A Proposed Performance-Measurement System for Enabling Supply-Chain Strategies
Thammasat Business School, Thammasat University, Bangkok 10200, Thailand
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Author to whom correspondence should be addressed.
Sustainability 2022, 14(19), 11797; https://doi.org/10.3390/su141911797
Submission received: 13 July 2022
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Revised: 9 September 2022
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Accepted: 16 September 2022
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Published: 20 September 2022
(This article belongs to the Special Issue Strategies in Supply Chain Planning and Business Resilience)
Abstract
:Existing performance-measurement systems in the supply-chain literature have been designed for specific supply chains. Without a business-appropriate performance-measurement system, practitioners devise strategies that are neither scientific nor supported by data. The objective of this paper was to propose a performance-measurement system to support the enabling of supply-chain strategies. The proposed performance-measurement system (PMS), combining the Plan–Do–Check–Act cycle (PDCA) with the evidence-based management (EBM) concept, served as the basis for developing a procedural framework. The PMS was validated using the case logistics service providers (LSPs). The PDCA methodology was used to develop a structural framework for fourth-party logistics (4PL). In the Plan step, the research team identified the business problems of fourth-party logistics (4PL). In the Do step, the LSP literature was reviewed, to identify five performance dimensions (‘Service Quality’; ‘Social and Environmental’; ‘Inter-organizational Relationship’; ‘Financial’; and ‘Efficiency and Effectiveness’), and key performance indicators (KPIs). The 4PL management team participated in the finalization of the five performance dimensions and the 53 KPIs, which were used to propose a preliminary version of the structural framework for the 4PL. In the Check step, the data collected from 478 subcontractors of the 4PL were analyzed, using confirmatory factor analysis and structural equation modeling, and were used to validate the proposed structural framework for the 4PL. The validated structural framework was further presented at an academic conference, and to the 4PL for feedback, and was used to formulate supply-chain strategies through brainstorming. The findings include a validated structural framework containing five performance dimensions and 32 KPIs. The research revealed that input performance (‘Service Quality’, ‘Social and Environmental’, and ‘Inter-organizational Relationship’) positively affected output performance (‘Financial’ and ‘Efficiency and Effectiveness’). Supply-chain strategies were further suggested to the 4PL. The validating case in this study demonstrated that the employed procedural framework (PDCA and EBM) was applicable, and could be used to derive a structural framework and supply-chain strategies for the 4PL. This study contributes to the literature, by proposing a PMS for supply-chain strategy development. The paper’s illustrative case provides a practical application of how to develop a performance-measurement system.
1. Introduction
Modern-day competition is no longer between companies but between supply chains [1]. Supply-chain management, therefore, requires the development of supply-chain strategies. The development of supply-chain strategies requires that all parties within the supply chains understand their respective baseline performances (‘As-Is’), and have a clear understanding with regards to their future directions (‘To-Be’) [2]. In the literature, many performance-measurement systems can lead to strategy development, but these are designed for specific supply chains [3,4], and raise a practical problem when applied in another context [5]. Without a business-appropriate performance-measurement system, practitioners devise strategies that are neither scientific nor supported by data [1,6]. This underlines the need to develop a performance-measurement system that can guide practitioners in formulating supply-chain strategies based on scientific evidence. From a management perspective, performance-measurement systems should be developed using an approach that is logical, systematic, and communicable [5,7].
The objective of this paper was to propose a performance-measurement system to support the enabling of supply-chain strategies. The proposed performance-measurement system combined the Plan–Do–Check–Act (PDCA) cycle with the evidence-based management (EBM) concept. The case of logistics service providers (LSPs) providing last-mile transportation was used, to validate the proposed performance-measurement system. This study contributes to the literature, by proposing a performance-measurement system that can be used in enabling supply-chain strategies. The paper’s illustrative case provides a practical application of the proposed performance-measurement system.
The structure of the paper is as follows. The next section provides an overview of the literature on performance-measurement systems for supply-chain management. It is followed by an introduction to the PDCA and EBM concepts and their applications in the context of performance-measurement systems. In Section 3, the context of LSPs is presented. The research methodology is explained next, and shows how the PDCA and EBM concepts were adapted within the context of measuring LSPs’ performance. The findings are reported in Section 4. Section 5 begins with theoretical discussions regarding the use of the PDCA cycle and EBM in the development of a performance-measurement system, and then moves on to managerial implications. The contribution and limitations of the study are summarized in Section 6, along with suggestions for future research.
