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Online visibility of supply chain demand requirements Plan4. The designation of a supply chain planning team Plan5. Long-term relationships with strategic suppliers Source2. Reduction in the number of suppliers Source3. Just-in-time delivery from suppliers Source4. Pull system JIT2. Cellular manufacturing JIT3. Cycle time reduction JIT4.
Agile manufacturing strategy JIT5. Preventive maintenance TPM2. Maintenance optimization TPM3. Safety improvement programs TPM4. Planning and scheduling strategies TQM1. Total quality management TQM2. Statistical process control TQM3. Formal continuous improvement program TQM4. Six-sigma techniques HRM1. Self-directed work teams HRM2. We use knowledge, skill, and capabilities as criteria to select employees HRM3. Direct labor technical capabilities are acknowledged HRM4. We have a single point of contact for all order inquiries Deliver2.
We have real-time visibilities of order tracking Deliver3. We consolidate orders by customers, sources, carriers, etc. We use automatic identi? The results in Table 3 show that all factor loadings meet the criterion of larger than. For the Deliver process, the second largest eigenvalue is slightly larger than 1. The scree test suggests that one factor is the most appropriate for this set of items. Thus, the Deliver process is determined to be unidimensional. Thus, it is concluded that all measurement scales are reliable. After performing the exploratory factor analysis, CFA was performed to con?
As Table 3 shows, reliability rho scores for all constructs exceed the threshold of. For each construct, the average shared variance is smaller than the average variance extracted. Moreover, the overall CFA model statistics comparative? As we used a single informant to answer all questions, potential common method bias is checked. The respondents are familiar with the constructs.
Summary of research methodology This study used a survey research method. The analysis was based on useable responses from U. The survey followed the standard process suggested by Dillman to ensure that a good and representative sample was obtained. After the sample was obtained, the statistical analysis has been performed to ensure that the measurement scales are valid and reliable before the measurement scales have been used in further statistical analysis such as structural equation model.
Other measurement concerns such as common method bias have been addressed in this research methodology stage. For the? In contrast to that, all? In the Make process, it is quite surprising to see that the mean of the pull system, cellular manufacturing, agile manufacturing strategy, six-sigma techniques, and self-directed work teams are below 4. It seems that the? Regarding the delivery process, the?
In sum, the descriptive statistics suggest that? But the? Structural equation model We use the structural equation model method to test the hypotheses H1—H5 about the relationships among the four supply chain processes and the results are shown in Figure 3. The results are summarized in Tables 3 and 4. Then we use Sobel tests to test the two mediation e? The results are shown in Table 5. A number of? A normed chi-square below one indicates that the model is over? The normed chi-square adjusts the sample discrepancy function by the degree of freedom. Hair et al. Source H1 Plan?
Make H2 Plan? Deliver H3 Source? Make H4 Make? The means of the planning Path coe? Mediation e? For each mediation test, three regressions are required. Take the mediation e? First, Plan process must have signi? Second, Plan process must have signi? Third, the in? Then a Sobel test is performed to test the signi? Model 1 in Table 5 shows that the Plan process has a signi? The regression coe? Model 2 shows that the Plan process has a signi? The coe?
Model 3 shows that the coe? To test whether this reduction is signi? The calculation of the Sobel test statistics is shown in Table 5. The result shows that the Sobel test statistic is 4. The p-value of this Sobel test is smaller than. This means that the Source process signi? Similar regression analysis is performed for the mediation e? The results are summarized in Table 5. The Sobel test statistic is 3. Thus, we conclude that the Make process signi? Summary of analysis This analysis section? It is desirable to have IFI no less than. As shown in the bottom of Table 3, the? Based on the structural equation model, the results of the?
According to the t-values in Table 4, all? In addition to a good? Finally, regression analysis is used to test the mediation role of the Make process and the Source process in the SCOR model. According to the results in Figure 3 and Table 4, the relationships of the supply chain processes in the SCOR model are supported as expected Supply Chain Council Source process has signi? The strongest link is from the Source process to the Make process while the weakest link is from the Plan process to the Make process.
