MEASURING SUPPLY CHAIN

PERFORMANCE
1. Criteria for evaluating supply chain performance

A set of supply chain performance evaluation criteria always plays an important role in
measuring performance and improving management processes. This ensures the efficiency,
flexibility and ability to meet market demands of the supply chain. The evaluation often focuses
on many important factors to assess supply chain risks as well as ensure supply chain performance
and optimize processes. Some criteria that can be considered to evaluate supply chain performance
are as follows:
Customer Service: Customers are always the top priority in the supply chain because of the
value they bring. Customer service in the supply chain reflects the level of customer satisfaction
through factors such as delivery time, quality of support, and responsiveness. Customer service
index reflects the level of customer satisfaction, which plays a key role in maintaining loyalty and
enhancing the reputation of the business. Customer service index can be measured through
customer satisfaction surveys or tracking indicators such as complaint response time and order
fulfillment rate.
Delivery speed: is understood as the time required to complete the process of transporting
products from the warehouse or production point to the customer. This is a time-based indicator
that shows the ability of the supply chain to meet market demand in a timely manner. Delivery
speed directly affects customer satisfaction and the competitive advantage of the business in the
market. Especially in highly competitive industries, fast delivery speed is a key factor in retaining
customers. This indicator is often measured by the total time taken from receiving the order to
delivering the product. Businesses need to determine specific delivery time goals and optimize the
process to minimize unnecessary steps.
Coordination: This is the coordination between supply chain partners including information
sharing, planning and coordination between parties such as suppliers, manufacturers and
distributors. Close coordination helps improve synchronization, reduce delays, and optimize
supply chain performance. It can be measured by the level of use of information sharing tools or
the rate of successful transactions between partners.
Supply chain costs: This index includes all costs incurred during the operation process,
from production, storage, transportation to other management activities. Controlling supply chain
costs is one of the important factors to ensure business profits. Supply chain costs need to be
optimized without reducing the quality of products or services.
 Supply chain costs are measured by calculating the total cost of operating the supply chain,
then comparing it with the value of goods produced or revenue.
Inventory management efficiency: Demonstrates the ability to adjust inventory levels to
meet market demand while minimizing storage costs. Effective inventory management not only
helps businesses reduce costs but also ensures the ability to meet demand quickly and accurately.
Inventory turnover ratio or Order Fulfillment Rate are commonly used indicators to measure
and evaluate inventory management efficiency.
Product/Service Quality: The quality of products/services in the supply chain is not only
related to the final product but also to all aspects of the service such as packaging, delivery, and
customer support. This ensures quality means maintaining customer trust and minimizing the costs
of repairing or replacing defective products. This is often measured by the rate of product defects,
return rates, and customer satisfaction.
Forecast Accuracy: The ability to accurately estimate future market demand based on
historical data and forecasting models. Accurate forecasting helps businesses manage inventory
better, avoid shortages or overstocking, thereby reducing costs and increasing resource efficiency.
The Mean Absolute Percentage Error (MAPE) or the difference between forecast and actual
demand is often used to measure forecast accuracy.
Flexibility: is the ability of the supply chain to adapt to sudden changes in demand, supply,
or external environmental factors. In the context of a rapidly changing business environment,
supply chain flexibility is a prerequisite to minimize risks and ensure continuity of operations.
Measured through the ability to quickly change production plans, adjust the scale and scope
of supply, or maintain operating levels in the event of an incident.
Asset utilization: Related to the ability to optimize the use of fixed assets such as
warehouses, transportation vehicles, and other equipment in the supply chain. The level of asset
utilization affects the fixed costs of the business. If assets are not used effectively, the business will
incur wasteful costs and reduce overall efficiency.
The asset utilization percentage or inventory turnover ratio is often used to evaluate this
criterion.