2. Literature Review
This section includes a review of the literature on performance-measurement systems for supply-chain management, and a review of the PDCA and EBM concepts.
2.1. Supply-Chain Strategies
Supply-chain strategies are supply-chain management objectives and ways to operationalize these objectives, to achieve improved performance; whereas operations strategies are plans for utilizing a company’s resources [8,9]. Consequently, supply-chain strategies transcend operations strategies, which are established within the boundaries of a single organization. This emphasizes the importance of supply-chain strategies in defining operations strategies, and organizations should consider both supply-chain and operations strategies when constructing effective and efficient supply networks that benefit all parties involved [10]. Developing supply-chain and operations strategies necessitates a performance-measuring framework that enables practitioners to comprehend their baseline performances [2].
2.2. Performance-Measurement Systems
The performance-measurement literature divides performance-measurement frameworks into two types: structural and procedural. Structural performance-measurement (hereafter structural frameworks) specifies performance-measurement typologies, without prescribing the process used to develop them. Procedural performance-measurement (hereafter procedural frameworks) gives a step-by-step process for developing performance measurement [7]. The performance-measurement literature has provided lists of the most-used structural and procedural frameworks [7,11,12]. Folan and Browne [7] further emphasized that structural and procedural frameworks are developed independently. Structural frameworks provide typologies for performance measurement, but lack a procedural element. In contrast, procedural frameworks offer a systematic approach to performance measurement, but lack performance typologies.
When structural and procedural frameworks are combined, the combination is known as a performance-measurement system. There is a limited list of performance-measurement systems in the literature [7,13,14]. Among them, the Balanced Scorecard (BSC) [15] has been the most widely studied and implemented in the performance-measurement literature [11]. In the supply-chain-management literature, several performance-measurement systems have been proposed [16,17,18,19]. The Supply-Chain Operations Reference (SCOR) model [20] and the BSC have been recognized as the most prevalent performance-measurement systems used for improving supply chains [21,22].
The BSC is a method that facilitates the development of a firm’s strategy [15]. The BSC’s structural framework includes four dimensions: financial, customer, internal business process, and learning and growth perspectives [15]. The latter three dimensions focus on non-financial and operational aspects complementary to the financial dimension. The BSC’s procedural framework consists of translating vision, communicating and linking, business planning, and feedback and learning [15]. The BSC is the most well-recognized management control system [23] that helps reduce issues related to insufficient information, inconsistent incentives, and coordination [24]. There are applications of the BSC in supply-chain-management literature [25,26,27].
The SCOR model enables organizational strategies that can enhance supply chains. The initial level of the SCOR model includes five dimensions: supply-chain dependability, flexibility, responsiveness, cost, and assets. The second level includes metrics employed to indicate the causes of performance gaps identified at the first level. The third level contains metrics used to analyze the causes identified at the second level. There are five steps in the procedural framework: plan; source; make; deliver; and return. Researchers have employed the SCOR model for enhancing supply-chain processes [28,29].
There are, however, criticisms of the SCOR model and the BSC, when they are used to develop performance-measurement systems for supply-chain improvement. The SCOR model focuses on operational measures and process-improvement, but does not support supply-chain strategy development [30,31,32,33]. Axelsson and Frankel [32] have also criticized the SCOR model for having a pre-defined list of performance measures, that needs to be tailored to the organizational context. Similarly, the BSC comes with predetermined performance dimensions, and is somewhat generic, requiring considerable adjustments to match the objectives and operations of the organization [33,34]. Other criticisms of the BSC include the exclusion of important stakeholders, competitive business environments, and the social aspects of the industry [3,35,36].
All of the above-mentioned limitations underline the need for a performance-measurement system for supply-chain management. Such a system should permit adaptability to the business context, reflect a company’s day-to-day operations, and enable the formulation of supply-chain strategies. The following is a description of the PDCA cycle, and an explanation of why it can be used to solve the limitations identified by the literature: inability to support supply-chain strategy development; having a predetermined list of performance measures; having difficulty in adjusting to the organizational context; and neglecting relevant stakeholders, competitive business environments, and social aspects of the industry.
