A systems perspective on supply chain measurements

1、a systems perspective on supply chain measurementsstefan holmbergthe authorsstefan holmberg, division of logistics, lund university, swedenabstractboth practitioners and research scientists have noted a number of problems regarding measurement activities during the past decade. the problems reported

2、 suggest that measurement activities are fragmented both within and across organizations. expands on a systems perspective on supply chain measurements and describes how problems can be communicated, understood and managed by developing methods and tools for describing interrelationships within supp

3、ly chains. empirical evidence from a case study of a swedish home furnishing business supply chain provides data suggesting that firms within a supply chain cannot simply be categorized as either having adopted systems thinking or not. rather, both structured models indicating a high degree of syste

4、ms thinking, and problems showing fragmentation, are present. a performance model, which is used to reflect the systemic structure of an underlying supply chain and a potential integrator, is introduced and suggested as the focus of future research initiatives within supply chain measurements.articl

5、e type: case study.keywords: supply chain, measurement, systems integration, performance measurement.content indicators: research implications* practice implications* originality* readability*international journal of physical distribution & logistics managementvolume 30 number 10 2000 pp. 847-868cop

6、yright mcb university press issn 0960-0035introductionbackgroundthe interest in managing supply chains is growing rapidly among companies around the world. major forces behind this development are increasing competitive pressure and a belief that working cooperatively in supply chains can create a c

7、ompetitive advantage. firms abandon the old antagonistic approach to doing business in favor of a more integrative management style focused on coordinating activities along the supply chain in order to attain or sustain their competitive position.coordinating activities in a supply chain, however, i

8、s difficult. the difficulties are partly due to the complexity induced by the large number of related and interdependent activities in the supply chain. the fact that the effects of certain actions are separated from their cause both in time and place increases complexity, and is made even worse by

9、the functional division of responsibility along the supply chain. understanding the interdependencies and the complex causal relationships in a supply chain is therefore crucial to the successful management of these activities. it is important to realize that what you do not understand, you cannot m

10、anage.systems thinking offers a method for describing and analyzing problems in such contexts, and is therefore well suited to solving the complex and dynamic socioeconomic problems found in logistics systems today. however, the problems reported by many organizations show that the use of systems th

11、inking is insufficiently developed, although it has been with us for several decades. senge (1992) elaborates on this theme, and claims that firms seem more concerned with detail - as opposed to dynamic - complexity. if firms deal only with detail complexity, they are obstructed from seeing how rela

12、tions of different kinds reach beyond their own firms and change over time. the nature of the problems reported indicates that many organizations act as autonomous units instead of components of a larger system, and thus neglect the width and scope of their interdependencies with other firms.unfortu

13、nately, the lack of systems thinking also influences how firms approach another important area: the design of performance measurement systems. a performance measurement system plays an important role in managing a business as it provides the information necessary for decision making and actions. alt

14、hough this area has been pointed out many times as strategically important, it still is not sufficiently understood (keebler et al., 1999; atkinson et al., 1997; vitale and mavrinac, 1995; eccles, 1991). the lack of systems thinking becomes especially disturbing when measurement systems are applied

15、to supply chains.purposethe purpose of this article is to explain supply chain performance measurement problems from a systems perspective. one important objective is to show if and how the problems are a result of insufficient systems thinking. given the exploratory nature of this article, areas fo

16、r future research are suggested in order to contribute to the body of knowledge within logistics.methodthis article is based on an extensive literature review across disciplines such as management, quality and logistics, in addition to observations from a case study of six firms composing part of a

17、supply chain in the home furnishing business in sweden. ikea, a multinational company in the home furnishing business, acted as host, providing access to organizations within ikea as well as to suppliers of finished goods. several echelons of the supply chain were included, ranging from retail outle

18、t stores to manufacturers plants. the following organizations were included in the study: a sales organization; a wholesaler; a product development organization; a purchasing organization; and two key suppliers. each organization within ikea was a separate legal entity dedicated exclusively to ikea

19、operations. the fact that several echelons of the supply chain were included promised that problems and phenomena related to collaboration beyond dyadic relationships were examined.validity has been gained mainly by using triangulation of data sources and research methods, but also by adopting membe

20、r checks and debriefing by peers. regarding the collection of data, both semi-structured interviews and documents were used in addition to a questionnaire. each of the three data collection methods is presented in greater detail below:(1) a total of 33 semistructured in-depth interviews were conduct

