Page 326 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 14: Supply Chain Logistics Administration

14.3 Financial Performance Notes

Evaluation of the financial performance, including the creation of profit and loss statements,
could be considered the overriding measure of the appropriateness of supply chain configuration.
Financial evaluation should take into account the operational and dynamic aspects in order to
capture the detailed financial drivers and take account of the real-world operation of the supply
chain. Prominently the evaluation would be holistic rather than of partial performance
Financial evaluation by assessing the impact on the profit and loss account is far more influential
as it captures the overall effect rather than immediate local effects. Measuring financial impacts
can be difficult due to the need to capture a sufficient number of the financial drivers within an
enterprise. Measurement of financial impact at an enterprise level is uncommon and those
reported instances have been found of such measurement in a supply chain context are at a more
abstract level.
A comprehensive supply chain design methodology needs the appropriate scope and detail to
be meaningful for implementation across the supply chain as well as evaluation to assess the
performance of the design. Even as there are a number of supply chain metrics that can be used,
the financial performance is the most powerful; financial measures take a global, all inclusive
view of the business rather than selective, localised measurement. Balanced scorecards can be
employed to provide assessment through finance, customers, processes and learning and growth
areas. However, taking a hierarchical perspective the finance is at the top resulting from market
performance facilitated by the business processes and sustained by learning and growth. It is
argued here that whilst operational/business process measures are vital they should be
complemented by financial assessment.

The financial perspective answers the question: “To succeed financially, how should we appear
to our shareholders?” and is typically related to profitability. Some measures are, for example,
the Return on Investment (ROI), Return on Capital Employed (ROCE), and Economic Value
Added (EVA), etc.

14.3.1 Asset Utilization

Related to collaboration is the concept of asset utilization. With increasing financial, customer
service and environmental demands, many transportation companies have started gathering
equipment asset information through web portals, community systems and location-tracking
technologies. This search, though at its early stages, is an effort to connect and run their equipment
networks more effectively. This focus has validity and is now being practiced by some
transportation companies.
The future seems to indicate the successful implementation of this concept. With increasing
financial, customer service and environmental demands, this has the potential to become an
enabler to manage the supply and demand of equipment. By interchanging equipment with any
transportation provider, on demand, anywhere in the world, there will be optimization in the
use of enterprise resources while improving customer satisfaction. As this fructifies, transport
providers will offer higher value end-to-end services, increase their appeal to customers and
enjoy the multi-fold economic benefits from greater asset utilization.

Task What is the basic inventory management techniques used in fast moving consumer
goods (FMCG) industry firms in Indian economy?

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