The Plan process primarily focuses on sourcing, JIT production, and delivery practices. The results in Table 5 support the hypotheses that 1 Source process mediates the in? The signi? According to Table 5, the indirect in? The direct in? The total in? To our best knowledge, this is the? Very few studies Lockamy and McCormack ; Huang et al. To date, this is the only study that has comprehensively addressed the relationships among all four supply chain processes. This study contributes to the literature by providing a holistic view of the supply chain management from the process perspective and o?
For practitioners, the? For example, this study reveals the? This study identi? The descriptive statistics can also help? It has been shown that the relationships among the supply chain processes in the SCOR model are generally supported. With data from North America manufacturing companies, the Plan process has signi?
Among the four supply chain processes, it appears that the Plan process has received the least attention from the? This study contributes to both academic literature and practitioners. Several recent studies have addressed the issue of supply chain integration and governance Chen et al. As Chen et al. This study provides a holistic view of supply chain integration from an empirical survey research methodology perspective. It reveals the quantitative relationships among the four components of the SCOR model.
Richey et al. Through the Source and Deliver components of the SCOR model, this study enhances our understanding of the importance of working with suppliers and customers in supply chain management. For practitioners, the empirical validation of the SCOR model structure gives practitioners more con? The study also reveals the weaknesses in using the SCOR model such as in the planning area. The statistics in this study provides practitioners a quantitative sense of the various linkages in the SCOR model and also help? The quanti? As this study is the?
This limits the richness of this study. Future studies can investigate Level 2 or below of the SCOR model with more details such as information sharing and coordination. Information sharing and coordination is an important aspect of supply chain management Chen and Paulraj ; Li et al. Future research can address this topic with respect to the use of the SCOR model. For example, Level 3 of the SCOR model does specify the information inputs and outputs of process element.
Acknowledgment The authors would like to extend their appreciation to University of Malaya for the Postgraduate Research Fund Grant no. Conflict of Interests The authors declare that there is no conflict of interests regarding the publication of this paper. References 1. Extending the horizons: environmental excellence as key to improving operations. Manufacturing and Service Operations Management. The role of stakeholder pressure and managerial values in the implementation of environmental logistics practices.
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Impact of sustainable manufacturing practices on consumer perception and revenue growth: an emerging economy perspective. Green supply chain management in China: pressures, practices and performance. Green supply chain management: pressures, practices and performance within the Chinese automobile industry. Rao P. Greening the supply chain: a new initiative in South East Asia. An empirical study of the implementation of green supply chain management practices in the electrical and electronic industry and their relation to organizational performances.
Zhu Q, Sarkis J. The moderating effects of institutional pressures on emergent green supply chain practices and performance. Is an environmental management system able to influence environmental and competitive performance? Testa F, Iraldo F. Shadows and lights of GSCM green supply chain management : determinants and effects of these practices based on a multi-national study. Diabat A, Govindan K. An analysis of the drivers affecting the implementation of green supply chain management. Lun YHV.
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Green management practices and firm performance: a case of container terminal operations. Buyukozkan G, Cifci G. Evaluation of the green supply chain management practices: a fuzzy ANP approach. Green KW, Jr. Green supply chain management practices: impact on performance. Sustainable production: practices and determinant factors of green supply chain management of chinese companies. Business Strategy and the Environment. Examining the effects of green supply chain management practices and their mediations on performance improvements. Diffusion of selected green supply chain management practices: an assessment of chinese enterprises.
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A capacitated production planning problem for closed-loop supply chain with remanufacturing. International Journal of Advanced Manufacturing Technology. Production planning of a hybrid manufacturingremanufacturing system under uncertainty within a closed-loop supply chain. The impact of product recovery on logistics network design. Lieckens K, Vandaele N. Reverse logistics network design with stochastic lead times.
Du F, Evans GW. A bi-objective reverse logistics network analysis for post-sale service. Network design for reverse logistics. Cruz-Rivera R, Ertel J. This component has the task of planning, implementing and controlling the efficiency and effectivity of the forward- and backward-facing flows of goods, services and appropriate information, with the intention of fulfilling customer requirements. These connections are intended to help the business arrive at a consistent and achieveable business model that comprises the logistics management functions in addition to production flows and has the task of ensuring the coordination of the SC processes with the functional areas of marketing, sales, product design, finances and information technology.
