DELIVERY PERFORMANCE MEASUREMENT IN AN …

1 1. INTRODUCTIOND elivery PERFORMANCE can be defined asthe level up to which products and servicessupplied by an organization meet thecustomer expectation. It provides anindication of the potentiality of the supplychain in providing products and services tothe customer. This metric is most importantin supply chain management as it integrates(involves) the MEASUREMENT of performanceright from supplier end to the customer PERFORMANCE MEASUREMENT IN ANINTEGRATED SUPPLY CHAIN MANAGEMENT: CASE STUDY INBATTERIES MANUFACTURING FIRM C. Madhusudhana Raoa*, K. Prahlada Raoband MuniswamycaSeshachala Institute of Technology, Department of Mechanical Engineering, Puttur 517583, Chittoor District, Andhra Pradesh, IndiabJ N T University College of Engineering, Department of Mechanical Engineering,Anantapur 515002, Andhra Pradesh, IndiacSwetha Institute of Technology & Science for Women, Tirupati 517561,Chittoor District, Andhra Pradesh, India (Received 13 February 2011; accepted 10 July 2011) AbstractDelivery PERFORMANCE provides an indication of how successful the supply chain is at providingproducts and services to the customer.

2 This metric is most important in supply chain management asit integrates the MEASUREMENT of PERFORMANCE right from supplier end to the customer end. Presentresearch is focused on a case study conducted in a leading batteries manufacturing firm in SouthIndia and analysis of elemental performances in overall DELIVERY PERFORMANCE of an entire supplychain in an integrated approach. NLP and Dynamic Programming models have been used to getoptimal and sub-optimal solutions to help firms in benchmarking expected PERFORMANCE levels. Theeffect of learning has also been described with an empirical : Supply Chain, DELIVERY PERFORMANCE , Benchmarking and learnability index.*Corresponding author: Serbian Journalof ManagementSerbian Journal of Management 6 (2) (2011) 205 - 220 : critical review of several researcharticles on supply chain performancemeasurement, it has been identified that thefocus was mostly on a few one dimensionalkey PERFORMANCE indicators.

3 In most of thecases, the models developed were morespecific in nature with a goal of optimizingthe objective function (constrained orunconstrained) of limited scope in aparticular setup. The focus was narrow tomake profit / improvement in performancefor a single organization or particularindustry under consideration as a case. Thelimitations of these models will not lendthem to be used in any kind of industry setupor any supply chain in a generic sense tomake profits to all firms along the supplychain. Also, industry specific models maynot be affordable to other types of industriesdue to inherent deficiencies (due to modelassumptions / limitations) in the formulationof such models.

4 In several cases, theresearch scope was limited in improvingperformance in terms of decreasing cost,reducing cycle time / lead time, increasingprofits, eliminating wastages, etc., may behelpful for any firm along a supply chain,provided there is knowledge sharing andintegrated approach in problem solvingamong the , the need arose to identify andimplement cross-industry performancemeasurement tools that would providesolution to inter-organizational are three important flows in anysupply chain. Material flow down stream,cash flow upstream and information flow inboth the directions. In the present paper, anintegrated approach to measure deliveryperformance from material flow aspectconsidering elemental performances oftrading partners along the supply chain of abatteries manufacturing REVIEW OF RELEVANTLITERATURET oday s manufacturing industry ischaracterized by strong interdependenciesbetween companies operating in globallydistributed production networks.

5 Theoperation of such value-added chains hasbeen enabled by recent developments inICTs and computer networking. To gaincompetitive advantages and efficiencyimprovements such as reduced inventory andhigher DELIVERY reliability, companies areintroducing information exchange systemsthat communicate demand to suppliers andproduction progress information tocustomers in the network (Rupp & Ristic,2004). Hiroshi Katayama & David Bennett(1999) examined the relationship betweenagility, adaptability and leanness in terms oftheir overall purpose and measures such as set up time,operational cycle time, variety of productsthat can be offered, procurement lead time,on-time DELIVERY to customers, DELIVERY leadtime and speed of new product developmenthave been analyzed under four processcategories: operational processes, supplyprocesses, order fulfillment processes andproduct development processes.

