A supply chain or logistics network is the entire system of organizations, people, technology, activities, and resources, which includes the movement of products or services from the supplier to the customer.
In the process of supply chain activities, natural resources, raw materials, and components are turned into the final product and delivered to the end customer. In other words, a supply chain is a group of organizations that are connected by a shared goal.
Supply chain management, on the other hand, is the efficient design and optimization of all processes that take place in the journey of a product or service from the supplier – or producer – to the consumer. By ensuring the integration and optimization of all activities in the chain, business models are created to increase customer satisfaction. With all this, the right product is delivered to the consumer at the right time, at the right place and at the right cost. What is important in supply chain management is the correct planning of activities such as stock levels, supply and demand balance, cost and asset management, cash flow, production, and logistics. Therefore, companies should work with a supply chain strategy and design that suits them and the chain best.
There are lots of different companies in the chain and all of them has different structures and services, as every customer expects different services alongside the way. Also, with the significant increase in competition, businesses in the supply chain have started to work in win-win partnership structures to gain competitive advantage. For this reason, it has been more efficient to apply measurement methods that will affect and evaluate the whole supply chain instead of measuring the performance of the members in the chain separately. The fact that the control within the supply chain does not belong to only one enterprise has increased the importance of supply chain performance measurement. Failure and poor performance at any stage of the chain will cause serious problems for industries.
In a general way, there are two main characteristics that describes supply chain performance: responsiveness and efficiency.
We can measure these two main characteristics in the below categories.
- Customer Service
- Internal Efficiency
- Demand Flexibility
- Product Development
This category measures the ability of the supply chain to meet the expectations of its customers. Depending on the type of service data market, customers in the market will have different customer service expectations. Whatever market is served, the supply chain must meet the customer service expectations of the people in the market.
Internal efficiency means that a supply chain could operate at an appropriate level of profitability. Since market conditions are variable, the appropriate level of profitability varies from market to market. It is expected that there will be a high profit margin in terms of the investment made and the money spent in the markets that develop in a risky way. In mature markets, where risk and uncertainty are relatively low, it is normal to have a lower profit margin.
This category measures the ability to respond to uncertainty in levels of product demand. It shows how much of an increase over current levels of demand can be handled by a company or a supply chain. At the same time demand flexibility also includes measuring the ability of the supply chain to respond to the risk of changing ranges of products that might be demanded.
The scale of product development covers the ability of a supply chain to continue to evolve with the market it serves. This metric measures how well the supply chain has the ability to develop new products in a timely manner and to distribute these products in a changing and evolving industry.
All these main categories go into much detailed metrics to measure the overall performance of supply chains. Day by day, we are able to measure the performance better thanks to technological developments and operational research.