Beyond this, however, it comprises the coordination of and cooperation with the business partners within the Supply Chain, such as suppliers, distributors, logistic service providers and customers. In the main, SCM integrates the management of supply and demand Supply and Demand Management within one business, and also throughout various other firms.
In actual fact, the term SCM is associated with various meanings. In the widest sense, it encompasses all logistical activities, customer-supplier relationships, development and introduction of new products, inventory management and facilities. The concept allows itself to be applied, in analogue, to the area of service provision. Many practitioners define SCM more closely and restrict the definition to activities within one companys Supply Chain.
By this they inevitably reduce the application area of improvement measures to their own business and the internal Supply Chain, without the inclusion of external Supply Chains. This is also inherently connected with the Advanced Planning System APS , 99 which also explicitly includes an information technology IT support aspect. If the time dimension or the planning horizon is included, SCM can be defined as the coordination of the strategic and long-term orientated cooperation between all participants within the whole SC network. Each SC participant is active in the area for which he possesses core competences.
The focus of such a process is the satisfaction of customer requirements. In this sense, it covers Supply Chain formation as well as the consequent operation and maintenance. New tasks ensue for the involved executives, because traditional tasks have to be completed in a new way. Principally, the introduction of an explicit SCM discipline has, as a consequence, an extension of the range of tasks and responsibilities of co- workers.
This integration provides the products, services and information that generate value for the customer. Having said that, SCM leads to a change in the existing Supply Chain and generates customer benefits by means of the targeted usage of information associated with the Supply Chain. SCM therefore represents the integration of these activities by means of improved relationships with the SC partners, in order to gain a permanent competitive advantage. In the framework of this philosophy, the objective is to combine the common production competences and production resources of the business functions that lie not only within the organization, but also with the external allied SC partners.
The aim is to create a highly competitive SC system, furnished with customer benefits which targets the development of innovative solutions and the synchronization of the product, service and information flows. The ultimate goal is the generation of maximum value for the customer. In such concepts the application area is extended into the sphere of distribution. This means that it includes the functions within the respective business, as well as throughout various firms which are integrated into the Supply Chain.
The practice aims for long-term improvement of the performance capacity of the individual firms in addition to the Supply Chain as a whole. In this form, SCM represents the coordination of production, inventory stocks, locations and transportation amongst the SC participants, in order to ensure the best relationship between performance capacity capability on the one side, and efficiency on the other. In accordance with this, the distinction of the supplier-centric approach exists in the fact that the business and its suppliers, distributors and customers, i. The group of firms recruited from the respective partners or participants functions like an expanded business and ensures the optimal use of shared resources manpower, procedures, technologies and performance measurement , in order to attain synergies.
The results are products and services which combine high quality with value for money and can be quickly delivered to the market. The group of firms recruited from the SC partners or participants respectively, functions so to speak as an expanded business and ensures the optimal usage of shared resources in order to attain synergy. The results are products and services of high quality that can be quickly delivered onto the market and ensure customer satisfaction. The primary purpose of this concept is the generation of value for the customer, with simultaneous performance capability improvement regarding asset performance and cost-efficiency.
As a result, SCM seeks to optimize the efficiency of the companies involved and harmonize the conflicting objectives under the provisions of the priorities according to each chosen competitive strategy. This tendency has been mainly promoted by firms who use highly developed information technologies to improve their capability in the field of SCM.
A decisive factor to business success is their competence in being able to offer innovative products of the highest possible quality, at marketable prices and faster than the competition. Such strategies are ultimately supposed to contribute to optimizing order cycle times, financial flows cash flow , Return on Equity RoE , market share and profitability. In this sense, they represent the basis of the SC strategy. For each product there is a Supply Chain, and for each Supply Chain a competitor.