2. Supply Chain Measurement System:

2.1. Coyle:
Coyle or John J. Coyle is an expert in supply chain management. He has provided a detailed
reference framework for evaluating supply chain efficiency and performance. This assessment
framework aims to help companies and businesses identify, evaluate and improve supply chain
activities through a variety of different metrics such as: customer service, inventory, transportation
and distribution, costs, assets and resources, etc. This will be an important criterion for evaluating
Coyle's supply chain efficiency.
 Quality: Quality is a key factor that not only determines operational efficiency but also
directly affects customer satisfaction and business competitiveness. Coyle's supply chain quality
measurement system provides a comprehensive approach to assessing quality not only at the final
stage of the production process, but throughout every stage of the supply chain. Coyle proposes a
series of indicators to measure the quality of products, services, and processes, from production,
transportation to after-sales service. These indicators not only help businesses detect quality
problems but also play an important role in developing a continuous improvement strategy:
Product defect rate, return rate, complete delivery rate, customer satisfaction, etc.
Time: is an important variable that determines the efficiency of production, distribution and
delivery activities. Good management of time-related factors not only helps businesses reduce
costs but also optimizes the use of resources and improves customer satisfaction. Coyle's supply
chain time measurement system acts as a performance assessment tool, helping businesses identify
weaknesses in the supply chain and thereby build continuous improvement strategies. Indicators
that can be used to measure time include: On-time delivery/receipt, order cycle time, order
fulfillment time, inventory turnover time, etc.
Cost: This index plays an essential role in analyzing, evaluating and optimizing the
performance of the supply chain. Cost is one of the most important factors affecting business
decisions and financial performance of the organization. The proposed indexes for evaluating costs
proposed by Coyle are: cash flow cycle time, collection time, labor cost, machine cost, production
cost, etc.
2.2. Lambert:

Supplier Relationship Management (SRM) and Customer Relationship Management (CRM)

are two elements covered in Lambert’s measurement system. This is an in-depth look at how
elements from supplier and customer relationships can influence key economic indicators,
including sales revenue, gross profit, net profit, and overall costs, thereby helping businesses
optimize operations and achieve sustainable growth.
Supplier Relationship Management (SRM):
SRM plays an important role in improving operational processes, reducing costs and
optimizing production performance through effective supplier relationship management. The
impact of SRM can be analyzed through specific aspects:
 Increase sales prices and sales volume: Improve quality and/or service: Good supplier
relationships can lead to higher quality products and improved product support services, which
can help businesses increase their selling prices or increase sales volume. This directly improves
sales revenue.
Reduce operating costs: Optimize customer service and costs: A strong supplier
relationship helps businesses synchronize services and production in a more cost-effective way,
thereby reducing total production costs.
Improve production processes: SRM helps improve production process efficiency, reduce
direct material costs and increase labor productivity, thereby reducing production costs.
Reduce management costs: Effective supplier management reduces costs related to
transportation, warehousing and inventory management, by optimizing the flow of raw materials
and intermediate products.
Improve productivity and operational efficiency:
Increase factory productivity: Strong relationships with suppliers help businesses improve
production processes, increase the efficiency of equipment and factories. This contributes to
reducing waste, increasing labor productivity, and minimizing dependence on human resources.
Reduce labor and indirect labor costs: Redundant and inefficient work in the production
system will be eliminated through SRM, helping to reduce the need for unnecessary labor.
Optimize information systems: Effective relationships with suppliers help integrate and
improve information systems, contributing to reducing management and monitoring costs.
Effective inventory management:
Reduce inventory: By optimizing the supply of raw materials from suppliers, businesses can
maintain reasonable raw material inventory levels, thereby reducing storage costs and improving
asset utilization efficiency.
Improve asset deployment efficiency: Supplier relationship management strategies enable
businesses to optimize the use of manufacturing assets, including equipment and warehouses,
thereby improving the ability to use assets most effectively.
Customer Relationship Management (CRM):
CRM plays a strategic role in maintaining and developing customer relationships, thereby
helping businesses increase revenue, reduce operating costs and improve net profits. The impact
of CRM can be divided into the following aspects:
Customer retention and sales growth:
Maintain and strengthen relationships with high-profit customers: CRM helps businesses
identify and maintain relationships with high-profit customers, thereby increasing customer
loyalty and maintaining sales volume. This helps businesses not only increase revenue but also
optimize costs associated with finding new customers.
Increase sales volume and customer value: By improving the quality of services and products
through customer relationship management, businesses can increase customer value, thereby
increasing sales volume and revenue.
 Sell high-profit products: CRM allows businesses to focus on selling products with higher
profit margins, thereby improving overall profitability.
Optimize service costs and reduce operating costs:
Services: CRM helps businesses analyze and optimize the services provided to customers,
thereby focusing on providing services to high-profit customers and cutting unnecessary services
for low-profit customers, helping to save operating costs.
Rationalize distribution channels: CRM helps optimize product and service distribution
channels, reduce intermediary steps and administrative management, thereby helping to reduce
management and operating costs.
Reduce inventory management costs: Good customer relations help businesses optimize
inventory management processes, reducing costs related to excess inventory and waste.
Improve financial metrics and business health:
Improve the payback cycle: Effective customer relationship management helps businesses
speed up the payment cycle from customers, thereby improving cash flow and enhancing financial
health.
Improve the quality of investment planning: CRM allows businesses to plan investments and
developments more effectively, thereby minimizing financial risks and improving long-term
profitability.
2.3. M.Hugos:

