Integrated Supply Chain Performance Measurement Model for the Manufacturing Industry ()
1. Introduction
Manufacturing organizations have perceived the benefits of effective SCM in day to day operations. Conversely, numerous organizations disregarded to generate enthralling performance and operational measures which are indispensable to warrant a commendable and coordinated SCM (Molina-Besch, 2016). To realize the solitary of globalization and SCM objective, which is to indulge customers more rapidly and more effectively than other competitors, SCM necessities to participate in the nonstop execution of developmental strategies.
SCM is an integrated method in business from the suppliers of raw material, factories, inventory and delivering to the customers that ensures right product at an accurate price, is in an appropriate size, and at a right place that delivers the optimum lot size through proper distribution channel (Aleksandra et al., 2017). Practically, integrated SCM involves both logistics and strategic decisions for the sustainability of business operations. In other words, integrated SCM implies a concept to monitor all aspects of business operations and ensure value-adding activities through collaborative efforts both from manufacturers and logistics providers.
Top Management of the manufacturing companies has been studying innovative methods to attain competitive leverage where integrated SCM is reflected as an effective strategic approach to enhance competitive advantage in this modern era of intense global competition. Business dynamic forces have been transformed that put the arm on the legislative requirements to measure the performance of the manufacturing industry where companies have been witnessing to unlock the tools that can assess the supply chain performance measurement (SCPM) commendable (Kurien & Qureshi, 2018).
The justification of this study is to assess the literature on supply chain performance measurement (SCPM) in the manufacturing industry to capture existing practices, distinguish gaps and recommend forthcoming investigation itineraries. The study also recommends an Integrated Supply Chain Performance Measurement (ISCPM) model in the manufacturing industry.
This study consists of seven sections—1) introduction, 2) literature reviews, 3) supply chain performance measurement, 4) research methodology, 5) conceptual framework, 6) discussions, and 7) conclusion. In the literature review, the study investigated different supply chain performance measurement model frameworks and highlighted the appreciation and criticism made by the research scholars over the period.
The focus was given to the BSC model and the SCOR model which have been widely accepted and adopted. In section 5, the study illustrated the conceptual framework, and section 5.1 illustrated the step-by-step Integrated Supply Chain Performance Measurement (ISCPM) model development. In section 6, ten supply chain performance measurement attributes and thirty-six performance measurement indexes were elaborated in Table 1 to Table 10. Finally, the conclusion, recommendation and future research scope were also discussed in section 7 and sub section 7.1.
2. Literature Review
There is an urgency for a comprehensive direction for the researchers to evaluate supply chain performance measurement (SCPM) for the manufacturing industry that addresses supply chain performance measurement (SCPM) attributes and performance measurement index from cost and non-cost perspective, evaluate on strategic, functional or emphasis on operational levels in order to evaluate the bottom-line impacts of an organization (Kumar et al., 2020).
As of now, the supply chain performance measurement (SCPM) is evaluated into a financial and non-financial measurement system. Business enterprises witnessed a paradigm transformation to evaluate SCPM, where Global companies adopted either Supply Chain Operations Reference (SCOR) model or Balanced Scorecard (BSC) model.
Despite an incredible appreciation of the Balanced Scorecard model (BSC) in the corporate to evaluate supply chain performance measurement (SCPM), the model has found multifold constraints (Kottala & Herbert, 2019). As time passes by, it becomes more noticeable—the model did not think through leadership or capacity building to assess its performance, it is also considered as an observing and monitoring apparatus instead of a development apparatus and inclined towards strategic level as opposed to planning or operational level.
The BSC model does not deliver appropriate direction to run a business, replicate the market competition, formulate a mathematical or logical association, and it is also challenging to make a comparison within and across a firm (Kurien & Qureshi, 2018).
This BSC model is not operational for a small organization as it involves know-how of managerial capacities, the relationship of a cause and effect to select the best measure of performance has not also been considered in this model where it predominantly discharges internal corporate perspective (Taghipour et al., 2015).
External influences such as risk, government regulations, uncertainty, collaborations, sustainability, and continuous improvement are not also considered in this BSC model, where it also overlooks environmental, social and sustainability factors and completely miscarries to classify buyer and supplier relationship, supplier network and strategy factors, to address employee motivation, employee engagement, team building, agility factors in a dynamic environment, resilient factors, and finally future business opportunities were not considered in this model (Hussain et al., 2019).
In contrast, the SCOR model was formulated to provide a business to enhance its efficiency with a vision to regulate the supply chain performance measurement (SCPM) and investigate as a point of reference for enterprises and inter-link the financial statement. The SCOR model also miscarries to anticipate the global outlook on market uncertainty and business risk.
