Performance Measurement of the Value Chain

Time: 3:45 pm 9-23-2005

Performance Measurement addresses key issues of today’s complex Value Chains: 

Fast change often invalidates business strategies:

• Performance measurement can detect such change, isolate its impact and create a focused response utilizing the assets of the extended enterprise

Decision-making process is increasingly based on performance:

• Effective measurement provides the knowledge needed to support value chain decision-making

Value chains are semi-deterministic systems; their performance cannot be guaranteed by design:

• Measurement helps manage the uncertainty and validate the assumptions of the value chain model

Measurement links strategy to expectations and operation of the Value Chain:

• By explicitly linking strategic objectives to a set of operational measures across the extended enterprise

• By quantifying the impact of operational performance on the bottom line of the Value Chain leader and supporting participants

Measurement reaches across the Value Chain:

• By generating measures which have an extended enterprise impact

• By exposing the links and interdependencies between different participants

Measurement links current performance to future results:

• By generating a set of measures which are predictive in nature rather than output measures

• By exposing the links between today’s operational actions and tomorrow’s financial impact

To illustrate these issues, a case study of product selection by the world’s largest retailer will be described.