Elsevier

Computers in Industry

Volume 122, November 2020, 103294
Computers in Industry

A dynamic supply chain BSC-based methodology to improve operations efficiency

https://doi.org/10.1016/j.compind.2020.103294Get rights and content

Highlights

  • Supply chain performance management lacks of an objective method to design business scenarios.

  • Inductive scenario planning can be used to retune supply chain balanced scorecard measures and strategic objectives

  • Application of multivariate techniques lead to determine the order of activation of the action plans, saving resources

Abstract

This paper presents how to objectively set up the process for activation of the future action plans from a supply chain Balanced Scorecard (BSC), aligning such an activation process to reach the main objectives and being able to save resources. Additionally, it also shows how to define supply chain business scenarios based on the future expected values of the Key Performance Indicators (KPI). Once the future business scenario has been chosen, the KPI values associated with this scenario will become the new KPI values of the BSC in order to align efforts and save resources Further, the strategic objectives associated with the KPIs may also be extensively retuned, thus redefining their target values. From the application carried out, there were four KPIs whose values needed, in absolute terms, to be increased and four other KPIs to be decreased. Additionally, the associated strategic objectives were retuned; for example, the value of the strategic objective “To reduce product development costs” was initially set in the BSC at 10 % but it was deduced to 8% as a consequence of the application of the proposal. As a result, this methodology has aligned all the future efforts of a whole supply chain in order to reach one point on a plane, which is a combination of interrelated supply chain KPI.

Introduction

Performance Measurement Systems (PMSs) have become one of the most popular and implemented tools to manage organisations. There are many PMS frameworks that could be used to manage performance, e.g., the Performance Pyramid (Cross and Lynch, 1988), the Balanced Scorecard (BSC) (Kaplan and Norton, 1992), the Performance Prism (Neely et al., 2002), etc. Usually, based on an organisation’s strategy, a PMS defines some strategic objectives, associated action plans and key performance metrics (KPIs), combining these elements in an easy and traceable structure. However, the usage of PMSs, and especially of the most extended one, the BSC, has also engendered criticism not only from academics but also from practitioners. Issues that have been pointed out recently include the usage of too many KPIs (Balfaqih et al., 2016); lack of guidance on what internal factors and action plans should be activated and in which order (Dror, 2019); lack of determination of the relative importance and the trade-offs of the BSC’s four perspectives (Itner and Larker, 2003; Chenhall and Langfield-Smith, 2007); lack of objective identification and quantification of cause-effect relationships between and among its main elements (Rodriguez Rodriguez et al., 2009; Mendonça Peixoto et al., 2018); and lack of use of the latent information gathered by the KPIs over time to build future scorecards (Rodriguez-Rodriguez et al., 2010; Chytas et al., 2011; Javari et al., 2015). Despite some remarkable efforts to address some of these issues by extending and improving BSC concepts (Kaplan, 2009), some of them remain unresolved or, at best, treated individually.

Further, when tackling inter-organisational definitions and applications of PMSs, the situation becomes much more complex. Elements such as coherence, equity or trust (Verdecho et al., 2012), or the fact of working with several independent organisations that aim to reach some common supply-chain objectives cause problems to arise, including constructing and gathering the information for the KPIs, defining KPIs, the definition of roles and responsibilities or resource allocation (Alfaro-Saiz et al., 2019). These supply chain problems, together with the issues previously presented, make supply chain PMSs an exciting and up-to-date research topic.

This research aims to develop a dynamic supply chain BSC-based methodology that will, by addressing some of the presented issues from a global approach, improve the efficiency of supply chains with regard to their business performance.

Section snippets

Research methodology

This research followed a constructivist research approach, which is appropriate for operations management (Coughlan and Coughlan, 2002). This research methodology focuses on generating solutions to concrete problems supported with the study and analysis of current scientific knowledge, determination of main postulates and creation of the new proposal (Meredith, 1993). Then, the main elements taken into account were: The existing supply chain PMS; the main factors that affect to PMS over time;

Supply chain PMSs

Currently, PMSs are believed to be the key managerial mechanisms for implementing efficient supply chain management (Laihonen and Pekkola, 2016). Therefore, many supply chain PMS frameworks to be designed and implemented are available. In this sense, Jagan et al. (2019) classify them into:

  • Processed-based approaches, whereby the frameworks focus on integrating both processes and activities within the PMS; examples of these are Bullinger et al. (2002), Gunasakeran et al. (2004), Govindan et al.

The proposed methodology

The methodology has six phases that are next presented and which are easily replicable for future researchers and practitioners.

Application

The methodology was applied to a ceramic supply chain with three main members: The Original Equipment Manufacturer (OEM) and two of its first-tier suppliers, one supplying both glazes and ceramic colours and another supplying frits. Additionally, these suppliers are medium-size organisations, which have a long experience in the ceramic sector. The supply chain was international, as the manufacturer was located in Spain and its main first-tier supplier in Italy. Additionally, the supply chain

Discussion

This section highlights not only the theoretical and the practical contributions of this research but also its limitations and scope for future work.

Then, this paper extends the theory about supply chain management and, more concretively about supply chain PMS, as it develops a novel dynamic supply chain BSC based-methodology that deals simultaneously and from an integrated and inter-organisational approach with some of the key factors expressed by Hald and Mouritsen (2018): allocation and

Conclusions

This paper has presented a dynamic supply chain BSC methodology to improve business efficiency. By applying both Principal Components Analysis (PCA) and Partial Least Squares 2 (PLS2), it shows how to objectively set up the process for activation of the action plans from a BSC, aligning such an activation process to reach the financial objectives and be able to save resources. Additionally, it has also presented how to define supply chain business scenarios based on the future expected values

Author statement

We have now incorporated the changes suggested by both reviewers. We do thank to them for their useful and constructive comments to our paper. We have highlighted the changes in the manuscript in yellow color.

Declaration of Competing Interest

None.

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