin to understand different perspectives on what value means and show how supply chain management and operations affect an organization s financial performance. In the next chapter, we will discuss the monetary value of a firm in greater depth, but for now, taken together, firm value includes ROIC, growth rate, and cost of capital. It is incredibly beneficial for supply chain professionals to understand how these factors are affected by supply chain activities. In the end, you will not only know how operational metrics are affected by your decisions but you will also grasp how financial metrics are influenced by your decisions. 

Many operations professionals will tout the idea that time is money, and they can demonstrate how this is true. In this instance, it is not simply being on time but also reducing time to complete tasks and processes. Customers from every tier in the supply chain value timeliness. Timeliness improves customer satisfaction and reduces supply chain risk. Further, timeliness improves a company s cash position, reducing working capital needs and providing higher returns to shareholders. Common metrics that measure timeliness include ... 

A literature analysis marks the starting point of the research process. Relevant research fields are, for instance, supply chain performance measurement or customer service literature rooted in marketing. The theory-based analysis helps to keep track of initial theoretical or practical indications and crystallize them Avithin a first conceptual model explaining the relation between the value drivers of SCM and the EVA as relevant business metric. This part expresses deductive research. The conceptual model is subsequently tested in practice to disclose inconsistencies and customize the degree of specification. Remarks and suggestions made by practice, reflecting the inductive research, inspire fiuther descriptions and improvement. The knowledge acquisition... 

When speaking of value, there is, basically, a financial and a non-financial interpretation of that term (Moller Tdrrdnen, 2003 323 Walter et aL, 2001 45). The financial meaning is closely linked to shareholder value, which characterizes a concept solely orienting a company s activities towards an enhancement of the value of its shareholders. As a result, the market value of the employed equity capital will be maximized (Buhner, 1992 418). The interests of other stakeholders are taken into account insofar as they are a means of achieving that objective. For the measurement of value enhancement, a set of diverse business metrics is developed, for example the economic value added (EVA), the discounted cash flow (DCF) or the cash flow return on investment (CFROI). However, the development of the shareholder value approach is not yet complete (Beck, 2003 3). Thus, many forms of application and transfer can be found, such as a combination of SCM and the shareholder value approach. Singhal Hendricks (2002, 2008) hint at the necessity of managing a supply chain in terms of the principles of shareholder value. The same thoughts can be found in the publications of Laupper (2004), Losbichler Rothbock (2006) and Neher (2003), who all deal with the transfer of the ideas of shareholder value into the context of supply chains. Due to the one-sided concentration on financial metrics and the value enhancement for the benefit of the company s shareholders, the stakeholder value approach is opposed to shareholder value (Achleitner, 1985 73 Bischoff 1994 ... 

SCIs unfold their financial impact along the supply chain via the value drivers costs, capital commitment and revenues. Reproducing this mechanism, the quantification gqjproach introduced in the work at hand comprises three components The effect of SCIs on revenues is computed by a fiizzy logic model, which on costs and capital commitment is determined by a system dynamics-based simulation. Both models are embedded in a conceptual extrapolation framework that makes it possible to consider individual shiftings of SCIs on company-specific supplier and customer bases along the supply chain. The business metric used for measuring the value of an SCI is the EVA. 

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