2.3. Plan-Do-Check-Act and Evidence-Based Management
The PDCA cycle was proposed by Shewhart [37], and popularized by Deming [38], for use as a problem-solving technique within the context of quality management. It consists of Plan (planning), Do (implementing the plan), Check (evaluating the implementations), and Act (processing the outcomes). Currently, the PDCA cycle is recognized as a scientific methodology with a standardized procedure that allows for continual improvement [39,40,41,42].
In the supply-chain management literature, few studies have utilized the PDCA cycle, with the majority focusing on green supply chains [43,44,45]. In contrast, the performance-measurement literature contains several examples of researchers applying the PDCA cycle in various circumstances, such as manufacturing [40], education [45], and employee development [46]. There are also many applications of PDCA-type cycles in the benchmarking literature [40], which is not surprising, given that the researchers in this field appear to be inspired by the PDCA cycle [47]. Developing performance-measurement systems and strategies for continuous improvement is one of the main purposes of the use of the PDCA cycle in benchmarking research [40,47]. According to Bhutta and Huq [48] and Pham Evans et al. [49]: the Plan step entails identifying a problem; the Do step includes carrying out the Plan; the Check step involves analysis of data; the Act step consists of activities to close the gaps and evaluations of the outcomes of these actions.
In conclusion, the literature suggests that the PDCA cycle is a methodology that should enable us to develop a performance-assessment system that satisfies a company’s goal and its desire for continuous improvement. The methodology also allows for adaptation to the organization context and its day-to-day operations, and should lead to formulating supply-chain strategies.
In addition, Kulikowski [50] has proposed using Evidence-Based Management (EBM) in the PDCA cycle, to increase the scientific robustness of the PDCA methodology. EBM was introduced into the management field to decrease biases in human decision-making, and to promote the objectivity of decisions and judgments [51]. This objectivity can be derived from four primary sources: (1) scientific research; (2) information from organizations; (3) the judgments and opinions of managers, practitioners, and specialists participating in organizations; (4) the opinions of stakeholders [52]. Kulikowski [50] proposed a six-step critical-thinking process of EBM in the PDCA cycle, and believed that this should stimulate critical thinking: ‘Ask’, in evidence-based planning, indicates that researchers must translate practical problems into answerable inquiries; in evidence-based doing, there are two steps—‘Acquire’ refers to systematically searching for and gathering evidence, and ‘Appraise’ refers to critically assessing the reliability and significance of the evidence; ‘Aggregate’, in evidence-based checking, is the process of weighing and pulling evidence together; the last two steps, in this six-step critical-thinking process of EBM, entail evidence-based acting—‘Apply’ refers to incorporating the evidence in the decision-making process, and ‘Assess’ refers to analyzing the outcome of the decision made. The integration of EBM’s six-step critical-thinking process in the PDCA cycle has not, to the best of our knowledge, been empirically validated.
The following section introduces the case used in this study, and describes how the PDCA cycle and EBM were adapted to propose a performance-measurement system. The proposed performance-measurement system was further employed to derive a performance-measurement system for the case under investigation.
3. Methodology
3.1. The Context of the Validating Case
Logistics service businesses in Thailand have been criticized for lacking competitiveness [53], as compared to most European Union member states and OECD members [54]. Due to globalization, many local logistics service businesses in Thailand must compete with multinational corporations such as Kerry, DHL, and Maersk. This creates challenges for both small-size local logistics service businesses and large local logistics service firms.
The corporation under investigation (hereafter ‘FIRM’) is a large local logistics service business operating in the context of last-mile transportation services. It offers consolidation services through its central distribution center, based in a location with connections to all regions in Thailand. FIRM has also extended its services to parcel-delivery services. FIRM offers different types of services, which include business-to-business, business-to-consumer, and consumer-to-consumer.