Based on the document of M. Hugos (2011), the content is divided into two main parts,
focusing on classifying markets based on supply and demand status as well as evaluating supply
chain management strategies suitable for each stage of market development.
Market segmentation matrix based on supply and demand
This matrix classifies the market into four different states: Mature, Stable, Developing, and
Growth. Each state reflects the relationship between supply and demand, thereby helping
businesses adjust their supply chain strategies, customer service, and product development to best
suit the market situation.
Saturation (Supply exceeds demand): This is the stage where the supply of a business far
exceeds the demand of the market, meaning there are too many goods or services than customers
demand. This can lead to a surplus of goods, putting pressure on prices and fierce competition
among suppliers. The market is now saturated, customer demand is no longer growing strongly.
Businesses will have difficulty maintaining revenue and profits, facing competitors by reducing
prices, promotions or differentiation strategies. In this situation, businesses need to improve
customer service to maintain and increase the satisfaction of existing customers, thereby
maintaining market share. Strategies such as providing good after-sales service, improving
customer experience, or optimizing customer care processes will help businesses stand out from
competitors in a saturated market.
Stable (Supply and demand are balanced): This is the stage where supply and demand are
in balance, the market does not fluctuate much, and the demand and supply of goods and services
are stable. Businesses maintain operations without having to expand or cut back significantly.
During this stage, businesses do not need to face major fluctuations in the market, but they also
need to focus on maintaining stability and efficiency in the production and operation process.
Stability in supply and demand helps businesses optimize internal operations without worrying
about unexpected changes in the market. Businesses should focus on optimizing operational
efficiency by improving processes, minimizing waste and unnecessary costs. At the same time,
operational flexibility also needs to be focused on to be able to respond promptly to small
fluctuations in the market. This includes measures such as optimizing supply chain management,
maintaining reasonable inventory levels, and minimizing operating costs.
Developing (New and expanding market, low supply): This market is in the development
and expansion stage, with increasing demand but the supply capacity of enterprises is not yet able
to fully meet it. This is often an emerging market, with great potential for development and
increasing market share, but also means challenges in increasing production and meeting demand
in a timely manner. When customer demand increases sharply, enterprises need to find ways to
expand production or speed up product development to meet the growing market. However, limited
supply capacity leads to enterprises facing supply pressure, thereby risking losing customers if
they do not provide products or services in a timely manner. During this stage, enterprises need to
focus on expanding customer service and product development to meet increasing demand.
Investing in research and development (R&D) to create new products, improve the quality of
existing products, and improve customer service processes are important factors to maintain and
expand market share.
Growth (Demand Exceeds Supply): In this market, customer demand exceeds supply,
creating a shortage of products and services. This is a period of strong growth, often occurring
when a new product or service becomes popular or when a new market begins to boom. Businesses
face great opportunities for revenue and profit growth, but also face challenges in production and
supply capacity. High customer demand can lead to a shortage of supply, causing lost business
opportunities if businesses do not promptly increase production capacity. Businesses need to
quickly increase production capacity and enhance customer service to meet the strong growth of
the market. This includes investing in technology, infrastructure and production processes to
increase supply capacity. At the same time, improving customer service is also a key factor in
maintaining customer satisfaction in the context of demand exceeding supply.

Evaluating supply chain performance in different markets

This matrix also helps businesses evaluate the effectiveness of supply chain operations
corresponding to each stage of market development. Each supply and demand state requires
businesses to apply different supply chain management strategies to optimize operations and take
advantage of market opportunities.
Saturation: Businesses focus on customer service and optimizing internal efficiency to
maintain market position, while developing flexible capabilities to respond to small fluctuations
in supply and demand.
Stable: Businesses focus on operational efficiency and maintaining stability in production
and distribution to ensure uninterrupted business operations.
Developing: For an expanding market, businesses need to focus on developing customer
service and product development to promptly meet market demand.
Growth: As the market grows, businesses need to increase their production and customer
service capabilities to take advantage of growth opportunities and expand market share.

