Key Financial Measures of Supply Chain Performance (4, 1)

Question 1

What are challenges with managing supplier performance?

Answer 1

• Data Collection
• Future-proofing
• Culture
• Reward
• Conflict

Question 2

How can performance measures be categorised?

Answer 2

Objective – based on stats

Subjective – based on opinion

Question 3

How are performance measures typically measured?

Answer 3

Service Level Agreements

Key Performance Indicators

Question 4

What steps are in a typical approach to performance management?

Answer 4

• Areas for Measurement
• Determine Measures
• Comparison Standards
• Monitor
• Evaluate
• Improve

Question 5

What are key elements to process based metrics?

Answer 5

• Cycle time (from input to output)
• Throughput (rate of production)
• Capacity (maximum production rate)
• Bottlenecks (limiting production rate)
• Batching (grouping similar items for production)

Question 6

As well as financial and process indicators, customer satisfaction is a key measure of performance. What are the key dimensions of service quality?

Answer 6

• Tangibles (e.g. facilities and equipment)
• Reliability (e.g. ability to perform service consistently)
• Responsiveness (e.g. willingness to adapt to customers needs)
• Assurance (e.g. ability of staff to instil confidence)
• Empathy (e.g. extent to which caring service is given)

Question 7

Another key measure for measuring performance is time. What time based metrics are commonly used?

Answer 7

• OTIF (On time and in full)
• Time taken to fulfil orders
• Time taken to respond to queries

Question 8

Profitability is also a key financial measure of performance. What methods are there for measuring profitability?

Answer 8

• Gross profit
• Net profit
• EBITDA (profit attributable to trading)

Question 9

Apart from profit, what other key financial measures of performance are there?

Answer 9

• Dividend per share (Dividend / amount of shares)
• Dividend yield (Dividend per share / price per share)
• Earnings per share (Net profit / amount of shares)
• Dividend cover (Net profit / Dividend declared)
• Price/earnings ratio (Share price / earnings per share)
• Return on shareholder funds (Net profit / ordinary share capital)

Question 10

Revenue can also be a key financial performance indicator. What metrics are there for measuring revenue?

Answer 10

• Sales revenues generated
• Year on year growth
• Costs to revenue ratio

Question 11

Cash flow is another key financial performance indicator. Liquidity is a good indication in this respect. What can be used to measure liquidity?

Answer 11

• Current ratio (current assets : current liabilities)

* Acid Test (Current ratio except stocks aren’t included in assets)

Question 12

What is a balanced scorecard?

Answer 12

It is an approach which considers a number of aspects as priority areas. Examples might be Internal perspective, Financial perspective, Customer perspective and Supplier perspective.

Question 13

What is “The Supply Chain Operations Reference”?

Answer 13

A model developed by the supply chain council which includes business processes, metric and acknowledged best practices that can be used to improve the effectiveness of supply chains. It is widely acknowledged as encompassing a wider range of performance measures than a balanced scorecard.