21、ed by a single researcher, preceded by a test of the interview guide on three respondents from ikea. the interviews were conducted with respondents at various levels within each of the organizations until saturation was reached. the interviews, lasting between one and three hours, were recorded and

22、transcribed, leading to more than 250 pages of single-spaced data. a manual method for the categorization, clustering and analysis of interview data was used. (2) documents showing such things as strategic business plans, financial reports, performance reports, supplier evaluation criteria and worke

23、r compensation criteria were collected when available. the purpose was to collect information that could be used to complement, contrast or verify the information provided through interviews. (3) a questionnaire was used to assess the extent to which the actors in the supply chain had a consistent v

24、iew of priorities, and whether the respondents found that they were measuring the right things or not. the questionnaire was designed to follow the ideas of the performance measurement questionnaire developed by dixon et al. (1990). outline of the articlein the following section, supply chain fundam

25、entals, a brief description of supply chain fundamentals is presented. the next section, typical measurement problems, encompasses a discussion of common measurement problems. the section adopting systems thinking to measurements provides an introduction to systems thinking and its application to su

26、pply chain performance measurement, which is further developed in the following three sections - fragmented supply chain measurement activities, behavioral patterns, and structure determines behavior. some insights are presented in a new view of measurement systems before the final section, concludi

27、ng discussion, which provides concluding remarks and suggestions for future research.supply chain fundamentalsin the following discussion a supply chain is viewed as a number of organizations - at least three - working cooperatively with at least some shared objectives. to understand how these firms

28、 interact, it is important to notice how the management of such supply chains differs from classical materials and manufacturing control. oliver and webber (1982) have described the fundamentals of supply chain management as follows: the supply chain is viewed as a single entity, not fragmented area

29、s of responsibility for functional areas such as purchasing, manufacturing, distribution, etc. a direct consequence of the first statement is that supply chain management calls for - and depends upon - strategic decision making. supply chain management includes a different perspective on inventories

30、, which are used as a balancing mechanism of last, not first, resort. supply chain management requires a new perspective on systems. organizations must be integrated, not simply interfaced. the result of a study covering more than 100 manufacturers, distributors and retailers conducted by andersen c

31、onsulting and presented in 1997 (anderson et al., 1997) supported the concept presented above. the study showed that companies that have successfully implemented supply chain management have two things in common. first, they think about the supply chain as a whole. overcoming the inward-looking, sel

32、f-focused attitude is thus a crucial element in supply chain management. second, they pursue tangible outcomes focused on revenue growth, asset utilization and cost reduction.in order to succeed, the firms adopted a number of principles that required them to look at the supply chain from their suppl

33、iers suppliers to their customers customers. the segmentation of customers, the customization of the logistics network, the cross-functional planning process, the postponement of product customization, and development of enterprise-wide systems for control and monitoring all required the supply chai

34、n members to adopt a holistic view of the supply chain. neither of these initiatives would have been possible without viewing the supply chain as one entity.however, the firms in the study reported difficulties in a number of areas. assessing customer profitability was hard, partly because they lack

35、ed the adequate tools to understand both their own and their customers costs. furthermore, the independent, self-centered forecasting routine applied by firms was identified as incompatible with excellent supply chain management, and was replaced by cross-functional planning systems and processes. i

36、n order to deal with high inventory levels and out-of-stock situations, distributors started sharing information with the manufacturer, leading to improved fill rates, asset turns, and cost metrics for all concerned.unsuccessful companies had an equally consistent profile. those companies were funct

37、ionally oriented and narrowly focused. the problem was not a lack of ideas about what to do, but instead about how to coordinate the efforts in order to avoid dying the death of a thousand initiatives. the functional orientation and narrow focus that obstruct the coordination of activities for those

38、 companies suggest that they lack a holistic perspective, and that systems thinking in those supply chains is underdeveloped. in essence, the study shows that those firms that have succeeded have adopted a holistic view of the supply chain, recognizing that the outcome that counts is that of the ent

39、ire supply chain, not that of single organizations.typical measurement problemsresearch scientists have shown an increasing interest in improving the measurement systems design during the last few years (keebler et al., 1999; vitale and mavrinac, 1995; caplice and sheffi, 1995; kaplan and norton, 19

