Managing Information in New Ways

Cost, profits, and financial ratios can provide useful insights into the overall efficiency and

effectiveness of any business. However, they do not always tell the full story. A sudden spike in

the price of oil, a flood that destroys a low-cost supplier, an increase in interest rates, the closing

of a large plant in a small town, or a national banking crisis are all external factors that can

cripple the financial viability of any business. These external factors lie beyond the control of

even the best management team. Sometimes we need to be very careful about what we measure

and how we should measure. Although it adds a layer of complexity to a basic accounting

system, measurements that are useful for evaluating processes that serve customers can be

provided.

When evaluating the supply chain of a business, there is a great need to carefully consider what

metrics should be employed. Such a consideration should include at least some of the following

factors:

• Total supply chain cost. All the operational expenditures of a cost associated with the requisite

information systems.

• Cash-to-cash cycle time. The time between when an organization purchases raw materials and when

they are paid by the customer.

• Delivery. The percentage of orders delivered on or before customer due dates.

• Flexibility. The amount of time required to handle a significant ramp up in production. [3]

For those who are seriously committed to maximizing the benefits from successful supply chain

management, study the supply chain operations reference (SCOR) model. This model enables

businesses to benchmark their supply chain management systems. Developed in 1996 by the

Supply Chain Council in conjunction with AMR Research and Pittiglio Rabin Todd and

Rath, [4] the purpose of the SCOR model is to provide methods to measure and benchmark the

performance of the supply chain management system of a business. Currently, one thousand

firms, universities, and government agencies participate in the continuing evolution of the

SCOR model. It is predicated on three major components: process modeling, performance

measurement, and the determination of best practices.