Multifold issues such as sustainability, visibility, and IT-related upgradations were not also shielded within the SCOR model, training and development, capacity building, a collaboration of inter and intra organizational or functional activities are not also reflected (Shokouhyar et al., 2020).
3. Supply Chain Performance Measurement
Supply chain performance measurement (SCPM) supports the decision—making process through a holistic approach. It assists an organization meaningfully, where top-level executives are enthusiastic about understanding the bottom-line impacts of an organization and performance measurement parameters reflects from procurement, manufacturing, warehouse, distribution, customer service as well as financial aspects of an organization (Kumar et al., 2020). Ideally, the performance measurement model should consider quantitative as well as qualitative approach and have the capacity to apply different measuring tools.
Furthermore, the performance measurement parameters should come together in agreement with certain features like comprehensiveness, universal acceptability, and steadiness (Hussain et al., 2019).
Researchers reported that accurate measurement of performance could be beneficial to businesses in order to formulate, implement and control organizational strategy, where stated that employee motivation and organizational culture retention are also impactful in this performance measurement. Kaplan and Norton (1992) pronounced the Balanced Scorecard (BSC) model as an authoritative performance measurement instrument, and it allows administrators to detect a composed understanding, where the researchers recommended four basic perceptions that administrators should observe and follow—financial, customer feedback, internal business processes & innovation and learning perceptions.
The author demonstrated how SCM structure is connected in a balanced scorecard model; the BSC model is dominant in delivering managers with a comprehensive image of business performance.
Nevertheless, it undergoes two elementary restraints. First, it is a top-down tactic. Hence, it is not participative and might miscarry to perceive prevailing collaborations between different procedure metrics (Kaplan & Norton, 1992).
The SCOR model was formulated by the SC Council (SCC) to support businesses to enhance the effectiveness of their SCs and to deliver a process-based approach to SCM, where the SCOR model carries a common process-oriented language in communicating among its SC associates in Plan, Source, Make and Deliver, where SCOR model designate, measure and estimate any SC configuration (Phan et al., 2019). There are twelve performance matrices as part of the SCOR Model to evaluate process performance: delivery reliability, flexibility, responsiveness, costs, and an asset to derive at a quantifiable SC performance measure
Alternatively, SCOR model does not contemplate on market uncertainty, where information visibility, IT-related issues, business sustainability, training and development, capacity building, etc. are also excluded in the scope of the SCOR model (Bhagwat & Sharma, 2007). No clear interaction of inter and intra organizational or functional activities are mentioned in the SCOR model (Miraz et al., 2016, 2017).
4. Research Methodology
The study applied an exploratory study method based on primary and secondary data. Review of journal papers on supply chain performance measurement was made. The target population in this study was Bangladesh manufacturing industry, which consists of twenty-four manufacturing sectors. Based on the analysis, twenty-four manufacturing sectors have around 7570 manufacturing companies. Therefore, the population size is 7570. From the 7570 lists of the respondent companies, 1832 individual company-have been chosen randomly and emails have been sent to the supply chain heads to respond.
An individual company’s supply chain professional has been considered as the unit of analysis. This study applied simple random sampling and used the Taro Yamane table at ±7% precision level, and confidence level at 95% the sample size of this research is 199. In this study, the researcher composed 207 respondents from the manufacturing industry. Hence, 207 respondents are the sample size in this study. Apart from these, the study also explored secondary data from Emerald, IJSCM, IGI, Nova publishers etc.
5. Conceptual Framework
The study formulates Integrated Supply Chain Performance Measurement (ISCPM) model for the manufacturing industry, where the model coordinates and shares information up and down the process. To provide a theoretical structure, Figure 4 illustrates a comprehensive observation of the manufacturing operations process.
In this study, the author discussed supplied inputs like raw materials, where raw materials are transformed into finished products in the manufacturing premises, and finished products are being channeled out through the distribution up to the consumer in Figure 1.
This study identifies SC macro-environmental process, which describes supplier relationship management (SRM) as a supplier, internal supply chain management (ISCM) as a manufacturer and customer relationship management (CRM) as a customer referred from Figure 2.
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Figure 1. A holistic view of the manufacturing operations.
Three decision levels are embedded in SRM, ISCM, and CRM; as illustrated in Figure 3, the ISCPM model has three decisions: strategic, planning, and operational.
The strategies for overall business operations are formulated at a strategic level from controlling to overseeing for SRM, ISCM and, CRM. They are referred to corporate-level executives who give complex decisions that require strategic direction, long-term commitments and planning for one year and beyond. The decisions eventually drive the firm to a sustainable position. Mid-level management belongs to the planning level and executes the firm’s plans as per the policy designed by the senior management where a decision needs less than a one-year horizon. This is appropriate for SRM, ISCM, and CRM. At the operational level, bottom line executives focus mostly on controlling and directing on a regular basis and measure plan versus actual applicable for SRM, ISCM, and CRM.
