A fremework 4 sc perf measurement

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Int. J. Production Economics 87 (2004) 333–347

A framework for supply chain performance measurement
A. Gunasekarana,*, C. Patelb, Ronald E. McGaugheyc
a

Department of Business Administration, University of Illinois at Springfield, One University Plaza, Springfield, IL 62703-5407, USA b Ace InfoTech, Inc., 406 Wellington Drive, Streamwood, IL 60107, USA c Department ofManagement Information Systems, The University of Central Arkansas, Conway, AR 72035-0001, USA

Abstract Supply chain management (SCM) has been a major component of competitive strategy to enhance organizational productivity and profitability. The literature on SCM that deals with strategies and technologies for effectively managing a supply chain is quite vast. In recent years, organizationalperformance measurement and metrics have received much attention from researchers and practitioners. The role of these measures and metrics in the success of an organization cannot be overstated because they affect strategic, tactical and operational planning and control. Performance measurement and metrics have an important role to play in setting objectives, evaluating performance, and determiningfuture courses of actions. Performance measurement and metrics pertaining to SCM have not received adequate attention from researchers or practitioners. We developed a framework to promote a better understanding of the importance of SCM performance measurement and metrics. Using the current literature and the results of an empirical study of selected British companies, we developed the frameworkpresented herein, in hopes that it would stimulate more interest in this important area. r 2003 Elsevier B.V. All rights reserved.
Keywords: Supply chain; Performance measurements; Metrics; Empirical analysis; Framework

1. Introduction By the late 1980s, outsourcing in US industries contributed to nearly 60% of the total product cost (Ballou, 1992). In the UK, a survey showed that 40% of theUK’s gross domestic product was spent on distribution and logistics related activities (Department of Trade and Industry, UK, 1990). Such findings and developments present significant visible impact of distribution, purchasing, and supply management on company assets. Managers
*Corresponding author. Tel.: +1-217-206-7927; fax: +1-217206-7543. E-mail address: Gunasekaran.angappa@uis.edu (A. Gunasekaran).in many industries, especially those in manufacturing, are trying to better manage supply chains. Important techniques/methodologies like just-intime (JIT), total quality management, lean production, computer generated enterprise resource planning schedule (ERP) and Kaizen have been embraced. The concept of supply chain management (SCM), according to Thomas and Griffin (1996) represents themost advanced state in the evolutionary development of purchasing, procurement and other supply chain activities. At the operational level, this brings together functions that are as old as commerce itself—seeking goods, buying them, storing them and distributing them. At the strategic level, SCM is a relatively new and rapidly expanding discipline that is transforming

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334 A. Gunasekaran et al. / Int. J. Production Economics 87 (2004) 333–347

the way that manufacturing and non-manufacturing operations meet the needs of their customers. Development of cross-functional teams aligns organisations with process oriented structure, which is much needed to realise asmooth flow of resources in a supply chain. As suggested by Trent and Monczka (1994), such teams promote improved supply chain effectiveness. They minimise or eliminate functional and departmental boundaries and overcome the drawbacks of specialisation, which according to Fawcett (1995), can distribute the knowledge of all value adding activities such that no one, including upper level managers,...