FIRM is a large fourth-party logistics (4PL) that offers logistics services through its subcontractors, who are operators of pick-up trucks or trucks with loads less than 1.5 tons. In its day-to-day operation, FIRM receives customer orders, and then assigns its subcontractors to perform delivery services to FIRM’s customers. The data used to validate the proposed measurement system in this study were the performances of these subcontractors. This study selected FIRM and its subcontractors for two reasons: firstly, the increase in e-commerce trade has rendered last-mile delivery critical, and the performance of such last-mile delivery parties is key to the success or failure of e-commerce businesses [55]; secondly, our research team could access FIRM and its subcontractors’ data.
3.2. Development of Performance-Measurement System
Figure 1 illustrates the PDCA methodology employed in this study, and the result of each step of PDCA.
Table 1 explains the process for developing the performance-measurement system for the LSPs under study. The concepts of the PDCA cycle and EBM served as the foundation for establishing the proposed procedural framework (i.e., the six-step critical-thinking process that was adapted for the development of a performance-measurement system). Each step of the proposed procedural framework was operationalized, using the research instruments listed in Table 1, to develop a structural framework for FIRM. The following is a summary of the research undertaken.
In the Plan step, to obtain FIRM’s needs, an interview [56] was conducted with the management team of FIRM, to determine general concerns and issues associated with the current competition in the LSP industry. The management included the managing director and two logistics managers. The interviews were carried out two times, lasted for four hours in total, and were noted in memos.
In the Do step, to acquire evidence, a systematic review of literature [57] on performance measurement for LSPs was carried out in 2019, via Scopus and ProQuest, which identified a total of 209 articles. Details of the systematic literature review can be found in Varadejsatitwong et al. [58]. Screening for the relevancy and trustworthiness of each identified article, using Ramos’s [59] criteria, resulted in 93 articles. Using Pajek Software 4.01, social network analysis (SNA) [60] was employed to link the relevant citations identified in the 93 articles, and reveal key performance dimensions. For each performance dimension, seminal papers were identified, using main-path analysis [61], and were reviewed by the research team, to extract key performance indicators (KPIs).
The systems model [62] served as the theoretical foundation for developing a preliminary-version performance of the structural-measurement framework for FIRM. The model posits that a company uses inputs to produce outputs (i.e., products and services) that satisfy customer needs [62]. The model has been implemented in numerous service industries [63,64], including transportation-service performance [65]. Similar to prior research on performance measurement for supply-chain management (e.g., [66]), the Q-sort technique [67] was employed to categorize the key performance dimensions into either the input or output side of the system model. The systems model and the key performance dimensions were introduced to 12 experts who attended an international conference, and they were then requested to do the sorting task. The agreements between the experts were evaluated, using an internal reliability assessment, and were acceptable, with a score of 70% [68]. The extracted KPIs were derived from their relevant performance dimension (i.e., significant articles in each performance dimension provided relevant KPIs); the Q-sort technique was employed to establish the relevance of the KPIs to their performance dimensions. The same group of experts was asked to sort the identified KPIs by performance dimension. A preliminary-version performance of the structural-measurement framework for FIRM was thus derived.
The management team of FIRM was interviewed, to assess the preliminary version’s applicability, and to tailor it to the contexts of FIRM and its subcontractors. Finally, the structural framework to be used by FIRM was proposed. Next, a survey [69] was administered, between July 2019 and February 2021. A questionnaire, containing key performance dimensions and KPIs pertinent to each dimension, was prepared (Appendix A). The importance of each KPI to its performance dimension was determined, using a Likert scale ranging from 1 (less important) to 5 (most important). The data were acquired from FIRM’s subcontractors, using the questionnaire and telephone interviews [56]. FIRM provided an accurate and up-to-date list of subcontractors; the authors called each subcontractor on the list, and asked them to participate in the survey. Each interview lasted around 30 min, to cover all questionnaire items. There was a total of 503 responses, of which 478 were complete and usable, which was sufficient for a test using confirmatory factor analysis (CFA) and structural equation modeling (SEM) [70].
In the Check step, the proposed structural framework was empirically validated, using the collected data. Following Srivastava and Singh’s [71] recommendation, CFA was used to validate the measurement model, and to evaluate inter-relationships between KPIs in each performance dimension. KPIs with standardized factor loadings below a score of 0.60 were excluded [70,72]. Construct reliability was tested by observing Cronbach alpha values [70]. The results of the CFA analysis were then used to develop an operational model that described the relationship between input and output performance. The operational model was validated by SEM testing, using AMOS version 23. Given the results of SEM, a structural framework for FIRM was established.