These chains are developed by large corporations typically distinguished wholesale chains and Original Equipment Manufacturers OEMs who have the necessary vision and enforcement potential to advance their SC partners performance capability, exchange data and work in an alliance, in order to ensure a superior market position and the improved efficiency of the business. Goldrath summarizes this in the recognition that the sum of local optima is not equal to the global optimum. Focusing on the Supply Chain as a whole represents the first stage; focusing on the product the second; and the inclusion of the value-generating flows in the sense of a value-oriented, SC-focused process organization, as opposed to the traditional performance measurement that was built-up on structural organizations, represents the third stage.
The assignment of a value stream is thereby possible, which illustrates the present-day business processes more effectively than would be the case within the framework of the conventional Supply Chain. Within the development framework of the so-called SMART automobile, a feasibility study was carried out in the first instance. The Supply Chain developed in this context and at that point in time, mid s, represented a completely new approach. In this way, for example, new models were created for supplier inclusion and production outsourcing, which were distinguished by pre-installation at the suppliers location, integration of suppliers in the design and final assembly, and the proportional ownership-splitting of production locations.
Additional questions arose, for example, from the fact that the initializing company only contributed roughly 15 percent of the value-add within the Supply Chain. The concrete question resulting from this was how a Supply Chain, within which the central business only provides a relatively minor contribution in value, could be monitored. In accordance with this, the value- orientated approaches within business systems that simultaneously postulate a close cooperation and the retention of independent firms are the most effective.
Four characteristic features of a business system allow themselves to be identified, which are advantageous to the development of strategic networks: Some critical SC activities must show advantages if they are to be implemented in a de-integrated form. This can be determined by differences regarding market entry barriers and competitive advantages. Specialized investments lead to higher efficiencies. These can be represented in the form of capital investments or investment in the workforce. The adaptation speed speed of responsiveness is of fundamental importance.
Innovation presupposes the comprehension of the SC system as a whole. Processes may be further subdivided into partial processes. Furthermore, a differentiation can be made between key processes, which include main or partial processes and immediately contribute to purpose- fulfillment in the business core, and support processes, which represent associated activities in support of the key processes. Often the key processes named are also distributed amongst several companies if a respective division of the work is predetermined.
The key processes are integrated into the previously mentioned product life cycle. The SCOR model extends itself over the complete Supply Chain, beginning with the procurement process source of supply , up to the point of consumption. It is an ideal industry- spanning approach, in which the procedures within a Supply Chain are agreed upon by the partners. The process chain approach, also referred to as the Process Chain Model, forms a businesses Supply Chain seen from a purely process-oriented perspective. The result is a type of process-focused Supply Chain, for which the description Process Chain can be found.
With this, every process within the Supply Chain, which is reflected in the form of process chain elements, can be represented by means of the following parameters: Input Output Resources Structures Control A process chain element is associated with the business environment via the input, which describes the load under which the Supply Chain stands, and also refers to the output. According to process chain design, the respective process chain element transforms a given input into a given output. The process, which underlies the design, is described by process chain elements upon a lower, i.
Cost accounting is an important part of the successful business operations. Before costing can be undertaken, a number of decisions have to be made for example with reference to the timing of the cost accounting. Pre- and post- costing can be differentiated with regards to the timing: Pre-costing is necessary if a product is newly introduced onto the market. Exact cost data are therefore not known, but can be estimated on the basis of factors like presumed purchase prices or preparation periods.
Pre-costing thus enables an initial price determination.
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Post-costing is mostly undertaken upon expiry of an accounting period and namely on the basis of actual cost data. Deviations identified in this process can then be used to influence price corrections. Costs represent the assessed consumption of production factors for the provision and marketing of business performance, as well as the maintenance of operational preparedness. Alternatively expressed, quantities and times are multiplied, or respectively appraised, by prices or rates, leading to a cost figure.
It therefore identifies the personal cost and with that creates the basis for price politics through the identification of lowest price limits. This refers to an area that often comprises a complex alignment of activities, and an exact measurement is often difficult. There are two primary stages which must be successfully implemented in order to ensure the exact measurement of the SC costs: First, the cost structure of the Supply Chain must be located as close to the reality of the situation as possible.
