Performance Measurement
The performance measurement of the company is primarily based on four key metrics which are profit, gross margin, free cash flow and operating profit margin. The gross margin is primarily dependent on the customer needs and the production capability. The operational profit margin is the measure of profit realized after the expenses have been deducted for the cost of goods sold to the customers. Free cash flow is the income from the current assets and liabilities less the expenses. The goal of the company in order to achieve a good measure of performance is to improve the efficiency in the production, procurement, delivery, inventory and customer service level.
In order to measure the production, it is important to collect data on relevant variable such as supplier performance, customer demands, ability to meet customer demands and ability to satisfy the customer. The analysis of the data obtained on these variable will help the management to determine the root cause of the problem which in turn can provide solutions. The Supply Chain Management aims at aligning the efforts of the suppliers with those of the customers. This way the companies are able to improve the production capability and meet customer demands which leads to significant improvements in the quality and quantity of products supplied. While measuring the production process it is important that the focus of attention remains on the end-user or the consumer, to ensure that the target achieved is beneficial to the customer.
The objective of the supply chain performance measures is to reduce the cost of production, improve the quality and productivity of the process and improve the quality of the product or service supplied. The use of quantitative measures rather than qualitative measures will help to determine the status of the processes and identify the problems. Quantitative measures can be visualized, numerical (percentage) figures or graphs, where the data is presented in data form such as lists, tables, maps or even charts. It helps to easily track changes over time and identify the areas for improvement.
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