In the Act step, to conduct a model correction, the structural framework was presented at an academic conference, and subsequently presented to the management team for feedback collection. Next, the research team expanded the output of the model correction, to create supply-chain strategies. Through brainstorming [73], the authors analyzed the structural framework, to propose supply-chain strategies for FIRM and its subcontractors. The following section reports the findings of the study.
4. Findings
Table 2 reports the findings from implementing the proposed procedural framework. The information presented below corresponds to the six-step critical-thinking process.
In the Ask step, a conversation with FIRM revealed that FIRM needed a performance-measurement system for evaluating the performance of its subcontractors. Due to the limitations of the current performance-measurement system provided in the literature (Section 2), FIRM could not develop its performance-measurement system, and lacked knowledge of the framework’s components. In addition, FIRM wanted to know how to formulate supply-chain strategies, to improve its subcontractors’ performances and its overall supply chain.
In the Acquire step, social network analysis was used to process 93 articles identified from the systematic review of the literature; the social network analysis indicated five groups of articles: 21 articles related to service quality; 5 articles related to social and environmental aspects; 16 articles related to inter-organizational relationship, 4 articles related to financial aspects; and 47 articles related to efficiency and effectiveness. The results of the systematic literature review can be found in Varadejsatitwong et al. [58]). The citation networks of these articles are depicted in Appendix B, along with the titles of the five key performance dimensions: ‘Service Quality’, ‘Social and Environmental’, ‘Inter-organizational Relationship’, ‘Financial’, and ‘Efficiency and Effectiveness’. The main-path analyses found 96 KPIs collected from the seminal studies that the 93 articles cited; these KPIs included 22 indicators for the ‘Service Quality’ dimension, 27 for the ‘Social and Environmental’ dimension, 16 for the inter-organizational relationship dimension, 16 for the ‘Financial’ dimension, and 15 for the ‘Efficiency and Effectiveness’ dimension.
The Q-sort technique done by the experts revealed that the input performance was comprised of two performance dimensions: the ‘Financial’ dimension and the ‘Efficiency and Effectiveness’ dimension. The output performance included the remaining performance dimensions, namely, ‘Service Quality’, ‘Social and Environmental’, and ‘Inter-organizational Relationship’. Therefore, the preliminary-version performance of the structural-measurement framework for FIRM was developed. In addition, the Q-sort technique applied to the 96 KPIs yielded results similar to the literature.
In the Appraise step, the management team of FIRM appraised the preliminary framework, and suggested modifications. In conclusion, 51 out of 96 KPIs were chosen, as they were suitable for FIRM and its subcontractors. Two additional KPIs were added to the ‘Efficiency and Effectiveness’ dimension: the number of transportation accidents and the number of fatal transportation accidents. Accordingly, the preliminary framework comprised 53 KPIs (Appendix C), and was ready for empirical testing.
In the Check step, the Cronbach alpha values indicated that all key performance dimensions had scores greater than 0.90, and that all average variance extracted values exceeded 0.50. Each factor loading score was over 0.60. This supported the convergent and discriminant validity. According to the results of CFA, only 32 KPIs were included in the measurement model (Figure 2 and Figure 3). Figure 4 shows that the SEM results suggested that the input–output performance relationship described in the operational model was validated, based on fit indices proposed by academics [74,75,76,77]. Thus, the structural framework to be used by FIRM was established (Table 3).
In the Apply step, the academics and the management team of FIRM made comments on the structural framework. The academics agreed with the research instruments used, the analysis methods, and the conclusions of the investigation, and recommended that the findings might be applied to all subcontractors. Regarding the management team of FIRM, they concurred with the selection of 32 indicators, and stressed their inexperience with the input–output relationship and its components. In the past, FIRM evaluated subcontractors by mainly using financial, efficiency-related, and effectiveness-related indicators. These indicators were also interpreted independently: for instance, return-on-asset (ROA) was merely used to determine the strategic actions implemented to increase the efficiency of machinery use and reduce operating expenses. Therefore, the structural framework had increased their knowledge of performance dimensions and KPIs. FIRM was now aware of alternative strategies for improving financial performance, such as enhancing service quality and cultivating customer relationships. Additionally, FIRM intended to use the developed performance-measurement system to enable benchmarking of its subcontractors’ performances.