Further, the system for the measurement and reporting of these costs must be well designed. In addition to the specific SC costs, the most generally used components that can be accurately measured in post- costing or estimated in pre-costing are quantities and times. This is particularly important when it can be assumed that no substantial differences are to be expected with regards to quantities and times.
Supply chain management aims at minimizing mass and time. Needless to say, an efficiently managed supply chain requires measurement of the costs associated with the physical movement of goods and related information flows. In this sense, performance indicators are not only intended to contribute to the continual improvement of the Supply Chains performance, but also to further refine a competitive business strategy.
To be most effective, the performance indicators should be easy to define, simple to apply and easy to comprehend, in order to enable the executives who use them to react speedily and suitably with adequate measures. The performance of the operating procedures is a substantial premise for external customer satisfaction. The financial performance potential, on the other hand, reflects the companys internal profitability and its ability to be competitive in the long-term. In the short-term period, the estimation of the financial performance potential consists of the measurement of incremental cost per unit for every activity and every project, in addition to the measurement of non-value generating expenditure.
During all this, the business executives must consider that capital investors are focused upon maximizing the capital productivity of the invested capital, and that such a focus favors maximization of the profit margin and capital turnover. Finally, they must allow sufficient financial clearance whilst making strategic decisions or, in other words, ensure the business has a sufficient cash flow.
To this end performance is measured and monitored by means of performance indicators. In this case, however, not all measurement procedures and indicators lead to their objectives. Many organizations are barely in a position to cope with the amount of data, which is either irrelevant, too explicit, badly classified and of low value for decision making, or on the other hand can be difficult to obtain. A glut of information can, in fact, have a detrimental effect. Several of the indicators defined above may only have a nominal relationship to an organizations goals. They are, therefore, not relevant to the achievement of objectives.
Other indicators can be misinterpreted, because their meaning is unclear or ambiguous, resulting in wrong decisions with far-reaching consequences. This leads to a management reporting system that is characterized by Key Performance Indicators KPIs and their application for example, in the framework of a Balanced Scorecard, which will be dealt with more closely in the next section.
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The key performance indicators must be seen in conjunction with the so-called Critical Success Factors, CSF : Critical success factors serve the purpose of identifying the substantial factors for the organizations success. Control of the performance indicators must, therefore, be directed towards the targets, problem areas and decisive factors, in other words: the critical success factors.
The resulting advantages allow themselves to be collected as follows: Better achievement of objectives Better and quicker decision making All staff are aligned to common goals Managers and staff have greater confidence and motivation. The problems immanent to the general performance indicators have lead to the development of special performance measures and metrics, used to support companies in specific areas such as SCM. Novack et al. In this a differentiation is made between ten so-called logistics activities and five logistics service outputs.
The logistic activities contain the Supply Chains partial processes: Purchasing Inbound transportation Packaging Inventory management Warehousing Manufacturing Intra-company transportation Order processing Outbound transportation Logistics design and strategic planning The logistics service outputs measure the performance of the aforementioned activities and therefore represent performance indicators. These include: Product availability Order cycle time Logistics operations responsiveness Logistics system information Post sale customer support.
Another possibility for improved control may be found in the differentiation by process performance indicators process measurements and the method used to measure the indicators metric measurements. The process performance indicators include, in the first instance, customer satisfaction. This can be measured by the collection and evaluation of customer complaints, thus enabling the customer to be included in product- and procedure- orientated performance evaluations.
This focuses upon a products successful delivery to a customer, fulfillment of his expectations and the extent to which the product is useful to him. These customer expectations include, as a rule, perfect order rates as well as the delivery of the product to the correct location, in good condition and at the correct time. Due to the fact that performances within a Supply Chain often involve overlapping and cross-sectional tasks, the formation of a cost distribution by areas of expenditure is often difficult. Additionally, cost distribution transparency on an internal and higher operational level is often not possible.
These influencing factors are described as cost drivers. Those drivers that are themselves shaped by quantity amount and those that are dependent on performance are differentiated. The aim is to identify the cost per process implementation. The relevant basis data is collected from the study of the individual activities of the process. The following example is supposed to show how performance indicators in the logistics area can be classified and identified.