40、92; eccles, 1991). they have questioned traditional performance measurement for several good reasons, not least because of its inability to allocate resources to areas important to future success, e.g. the development of employees competency, capabilities and skills (vitale and mavrinac, 1995). a fe

41、w important problems are briefly described in the following paragraphs.strategy and measurements are not connectedone problem that deserves attention is the lack of connection between strategy and measurements. adams et al. (1995) report that many measurement initiatives are not derived from strateg

42、y and are therefore not supporting the business. although it seems obvious and natural to base a measurement system on the companys strategy, eccles (1991) claims that a surprising number of companies do little to measure the variables described in their strategies. because of the missing connection

43、, measures and measurement activities seem focused on internal functions instead of overall company performance and customer needs. for instance, a firm may measure productivity throughout its own facility and closely track that goods are shipped on time, but pay little or no attention to whether th

44、e goods actually arrive at the customers facilities when promised or needed.furthermore, because of the weak link to strategy, different divisions and functions have developed their own metrics in isolation and linked local reward incentives to those measures. this might lead them in different direc

45、tions. thus, the missing connection between strategy and measurements promotes an internal focus, which becomes an obstacle to developing supply chain measurement systems. however, not all strategies are successful. regardless of how well a measurement system is connected to strategy, it will not tu

46、rn a losing strategy into a winning one.a biased focus on financial metricsmany companies still rely too heavily on financial figures as their key performance indicators, which unfortunately are better at showing the result of yesterdays actions than indicating tomorrows performance. financial metri

47、cs have served as a tool for comparing firms and evaluating a firms behavior over time, and the information was primarily designed to meet external evaluators needs.today the situation is quite different. people inside the organizations have more responsibility, and financial information is not deci

48、sion-relevant to them (atkinson et al., 1997). the lagging nature of financial metrics makes them less useful for proactive actions. what meaningful actions to manage a situation can be taken when the report finally arrives two weeks after the event? furthermore, the usefulness of financial informat

49、ion is reduced by the aggregation of data over time and place, which makes it even more difficult to understand.success in business today is not solely determined by a strong cash flow or meeting a financial budget. instead, developing competency, capabilities and skills in areas such as team-based

50、problem solving and innovation are much more important, yet not easily measured in financial terms (vitale and mavrinac, 1995). some firms have started to regularly report how much time and other resources are invested in employee development programs, or how well the firms competency profile meets

51、future demands. therefore, describing the complex and dynamic characteristics of a supply chain in financial terms alone is no longer sufficient, as it provides too simplified a view of the supply chain. nonetheless, accounting-based information plays an important role in strategic planning and for

52、monitoring financial results, although it is less suitable for controlling and improving activities (johnson, 1990).too many isolated and incompatible measuresthe number and variety of metrics used in organizations tend to increase over time, and require more and more resources to produce. because m

53、etrics once introduced are too seldom removed, they soon become obsolete as strategy and underlying activities continue to change. for instance, why do firms continue giving top priority to goods handling efficiency and fill rate in trucks, when what the customers really need are timely and accurate

54、 shipments of goods? a common conclusion is that measurement systems have measured too many things and the wrong things. the negative impact of insufficient measurement systems can be severe. for example, baldwin and clark (1992) claim that a major cause of the usas competitive decline is due direct

55、ly to the managers use of inappropriate performance measurement systems.the problems in a supply chain contextthe problems described earlier are mainly those reported by single organizations. however, it seems reasonable to assume that similar problems will occur and negatively affect management act

56、ions in supply chains (holmberg, 1997). this assumption is based on the prevailing lack of systems thinking, and the increased complexity in supply chains encompassing several organizations with different corporate cultures, different policies and different routines. using a single-firm management s

57、tyle when managing a supply chain is therefore likely to obstruct supply chain integration.the idea proposed in this article is that the measurement activities in supply chains are not managed as one system, but as several independent systems (see figure 1). to make this point clearer, the next sect

58、ion will deal with some of the basic ideas in systems thinking and discuss measurement activities from that perspective.adopting systems thinking to performance measurementlogisticians often claim to use systems thinking when managing the flow of goods and information from point of origin to end con

59、sumers, but few authors explain why or how the concept is used. perhaps the lack of openness and clarity is unintentional. nevertheless, it obstructs both research scientists and practitioners from developing a deeper understanding of how complex problems can be approached, understood, and solved.the systems conceptthe idea of a system is generally expressed as encompassing inter-connected components separated from thei