In the Assess step, the results of brainstorming suggested the supply-chain strategies for FIRM and its subcontractors (Table 4). These strategies were offered to enhance the input side of the systems model: ‘Service Quality’; ‘Social and Environmental’; and ‘Inter-organizational Relationship’. As the input performance affected the output performance, implementing the proposed strategies should affect the input side of the systems model—specifically, the ‘Financial’ dimension and the ‘Efficiency and Effectiveness’ dimension. In addition, Table 4 contains only the strategies designed to improve the most important KPIs in each dimension. As implementing the strategies was an early step for FIRM and its subcontractors, it was more realistic to focus primarily on improving the most important KPIs. Table 4 contains supply-chain and operational strategies, because the two are inter-related, and companies should consider both when establishing supply chains that benefit all parties [78]. Following this section are theoretical and managerial discussions based on the findings.
5. Discussions
This section begins with our reflections on the application of the PDCA cycle and EBM in the study, and is followed by our proposal for a performance-measurement system and its managerial implications.
5.1. Theoretical Implications
5.1.1. Reflections on the Use of the PDCA Cycle and EBM
It has been suggested that the PDCA cycle is a standard methodology for developing, monitoring, and evaluating frameworks [96]. The PDCA cycle was adapted for the context of performance-measurement systems in this study. The PDCA cycle provided a process flow (i.e., from P to D to C to A) that could be used as a checklist, to ensure that the researchers did not overlook any crucial step in developing a performance-measurement system. As the PDCA cycle is an approach to continuous improvement [41,50], FIRM could re-examine and improve the structural framework whenever the business environment changed.
EBM has enhanced the PDCA cycle by providing granularity in each step. In this study, applying EBM helped to increase the scientific evidence supporting the development of a performance-measurement system. Researchers and managers were constantly required to provide scientific evidence to back their decisions at each stage of the development process. Combining EBM with the PDCA cycle strengthened the scientific robustness of the PDCA technique, and the robustness of the proposed performance-measurement system, as suggested by Kulikowski [50].
5.1.2. Proposed Performance-Measurement System
Figure 5 depicts the proposed performance-measurement system for supply-chain strategy development. The proposed performance-measurement system incorporates both procedural and structural frameworks, as suggested by Folan and Browne [7]. The proposed performance-measurement system provides a procedure for further developing a structural framework. It is more adaptable than existing performance-measurement systems, such as BSC and the SCOR model, which have predetermined performance dimensions. By using the proposed performance-measurement system, any practitioner, including the LSPs under study, should be able to create structural frameworks that reflect their company’s daily operations and supply chain structures. Consequently, performance dimensions and KPIs in a structural framework will correspond with the organization’s objectives. The proposed performance-measurement system can also facilitate the formulation of supply-chain strategies. Such strategies are derived from the performance dimensions and KPIs unique to the organization’s supply chain structure.
The PDCA cycle and EBM integrated into the procedural framework provide a scientific methodological procedure and enhance the robustness of any developed structural framework. This implies that supply-chain strategies have been developed from scientific evidence rather than non-scientific opinions. In addition, as the PDCA cycle is a continuous improvement process, the proposed performance-measurement system permits regular revision of the structural framework. Practitioners would be recommended to update their structural frameworks if the business environment changed (e.g., as new supply-chain parties were added) or if there was a significant shift in the literature (e.g., as new knowledge emerged). As a result of these evolutions, the number of performance dimensions and KPIs could increase or decrease.
5.2. Managerial Implications
The proposed performance-measurement system would be made available to organizations seeking to develop their performance-measurement systems. This study provides a case study of LSPs, to illustrate the implementation of the proposed performance-measurement system. Companies’ supply-chain managers can use this paper as a guide, in developing a performance assessment system.