The companies were distributed over a multitude of industry sectors, whereby the majority roughly a quarter came from the Food and Beverage industry. The first stage consisted of the identification of logistics activity costs and performance. The purpose of this part of the questionnaire was to find out which percentage of the companies questioned measured the costs connected with performance and logistics activities. During this the precondition was taken as a basis that fundamental measurement of costs and services represents a necessity for quantification of the logistic value.
The second stage consisted of the identification of relative cost and relative value creation. The people questioned were asked in the survey to prioritize the ten logistic activity areas with regards to their percentage of the logistics activity costs as part of the total of the firms expenditure, and the relative value generation of each activity in their respective company. A ranking of 1 was allocated to the highest relative logistic activities cost and value generating percentage, a ranking of 2 to the second highest and so on, up to a ranking of 10 for the lowest percentage.
This was done for two reasons: firstly, it would determine whether a relationship exists between what a company measures and the relative logistic activity costs and value generating percentages which are actually measured. Secondly, it would help identify whether a relationship exists between the cost of an activity and the value generation for a business that results from it. In the third and final stage, the logistics service performance was identified. This part contained two separate questions.
First, the people questioned were asked to specify whether they measure the five logistic service outputs product availability, order cycle time, logistics operations responsiveness, logistics system information and post sale customer service at all. They were then asked to allocate a ranking for the five outputs with 1 for is most important and 5 for is least important. One of the results identified within the framework of the study was that logistics activities are more important from the companys point of view, whilst logistics service outputs are more important for the customer.
The further development lay in, above all, not only optimizing existing processes, but also including new processes, structures and procedures. By these means the method gains in innovative strength. The method of the BSC was not completely new at the point in time of its development the early s , because companies were already using a number of indicators financial as well as non- financial, tactical and operational but the application of such a structured concept, leading to an accurate measurement of the companys performance against its set objectives, was relatively new.
The balance aims at the equality between the following components: strategic vs. The business vision, strategies and activities are usually observed from four perspectives: Financial, which covers the capital backflow and value generation. Customer, characterized by customer satisfaction, customer retention, market share. Business process, containing quality, reaction time, cost and introduction of new products. Learning and growth, which includes satisfaction of co-workers and availability of information systems.
Each of these perspectives within the BSC framework is itself determined by four expressions: objectives, measures, targets and initiatives. In most cases, the indicators are converted by means of databases data warehouses and spreadsheet analysis. These were often problematic, however, as they were often focused not exclusively on those processes that were critical to the business success, but on the entire spectrum of processes and systems. Equally, the collection, aggregation and analysis of the correct data, was often presented in a manner that made sustained analysis difficult and sometimes even impossible , because the necessary data was not always available.
BSC has developed itself into one of the most far reaching and recognized methods of definition and monitoring of business strategy. According to an exemplary study on the theme of performance monitoring, almost half 46 percent of the people questioned stated that their companies were implementing the BSC method or planned to use it in the future. It was remarkable that the diffusion was greater in the industrial and marketing sector than in the service sector.
Because the Supply Chain ultimately targets the end customer, the point of view of the end recipient must be included during the development of a SC Scorecard and the identification of the particular metrics. That consequently includes aspects that are relevant to the capabilities of the Supply Chain: those which satisfy the end customers requirements in the most cost-effective manner. Therefore, a SC Scorecard shared by all parties within the Supply Chain requires a considerable degree of trust.
Simultaneously, however, the communal development of a Scorecard and the sharing of data associated with it can serve to strengthen the mutual trust and the sense of partnership. Despite this, the introduction of a Scorecard directed at the whole Supply Chain, although theoretically desirable, is relatively difficult to attain in practice. Because the approach is extended to cover the whole Supply Chain, the procedures are configurable and the possibility of illustrating various alternatives of the same process exists.
Through this, a standardized language evolves, so to speak, for internal, intra-company, and integrated communication, respectively, which in turn is a substantial condition for the performance comparison between the SC partners. The performance of each of the processes in standardized Supply Chains is measured with the aid of specialized performance indicators. The primary objective of the SCC is to promote a common understanding of the processes and activities in the various businesses which participate in a Supply Chain network.