6 Agility andadaptability have been investigated byanalyzing survey data on strategy andperformance, collected from major Liu et al., (2005) developed a commonintegrated management system (Workflowsupported inner Supply Chain Managementsystem) for Nanjing Jin Cheng Motor CycleCorporation Limited and most of itssuppliers to manage their inner processes. Itwas built on an MS SQL server, www serverand browser. The results of implementation206C. M. Rao / SJM 6 (2) (2011) 205 - 220of WSCM system were: rapid response toever changing market, stability andoperability of the manufacturing plan, verylow inventory levels, 15% reduction inaverage life cycle of products in warehouse,quick flow of information along supply chainand improved working capital et al.

7 , (2004) argued that the supplychain process is complex, comprising ahierarchy of different levels of value-delivering business processes. Achievingsuperior DELIVERY PERFORMANCE is the primaryobjective of any industry supply chain. Asthe number of resources, operations andorganizations in supply chain increases,variability destroys synchronization amongthe individual processes, leading to poordelivery PERFORMANCE . In an integrated supply chain,coordination of logistical activities iseffectively extended to encompass source,make and deliver processes in collaborationwith channel partners and suppliers. Intra-firm coordination of sourcing, productionand logistics activities enhances the ability torespond to market volatility by eliminatingredundant activities and reducing responsetime by facilitating seamless flow of demandinformation, supply of materials and finishedgoods (Bowersox et al.)

8 , 1999; Mahamaniand Rao, 2010). Dinesh Garg et al. (2003) presented anovel approach to achieve variabilityreduction, synchronization and henceimproved DELIVERY PERFORMANCE in supplychain networks using Variance PoolAllocation problem to a linear Make-To-Order (MTO) supply chain with n , the research in the field of logisticsprovided technology-driven solution to thedistribution systems in terms of high deliveryreliability, customer satisfaction and quickresponse. Reward system to recognize team workand cooperation in logisticsinterdepartmental relations (Ellinger, 2000),Efficient Consumer Response (Alvarado &Kotzab, 2001), safety stock cost effect ofreverse logistics (Minner, 2001), supplierperformance MEASUREMENT in logisticscontext from OEM s perspective (Schmitz &Platts, 2004), Integrating transportation withsupply chain process (Mason & Lalwani,2004), 4PL: Fourth Party Logistics Providersfor seamless logistic solution to the client forquick response (Liston et al.

9 , 2007) are afew contributions on the role of logistics inan integrated supply chain management. There are several PERFORMANCE sub-measures connected to DELIVERY : on- timedelivery (Katayama & Bennett, 1999; Li &O Brein, 1999; Garg et al., 2004), deliveryreliability (Garg et al. 2003; Rupp & Ristic,2004; Michael & McCathie, 2005), fasterdelivery times (Bowersox et al., 1999; Liu etal., 2005), DELIVERY service, deliveryfrequencies (Katayama & Bennett, 1999), DELIVERY synchronization (Lee & Whang,2001) , DELIVERY speed (Mason et al., 2003),Order fulfillment lead time (Tannock et al.,2007), Supplier s DELIVERY PERFORMANCE (Morgan & Dewhurst, 2008) must decide which of thesesub-measures are most appropriate tomeasure, such as DELIVERY from suppliers, DELIVERY within their own organization ordelivery to customers.

10 On-time DELIVERY (OTD) is therefore a major concern of themanufacturing as well as the distributionfunctions. 3. METHODOLOGYThe present work is a step towardsmeasuring DELIVERY PERFORMANCE of an207C. M. Rao / SJM 6 (2) (2011) 205 - 220integrated supply chain consideringprocurement, manufacturing, logistics anddistribution functions. In level-2 of SCOR model, deliveryperformance has four elements. a) Supplier on-time and in full deliveryb) Manufacturing schedule attainmentc) Warehouse on-time and in fullshipmentd) Transportation provider on-timedelivery The working definitions of the aboveelements are as follows:1. Supplier on-time and in full DELIVERY : Itis the ratio of the number of purchase ordersfulfilled by supplier(s) on-time (with flawless match of quality, quantity and price asquoted in purchase order and invoice) to thetotal number of purchase orders placed perperiod.