Discussion : Supply Chain Management

Using the balanced scorecard approach as detailed in Chapter 14 (Figure 14.1), identify 4 key metrics that you would propose for your organization's supply management system and how you propose to measure those 4 key metrics in your supply chain. Be sure to respond to at least two of your classmates.

Overall total productivity measures such as (output)/(costs of labor + capital + energy + material) and single-factor productivity measures such as (output)/(cost of labor) are potentially useful

Example : Productivity Measures at the Ultra Ski Emporium

The Ultra Ski company makes top-of-the-line custom snow skis for high-end ski shops as well as their own small retail shop, and employs fifteen people.

The owner has been adamant about finding a way to increase productivity because his sales have been flat for the past two seasons. Given the information shown below, he has calculated the single-factor and total productivity values as:

Labour productivity=1000 skis/10,800 hours =0.093 skis per labour hour

Material productivity=1000 skis/$18,000=0.056 skis per dollar of materials

Lease productivity=1000 skis/$24,000=0.042 skis per lease dollar

INPUTS AND OUTPUTS       LAST YEAR

Skis produced                    1,000

Labor hours                       10,800

Materials purchased            $18,000

Lease payments                 $24,000

He calculates their total productivity by multiplying the labor hours by their average wage of $17 per hour and finds:

Total productivity=100 skis/10,800($17)+$18,000+$24,000]=0.0044 skis per dollar.

So the owner figures he can get some great improvements in productivity by finding a low-cost supplier, moving to a cheaper location and laying off six workers (reducing his workforce by 40 percent), making his new single-factor productivities:

Labour productivity = 1,000 skis/10,800(.6) hours=0.154(a 66 percent increase)

Material productivity= 1,000 skis/$12,000=0.083(a 48 percent increase)

Lease productivity =1,000/$18,000=0.05(a 33 percent increase)and his new total productivity:

Total productivity =1000 skis/[10,800($17)(.6)+$12,000+$18,000]=0.0071 skis per dollar (a whopping 61 percent increase!)

Consequently, the owner decided to make the changes for the coming year. Unfortunately, they went out of business in six months due to poor-quality materials, a bad location and overworked, low-morale employees.

Textbook : Wisner, Joel D. Principles of Supply Chain Management: A Balanced Approach, 3rd Edition. Cengage Learning, 20110216. VitalBook file.