The process categories in the SCOR model are differentiated with the aid of the dimensions production concept and orientation of product structure. The expression discrete corresponds in this instance to the orientation within the installation, i. The planning and control methods required to make this possible are consequently identical to the methods used within firms for internal planning and control. Further measures include procedures necessary to access data between companies, especially data pertinent to inventory and capacity.
Only within a common comprehension of the relevant processes is the formation of customer-supplier relationships possible. Furthermore, the comparison of SC performances is only possible with the aid of a special comparative procedure, called Benchmarking, based upon such indicators. A normative model consists of a predefined set of alternatives, and Welke describes how an object of the model should be seen and behave.
The value of normative models lies primarily in the following areas: Simplification of modeling constrained choice vs. Making model exchange possible throughout business units and organizations by means of standardization. Description of common problems and metrics by means of standardization. Exchange of benchmarking and best practices by means of standardization. Normative models do not represent anything fundamentally new and have been around since the s. Whilst the growth in the computer industry at this time was way above average, this growth was not accompanied by a comparable improvement in communication between executives in the companies applying it and their IT managers with regards to the effective assignment of the new computer-supported technology.
It became obvious that there was a real need to find ways of making clear to executives the importance of IT applications. BIAIT was developed to solve these communication and estimation problems. Instead of the term normative models, one often finds the term reference model for SCOR. This will be dealt with more closely in Chapter 2. This study focuses upon industrial companies, because the author has practical experience in this commercial field. Furthermore, it focused upon the E-Business field B2B , because it can be assumed that the greatest scope for competitive success resides there.
Further models for E-Business are described in literature, but have not been comprehensively documented, or do not represent a normative model in the sense introduced here. The aforesaid arrangement can therefore be expanded by these business areas in which the SCOR model presently takes a primary position, as will be made clear.
Selecting a few targeted key performance indicators can help a company to concentrate on its supply chain goals. Choosing the wrong indicators, on the other hand, could lead to a decline in supply chain performance. In addition, analyzing the supply chain based solely on individual events can have the opposite effect, causing turbulence in the supply chain. Hugos defines five so-called supply chain drivers, which dominate the SCs performance potential. Each of these drivers has two competences or respectively, and more precisely, Supply Chain competences, as in the submitted context : The performance capability and the efficiency.
The five drivers and the two expressions are connected in the following way: Production: This driver can be arranged highly capable from a performance point of view, for example, by the construction of additional factories showing surplus capacities and use of flexible manufacturing procedures, in order to produce a large assortment of products. If efficiency is sought, a firm can build factories with low surplus capacity and optimize the factories for the manufacture of a limited assortment.
Inventory: Performance capability can be achieved here by holding a high amount of inventory stock for a large assortment of products. Efficiency, with regards to inventory management, would demand reduction of inventory amounts for all products especially those which show a low turnover rate. Location: A location approach that emphasizes performance potential would be seen, for example, where a computer firm opens many branches to be physically close to the customer base.
Efficiency can be achieved by serving all the customers from only a few locations and thereby centralizing activities. Transportation: Performance capability can be achieved by a transportation mode that is fast and flexible. Efficiency can be achieved by transporting products in collective deliveries batches and by fewer deliveries. Information: The influence of this driver grows continuously, whilst the technology for collection and distribution of information spreads increasingly, is simpler to use and becomes less expensive.
A high performance potential can be achieved by companies with the accurate and up-to-date collection of data, whereby that task is represented by the four drivers previously mentioned. If the objective is greater efficiency, it can be achieved by the collection of a smaller amount of data, resulting in a reduction in the associated and required activities. The following illustration combines these connections once again in a graphical manner: Diag. Both are subsumed under the term Performance in this study and measured by the illustrated KPIs. It is therefore about doing the right things.
Effectivity implies, for example, an attractive price-performance ratio for the customer, competitive advantages in the usage-related quality elements, a point of entry into the market which conforms to the objective, or a means of marketing products in accordance with or in excess of the planning level. Activities are considered efficient if they accompany relatively low cost, a relatively short development period or the use of synergy effects.