ISCPM Model Development
This exploratory study in Figure 4 classifies the SCOR model—input, process, and output model; with strategic, planning and operational level decisions into each stage of SRM, ISCM, and CRM. In addition to that, the six drivers of the manufacturing industry are beefed-up in order to formulate an SCM strategy either at responsive or an efficient level. And then, the concept is infiltrated and attached to the framework. The balanced scorecard (BSC) model is amalgamated
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Figure 2. A simplified view of the SC macro-environmental.
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Figure 3. Three-decision levels in ISCPM model.
were financial, process, learning & development, and finally, customer-centric issues are to be considered.
This study in Figure 5 classifies a complete Integrated Supply Chain Performance Measurement (ISCPM) model with 10 performance measurement attributes and 36 performance measurement index.
The researcher in Figure 5, classified that Supplier Relationship Management (SRM) at a strategic level consists of Financial Health (FH), Resilience (RE), and Sustainability (SS). The Supplier Relationship Management (SRM) at a planning level consists of Collaboration (CL), Continuous Improvement (CI), Velocity (VC), and Work People Health (WPH). And finally, the Supplier Relationship Management (SRM) at an operational level consists of Reliability (RL), Visibility (VS), Service Excellence (SE). Similarly, Internal Supply Chain Management (ISCM) and Customer Relationship Management (CRM) have been classified.
The researcher exhibits the ISCPM model, where the researcher classifies that an organization is ultimately responsible for its four stakeholders: shareholder, customer, people, nature, and community.
The first and foremost responsibility of an organization is to serve its shareholders’ interests through continuous growth and profitability.
The shareholders are better served when an organization has the highest focus to serve its customers through ensuring customer service excellence. The shareholders and customers could be made satisfied when the people of the organization perform satisfactorily through ensuring organizational excellence. The last and most important for an organization is to be responsible for their stakeholder who is nature and community. An organization should be responsible for its nature and its community in order to ensure that it is not engaging itself into any harmful activities through pollution of air, soil or releasing toxic gas or substances to nature. Not only that, but an organization also has responsivity towards its people, its community through the eradication of poverty. Therefore, when a firm’s performance is balanced to its four stakeholders, then and only true sustainability is achieved (Saleheen et al., 2018, 2019).
6. Discussion
The researcher in Figure 5, classified that Supplier Relationship Management (SRM) at a strategic level consists of Financial Health (FH) are Economic Performance, Cost, and Budget Variance; Resilience (RE) are Global Risk, Enterprise Risk, Human Capital & Management Risk, and Supplier Risk; and Sustainability (SS) are Sustainability to Nature, Sustainability to Community, and Application of Green Supply Chain. Similarly, Supplier Relationship Management (SRM) at a planning level consists of Collaboration (CL) are Inventory, Planning Variance, and Partnership; Continuous Improvement (CI) are Culture for TQM, Culture for Continuous Improvement, Application of 5S, Application of Lean, Application of Total Productive Maintenance; Velocity (VC) are Capacity Flexibility, Speed, Flexibility Consistency; Work People Health (WPH) are Leadership, Ethics, Integrity & Compliance, Talent Attraction and Retention, Health & Safety, Culture, Value and Employee Engagement. And finally, Supplier Relationship Management (SRM) at an operational level consists of Reliability (RL) Be on Time, Be on Specifications, Be on Utilization; Visibility (VS) are Integration, Traceability, and ERP Transactions; and Service Excellence (SE) are Innovation in Technology, Customer Satisfaction, and Service Facilities & Technical Skills (Saleheen et al., 2019; Saleheen & Habib, 2022b, 2022d, 2022e).
Attribute 1 in Table 1 is denoted as Financial Health (FH). The Financial Health (FH) in the supply chain (SC) diagnoses and tries to understand how an organization is performing financially and eventually it connects the company’s topline and bottom-line performance. The performance measurement index (PMI) is further segregated into FH1, FH2, and FH3, which are Economic Performance, Cost, and Budget Variance.
Attribute 2 in Table 2, is denoted as Collaboration (CL). The Collaboration (CL) in supply chain diagnoses and tries to understand how does the organization maintains the stakeholder relationship. The relationship spans from the
upstream to the downstream, internal as well as external. The performance measurement index (PMI) is further segregated into CL4, CL5, and CL6, which are Inventory, Planning Variance, and Partnership.
Attribute 3, in Table 3 is denoted as Velocity (VC). Velocity (VC) in supply chain diagnoses and tries to understand how long does an organization takes to respond to the market changes. The performance measurement index (PMI) is further segregated into VC 7, VC 8, and VC 9, which are Capacity Flexibility, Speed, and Flexibility Consistency
Attribute 4, in Table 4 is denoted as Resilience (RE). Resilience (RE) in supply chain diagnoses and tries to understand how does an organization predicts future changes. The performance measurement index (PMI) is further segregated
into RE10, RE11, RE12, and RE 13 which are Global Risk, Enterprise Risk, Human Capital & Management Risk, and Supplier Selection & Appraisal.