Regarding supply-chain strategies, it can be seen from the illustrated case that only some KPIs were employed to determine supply-chain strategies. Ideally, FIRM would use all identified significant KPIs to formulate supply-chain and operational strategies, and to implement improvements. From a practical standpoint, however, doing so would have consumed FIRM’s resources, and would have placed an excessive load on subcontractors. It was therefore recommended that FIRM should prioritize certain KPIs. By establishing these priorities, FIRM’s supply chain managers were capable of focusing on addressing specific supply-chain issues. Subcontractors also had a lesser load, and were more readily motivated to collaborate with FIRM to implement the strategy. At this early stage, supply chain collaboration was then formed, and provided a foundation for further development and implementation of supply-chain strategies.
6. Conclusions
This paper proposes a performance-measurement system to support the enabling of supply-chain strategies. The case of LSPs in Thailand was employed, to validate and demonstrate an application of the proposed performance-measurement system.
This paper contributes to the supply-chain literature, by proposing a performance-measurement system. In other words, it offers an alternative way of developing a structural framework, by applying the procedural framework in the proposed performance-measurement system, which allows for adaptation to the business context and environment. As the proposed procedural framework was developed from the Plan-Do-Check-Act (PDCA) cycle and the concept of evidence-based management (EBM), this increased the scientific rigor of the structural framework and the derived supply-chain strategies. Furthermore, to our knowledge, this is the first study to empirically validate the combined PDCA and EBM methodology.
The paper contributes to practice, by demonstrating how to implement the proposed performance-measurement system via a validating case. Practitioners and academics are strongly encouraged to adopt the proposed system, when establishing a framework for performance measurement, and initiating supply-chain strategies. In addition, a list of the performance dimensions and KPIs outlined in this study may serve as a reference. LSPs may also utilize the list of KPIs to establish monitoring procedures for their day-to-day operations. The firm and LSPs under study can utilize the developed performance-measurement system and strategies to improve their supply-chain performance.
This study is nonetheless subject to limitations. In this study, the application of the proposed performance-measurement system was based on a dyadic relationship (i.e., FIRM and its subcontractors). However, this should not preclude future implementations of the proposed performance-measurement system in a non-dyadic relationship and various organizations (e.g., government and not-for-profit organizations). We encourage future studies to employ the proposed performance-measurement system with other supply-chain parties or more than two parties. When there are more than two parties, complications may occur, offering a challenge for future research.
Author Contributions
Conceptualization, P.V. and R.B.; Data curation, P.V.; Formal analysis, P.V.; Methodology, P.V., R.B. and P.J.; Writing—original draft, P.V.; Writing—review & editing, R.B. and P.J. All authors have read and agreed to the published version of the manuscript.
Funding
The research was funded by the Research and Researcher for Industry (RRI); grant operated under the National Research Council of Thailand (NRCT): PHD59I0035. The discussions in the manuscript are based on the authors’ reflections, and are not an obligation for the implementations of RRI and NRCT.
Institutional Review Board Statement
Not applicable. Ethical review and approval were waived for this study, due to the study was not involving humans. According to the American Association for Public Opinion Research (2022), the data in this study were not obtained from humans, the authors did not use any intervention or interaction with humans to gather data, and the study did not contain individuals’ private data. Thus, this study did not meet the definition of ‘human subjects’.
Informed Consent Statement
Informed consent was obtained from all subjects involved in the study.
Acknowledgments
The authors gratefully acknowledge their funding from RRI and NRCT.
Conflicts of Interest
The authors declare no conflict of interest.
Appendix A
Performance Measurement Questionnaire for LSPs
1. Financial evaluation
(1) Please indicates the current assets of your firm for last year:…………………THB
(2) Please indicates the current liability of your firm for last year: ………………THB
(3) Please indicates the EBIT of your firm for last year: ………………………..THB
(4) Please indicates the total asset of your firm for last year: ……………………THB
(5) Please indicates the operating earnings of your firm for last year: ……………THB
(6) Please indicates the total revenue of your firm for last year: ………………… THB
(7) Please indicates the total debts of your firm for last year: …………………..THB
(8) Please indicates the total equity of your firm for last year: ………………….THB
2. Efficiency and effectiveness evaluation
Lead time
- What is the average lead-time from the moment your company gets the order to the delivery of your service (for export/import, please use lead-time to/from main port/airport): _______________ days
- What is your average lead-time when transporting products to your main customer (for export/import, please use lead time to/from main port/airport): _____________h/days
- What is the average number of days between customer order delivery to receipt of customer payment: ________________ days
- What was the average number of days between supplier order receipt to order payment by your firm:_________________ days
Reliability
- 5.