Together, effectivity and efficiency influence commercial success. In connection to the costs within the Supply Chain, one also speaks of Supply Chain costs. SC costs can be recorded within the framework of a target costing in supply chains. The scope of conventional cost control is a single firm. The fundamental idea of cost control within a Supply Chain is to extend the cost control approach to cover the whole Supply Chain, which requires an approach that goes above and beyond organizational boundaries.
Synergies are thereby used, which exist throughout several firms in a Supply Chain. Traditional cost controlling systems are only partially successful in ensuring an exact analysis of the costs beyond the domain of production. As opposed to this, activity-based costing systems assist organizations to allocate costs associated with supplier and customer relations more closely.
This supplier- and customer-orientated cost information enables firms to identify opportunities to increase cost efficiency of their market relations within the Supply Chain.
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According to this, firms reduced inventory buffers by half, increased on-time deliveries by 40 percent, and reduced the percentage of non-deliverable products to a fraction, simultaneously doubling the rate of inventory turnover. This degree of cost effectivity directly improves the percentage in trading margin or creates an opportunity of permanently lowering prices. As an example, leading companies within the food industry report about five percent lower SC costs than their competitors. In that industry, an increase of five percent in the margin or a consequent permanent decrease in price, if the savings are at least partially passed on to the end consumer is of great importance.
Having said that, the trading margin for the typical retailer comprises less than a half of cost savings achievable by leading businesses within the SCM area. In the computer industry, for example, a rough estimate of the annual stock-keeping costs can be identified by the combination of the capital costs 10 percent and price erosion 25 percent , which equate to 35 percent of the net asset value. A good measure for orientation can be identified by the calculation of stock-keeping costs over a 10 day period. The formula for this is as follows: 10 days multiplied by 35 percent, divided by days, equals 1 percent.
This means that a respective reduction or increase of the storage duration of 10 days leads to a respective one percent improvement or deterioration of the backflow of goods. Stock-keeping costs consist of the following components: Obsolescence, i. Lost sales Personnel costs, i. Stock-keeping costs have been identified as one of the main cost drivers and have a substantial influence upon a companys profitability.
The primary factor in positively influencing stock- keeping costs is, therefore, stock- keeping management, which represents an integral component within Supply Chain monitoring. They describe this connection as follows: Reliability is an important dimension of world class service. Reliability means predictable, on-time delivery of perfect orders, as expected by the customer. A perfect order is one that is shipped on time and complete, but more important, one received at the customers desired location within a precise time window, in excellent condition, and ready to use.
It also includes the flexibility to respond to last-minute changes by the customer at equally high service level. The measurement of these indicators plays, as already explained in section 1. It constitutes a kind of strength effect and drives the activities onwards.
The implementation of effective measurement procedures brings with it permanent challenges for business executives. It requires not only the restructuring of existing performance measurement procedures, but also the establishment of a structured process for monitoring the Supply Chain. The desire to positively influence the SV has in many cases represented the starting point for Supply Chain improvement. The Supply Chain can immediately influence the profitability as well as invested capital via the following determinants: Profitability: On the one hand, it includes revenue in the sense of a high market share, larger trading margins and higher product availability.
On the other hand, it contains cost with the objective of lower costs for sales, transportation, stock-keeping, material movement and distribution planning. Invested capital: This comprises, on the one hand, working capital with the objective of lower stocks of raw material and finished products, in addition to shorter payback cycles. On the other hand, it comprises fixed capital with the primary intention of binding less capital into capital goods for example, vehicle pool, warehouses, accessories for the movement of materials.
Repeated references will be made to the determinants for Supply Chain performance in the chapters that follow, because they also find a role within the framework of the SCOR model. During this study recourse will often be made to the division of performance potential into performance capability on the one hand as a respectively external or customer-related component and efficiency on the other hand as a respectively internal or business-related component. Under context of discovery, the motive that leads to a research project is understood.
The motives are different in their starting points, leading to an examination. They all refer, however, to social problems. With the SCOR model providing a unified description, it is therefore possible to consider analysis and evaluation of Supply Chains not only between one company and another, but also across sectors of wider industry.