What Performance Management Is In Supply Chain and Two Ways It Can Help Achieve Business Objectives
Updated: Jun 10, 2021
Within a workplace, understanding the value and importance of performance management is key for a company to meet its business objectives and goals. Managers who understand what performance management is and how they can effectively implement it possess a competitive advantage. This is because effective performance management helps businesses ensure that they are getting the most out of their employees, resources, and any systems that they have in place.
What performance management is in relation to supply chain activities is no different. The purpose of it is to ensure that businesses are optimizing their supply chain effectively so that they can improve its efficiency and ultimately reach the business objectives and goals that they have in place. Supply chain performance management analyzes what supply chain management processes, indicators, metrics and technologies are most effective. To accomplish this, it examines qualitative measures such as customer satisfaction and the quality of a company’s products as well as quantitative supply chain KPIs, such as the time a product takes to get delivered (OTD) for example. Ultimately, there are several benefits to effective supply chain performance management not only within supply chain processes themselves but for broader business objectives and goals.
Within supply chain performance management there are five key performance attributes. The
metrics used within performance management systems such as The OWL are designed with the intention of measuring each of the SCOR attributes below.
Understanding what supply chain management is along with what performance attributes it assesses is only the beginning. To truly understand the concept it is important to understand how it can benefit organizations in their big picture goals. Here are two ways that supply chain performance management systems such as The OWL can help firms succeed in achieving their business goals and objectives.
The goal of every firm is to increase profits, and effective supply chain management helps achieve this by maximizing efficiency. Through more efficient supply chain practices businesses are able to increase revenue and simultaneously cut costs. Supply chain software and performance management systems such as The OWL helps measure the level of supply chain efficiency a firm possesses through performance metrics and supply chain KPIs.
For example, the supply chain KPI known as inventory turnover can help a firm measure how quickly they are able to move inventory. Being able to move inventory at a faster rate not only helps reduce storage costs, but can allow a firm to sell products at the price they intended to rather than a discounted price for the intention of clearing stock.
Other supply chain KPIs such as on-time delivery (OTD) can help companies cut pesky costs as well. On-time delivery measures whether materials or finished goods are delivered by the requested date at any phase of the supply chain process. Not only can on-time deliveries help a company get products in the hands of the consumer quicker, but they can help reduce storage costs. Take for instance a car company that has their supplier ship raw materials to the manufacturer to produce cars. What if even a single part of the cars such as the steering wheel arrives an hour later than the requested time? Production lines would stall and storage costs would increase since the company would have to store materials for 45 minutes longer than it intended to.
These are the types of situations that firms may believe to be insignificant or take for granted, but costs incurred as a result of delays in the supply chain process can accumulate over time. This is why using supply chain performance management is critical to measure the status of a company’s supply chain through performance metrics and supply chain KPIs. By engaging in supply chain performance management, a firm can significantly reduce lead times (delays) and cut operating costs while getting goods to the consumer as quickly as possible to increase revenue.
In order for a business to function correctly, every part of the business must communicate effectively. All parts of a business including its departments, managers, employees and the systems that they have in place must be connected to ensure that every part of the organization is on the same page. That way, a company can take part in effective decision making, reduce costs and become more efficient overall.
Supply chain performance management helps a business do just that. Within supply chain management there are a lot of details you need to keep track of such as the time of deliveries, inventory status, cost of goods and so much more. In order to effectively monitor every part of the supply chain process, a firm should utilize a performance management system such as The OWL. These systems ensure that there are no weak links within the supply chain that become detrimental to the process as a whole. Information must flow effectively from the supplier to the manufacturer and retailer all the way down to the consumer. The only way to get the most accurate information possible in all aspects of the supply chain is to have an effective performance management system in place so that a firm can succeed in its decision making.
Although supply chain performance management can help reach business goals and objectives such as an increase in profit and improved information flow, it is important to have the correct performance management system in place. Many businesses resort to managing these processes through simple excel spreadsheets, BI Tools, ERP systems and other flawed methods.
The OWL is the only full purpose supply chain performance management solution that not only provides an adept supply chain software with reliable insights and KPI’s, but has unique features that are not commonly found in other supply chain solutions. The OWL offers a benchmarking tool that allows a business to contextualize its performance based on industry-specific indicators and highlights areas where a supply chain can improve so that it can become more efficient and save costs. The OWL also offers support from supply chain experts that possess decades of supply chain experience. They help a business understand and leverage the insights provided by The OWL and come up with tangible steps that can be taken to help a company improve its supply chain. In other words, The OWL is the easiest and most convenient supply chain software and performance management solution on the market.
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