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Measures for Evaluating Performance Along the Value Chain

The usage of accounting reports and performance measures in key decisions about the firm's value chain also applies to major high level areas such as usage of the firm's core competencies, outsourcing production vs. in-house, decentralization vs. centralization, management style and performance measures, and downsizing staff vs. expansion. Value chain management leadership is now a role of the CEO in many organizations.

JMI's CEO wants you to implement performance measures for evaluating the performance of each aspect of the value chain. Based on all you know about JMI and its many products, divisions, and operations, what performance recommendations would you make for each aspect of the value chain? What accounting tools and reports would you use?

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The primary value chain activities are:

Inbound Logistics: the receipt of raw material and its issuance to the manufacturing
Operations: the processes of transforming inputs into finished products and services.
Outbound Logistics: the warehousing and distribution of finished goods.
Marketing & Sales: the identification of customer needs and the generation of sales.
Service: the support of customers after the products and services are sold to them.

Value chain helps in identifying the core competencies of the organization. It helps in reducing the cost and improving the quality of the each of the activity in the value chain. It also helps in improving the focus where non value added activities are removed from the activities of the organization.

Thus we have to do performance measurement for each activity in the value chain analysis. For this I will recommend following:
The performance measures provide feedback to organizations in order to assist in implementing strategies and objectives. Note that in the strategic-management model that feedback is critically important. Changes can occur that impacts all strategic-management activities. Feedback allows these changes to be identified and adjustments to be made. Feedback in the strategic-management process promotes the creation of a climate for two-way communication and, thus, allows esprit de corps to be achieved in an organization. Therefore most desired outcomes are common to all types of organizations. Here are some categories of critical performance outcomes:

1. Customer Satisfaction and Quality - Ratings and performance standards for measuring and reporting how well you meet customer requirements.
2. Efficiency and Effectiveness - Many services must be delivered in an efficient and effective manner. For example, timeliness is often a good indicator of efficiency. If you do the "right things," this should get reflected in the form of effectiveness.
3. Resources and Utilization: The ability to maximize the use of fixed assets and use Agency resources is a good indicator of performance. Cost and budget performances are common examples.
4. Productivity and Improvements: If you can accomplish better results through new ways of doing things, then this is a form of innovation and in turn is a very solid indicator of performance.
(Govindrajan, Management Control system)
According to the one performance measurement index Balance scorecard the following perspectives are important:
The Balanced Scorecard is one of many performance management measurement tools that have become very popular in recent years in order to improve the performance of the organization. This system of performance management measurement was developed by Dr Robert Kaplan and Dr David Norton of the Harvard Business School. It focuses on four main perspectives as described by Kippenberger (1996), these are: i. The Customer, ii. The Internal, iii. Innovation and Learning and iv. Financial
Thus this measures all the activities of the organization:
As opposed to most previous measurement tools, the balanced scorecard didn't just focus on the financial perspective. The balanced scorecard aims to have a balance over the four areas rather than one area being much more focused upon "The BSC (Balanced Scorecard) divides the business environment into four key business areas" (Hepworth 1998)

II. Balanced score card overview
Balance scorecard seeks to measure a business from the following perspectives:
* Financial perspective - measures ...

Solution Summary

Over 2000 words recommend how to implement performance measures for evaluating each aspect of the chain. Tools, reports and references used are included.