The four factors of Customer Service, Internal Operational Efficiency, Product Development
Capability and Flexibility to Respond to Changing Demand are also mentioned in M.Hugos's
document.
3. Evaluation criteria according to SCOR model:

The Supply Chain Operations Reference (SCOR) process hierarchy is a standardized

approach that helps businesses manage and optimize their supply chains. SCOR not only helps
businesses improve performance, but also provides a detailed roadmap from the strategic level to
the operational level. The model divides the supply chain into four levels, each of which plays a
specific role in managing, implementing, and improving the supply chain.
Level 1: Major Processes: This level includes the largest processes in the supply chain,
focusing on establishing the scope, content, and performance goals that the supply chain needs to
achieve. This is the foundation of the entire supply chain system, helping to guide the next levels.
The SCOR model divides the major processes into groups:
Plan: The planning process includes forecasting demand, managing resources, optimizing
resource utilization, and adjusting production to meet market demand.
Source: This is the supply management process, ensuring that raw materials or products from
suppliers are selected, quality controlled, and transported in a timely manner to the manufacturing
plant or distribution facility.
Make: Focuses on the production or creation of products. This process includes production
control, progress monitoring, and ensuring product quality is maintained at the highest level.
Deliver: This is the process of managing distribution, from warehousing, order management,
to shipping products to end customers.
 Return: Handles returned, damaged, or substandard products, and ensures that returns are
processed quickly and efficiently.
Enable: Support processes, including information management, finance, human resources,
and other elements that help the supply chain operate smoothly.
These core processes establish the overall scope and performance metrics for the supply
chain, providing the foundation for implementing smaller processes at later levels.
Level 2: Process Categories
At this level, the SCOR model divides the main processes (level 1) into more detailed
categories. Each category will help the business establish a specific operating strategy and
determine the capabilities needed to perform these processes. The goal is to create processes that
are consistent with the overall operating strategy of the business.
Level 2 processes include:
sD1 (Plan): Corresponds to the planning process.
sD2 (Source): Related to sourcing.
sD3 (Make): Production management.
sD4 (Deliver): Delivery process.
sD5 (Return): Processing returned goods.
These categories are often adjusted depending on the characteristics of each industry,
business, or product type. The symbols MIS (Management Information Systems) and HQ (High
Quality) can refer to the use of management information systems and high quality standards in
these processes. This level specifically defines how the processes operate in the business.
Classifying and detailing the processes makes it easier for businesses to build specific strategies
for each group of activities in the supply chain.
Level 3: Process Elements: This level details each process, including the inputs, outputs,
required skills, and specific capabilities of each process. This is the operational level, where the
execution elements of the supply chain are analyzed and optimized.
This model illustrates how a specific process is broken down into smaller elements.
sD1.1 (Process Inquiry and Quote): The process of receiving requests and quotes, in which
the business processes information from customers and responds with prices and delivery times.
sD1.2 (Build Tools): The process of building and developing the tools needed for operations
or production, including the implementation of production management systems or supporting
technologies.
sD1.3, sD1.4, sD1.5, sD1.6: Other elements may be related to detailed planning, quality
management, system operation and maintenance, or monitoring of production progress. This level
focuses on implementing specific processes and detailed definitions of the elements involved in
each stage of the supply chain. It includes indicators of inputs, outputs, required skills,
performance, as well as best practices to improve operational efficiency.
Level 4: Improvement Tools/Activities: This level focuses on improvement tools and
activities that help businesses optimize processes, reduce waste, and improve supply chain
performance. This is the level where continuous improvement programs are implemented to
improve quality and efficiency.
The diagram illustrates improvement tools and activities such as:
- Kaizen: A continuous improvement method that focuses on making small changes to
improve performance.
- Lean: lean method that focuses on eliminating waste in production and operations.
- TQM (Total Quality Management): Total Quality Management, an approach to
continuously improve quality throughout the entire production process.
- Six Sigma: A statistical management method that aims to reduce errors and variation in the
process.
- Benchmarking: A method of comparing a business's performance with standards or
competitors to improve productivity and efficiency.
This level focuses on using modern innovation tools to optimize processes and reduce waste.
Businesses can apply these tools to improve efficiency, reduce errors, and increase supply chain
flexibility.