Attribute 5, in Table 5 is denoted as Reliability (RL). Reliability (RL) in supply chain diagnoses and tries to understand how reliable is the supply, process, and distribution of an organization. The performance measurement index (PMI) is further segregated into RL 14, RL 15, and RL 16 which are Be on Time, Be on Specifications and Be on Utilization. Be on Time deals with On-Time Arrival, Delivery, (RM, FG, Transport), Receive & Submission of PI, LC, Document, Customs Clearance, Freight Forwarder, etc., and Product Fill Rate.
Attribute 6, in Table 6 is denoted as Continuous Improvement (CI). Continuous Improvement (CI) in supply chain diagnoses and tries to understand the ongoing activities to make the company remain competitive. The performance measurement index (PMI) is further segregated into CI 17, CI 18, CI 19, CI 20, CI 21, and CI 22 which are Process Standardization, Culture for TQM, Culture for Continuous Improvement, Application for 5S, Application of Lean, and Application of Total Productive Maintenance.
Attribute 7, in Table 7 is denoted as Visibility (VS). Visibility (VS) in supply chain diagnoses and tries to understand the level of traceability of the organizational activities. The performance measurement index (PMI) is further segregated into VS 23, VS 24, and VS 25, which are Integration, Traceability, and ERP
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Table 6. Continuous Improvement (CI).
transactions. Integration deals with Assessment and integration for in transit, production, on hand, and SC cost visibility. Traceability deals with Product traceability and quality information from planning to payment, and ERP transactions deal with Product traceability and quality information from planning to payment.
Attribute 8, in Table 8 is denoted is denoted as Work People Health (WPH). Work Place Health (WPH) in supply chain diagnoses and tries to understand what are the ongoing company activities to achieve organizational excellence. The performance measurement index (PMI) is further segregated into WPH 26, WPH 27, WPH 28, WPH 29, and WPH 30 which are Leadership, (Ethics, Integrity, & Compliance), Talent Attraction & Retention, Health & Safety, and Culture, Value and Employee Engagement.
Attribute 9, in Table 9 is denoted as Sustainability (SS). Sustainability (SS) in supply chain diagnoses and tries to understand what are the organizational activities for the people and planet. The performance measurement index (PMI) is further segregated into SS 31, SS 32, and SS 33 which are Sustainability to Nature, Sustainability to Community, and Application of Green Supply Chain (SC) (Miraz et al., 2022).
Attribute 10, in Table 10 is denoted as Service Excellence (SE). Service Excellence (SE) in supply chain diagnoses and tries to understand what are the company activities to achieve customer service excellence. The performance mea
surement index (PMI) is further segregated into SE 34, SE 35, and SE 36 which are Innovation in Technology, Customer Satisfaction, and Service Facilities & Technical Skills. Innovation in Technology deals with Application of Artificial Intelligence, Application of Industry 4.0, Application of Industrial Internet of Things (IIoT), any innovation to improve product quality through technology.
7. Conclusion
The researcher exhibits the ISCPM model, where the researcher classifies that an organization is ultimately responsible for its four stakeholders: shareholder, customer, people, nature, and community. The first and foremost responsibility of an organization is to serve its shareholders’ interests through continuous growth and profitability. The shareholders are better served when an organization has the highest focus to serve its customers through ensuring customer service excellence. The shareholders and customers could be made satisfied when the people of the organization perform satisfactorily through ensuring organizational excellence. The last and most important for an organization is to be responsible for their stakeholder who is nature and community. An organization should be responsible for its nature and its community in order to ensure that it is not engaging itself into any harmful activities through pollution of air, soil or releasing toxic gas or substances to nature. Not only that, but an organization also has responsivity towards its people, its community through the eradication of poverty. Therefore, when a firm’s performance is balanced with its four stakeholders, then and only true sustainability is achieved.
Recommendation and Future Research
This ISCPM model has been prepared based on twenty-four manufacturing industry sectors and validated empirically. This model can measure supply chain performance measurement holistically where the stakeholders such as shareholders, customers, people, nature, & community can be better served with the appropriate strategies to review and appraise their performance toward fulfillment of the ultimate goals. However, it is suggested to implement this in real-life applications, particularly in the manufacturing industry.
The limitation of this study is that this model did not consider the service industry like hotel & tourism, education, and hospital sectors which are also very much important. Also, this model has not been validated and tested in real-life applications in the industry. Therefore, this would also be a potential future study for the researchers.