- What is the percentage of shipments per month that arrives on time to your main customer?: ______________%
- 6.
- What is the percentages of shipments per month that arrives in full to your main customer?: _______________%
- 7.
- What is the percentage of shipments per month that arrived wrong, arrived damaged and substitute items to your main customer?: _________________%
Transportation efficiency
- 8.
- In recent years, there is a proportion of all accidents that occur during the transportation. Accounted for _________________% of all transportation trips
- 9.
- In recent years, there is a proportion of fatal accidents that occur during the transportation. Accounted for _________________% of all transportation trips
- 10.
- On average, the usage of the space in the transport vehicles accounted for _________________% of the total space in the vehicle used for transportation
3. Service quality evaluation
| Factors | Strongly Disagree ---> Strongly Agree | ||||
| (1) Modern equipment | |||||
| (2) Physical facilities are visually appealing | |||||
| (3) Employees always look neat | |||||
| (4) Appearance of the physical facilities are consistent with the type of service industry | |||||
| (5) Accuracy of documents | |||||
| (6) Short transit time | |||||
| (7) Consistency of the service | |||||
| (8) Fast responses to customers’ requests | |||||
| (9) Provide enough information to customers | |||||
| (10) Good care of the customers | |||||
| (11) Fast and easy order and document processing | |||||
| (12) Quick respond to customer claims | |||||
| (13) Staff’s willingness to provide service | |||||
| (14) Clear policy on warranty, security | |||||
| (15) No damage goods while in transit | |||||
| (16) Staff’s knowledge and expertise | |||||
| (17) High standard service | |||||
| (18) Keep customers’ information confidentially | |||||
| (19) Care for customers’ needs and interests | |||||
| (20) Assess customers’ future needs | |||||
4. Social and environmental evaluation
| Factors | Strongly Disagree ---> Strongly Agree | ||||||
| Social responsibility | |||||||
| (1) There is a current Health and Safety Action Plan for the company | |||||||
| (2) The company keeps any statistics on lost time accidents, lost workdays resulting from incidents or total staff hours worked | |||||||
| (3) Any health and safety training have been provided for company personnel during the previous 2 years | |||||||
| (4) The company employs any personnel under the age of 18 | |||||||
| (5) There is any labor exacted under force, or not performed voluntarily by the workers | |||||||
| (6) There have been any strikes in the last 2 years | |||||||
| (7) The company pays a basic salary that is equal or higher than the legal local minimum wage | |||||||
| (8) The company provides all workers with legally required social security and benefits e.g., health insurance, pension, maternity leave, etc. | |||||||
| Environment concern | |||||||
| (9) The company have an Environmental Management System (EMS) | |||||||
| (10) The company have an environmental action plan outlining key actions and targets for the current year | |||||||
| (11) Any environmental training has been provided for company personnel during the previous three years | |||||||
5. Inter-organizational relationship evaluation
| Factors | Strongly Disagree ---> Strongly Agree | ||||
| (1) There is a cooperation within the company through joint learning processes/activities | |||||
| (2) There have incentives to be able to achieve their goals | |||||
| (3) There is the involvement of management in activities to create engagement at all levels | |||||
| (4) There is a delegation of the power to make decisions on the actions in all departments | |||||
| (5) There are opportunities to participate in the development of the company | |||||
| (6) There is a trustworthiness among partners | |||||
| (7) There is an information sharing among partners | |||||
| (8) There is knowledge and technology transfer among partners | |||||
| (9) There is a risk sharing among partners | |||||
| (10) There is a written contract agreement between partners | |||||
Appendix B
Figure A1.
The citation network entitled ‘Efficiency and Effectiveness’.
Figure A2.
The citation network entitled ‘Service Quality’.
Figure A3.
The citation network entitled ‘Inter-organizational Relationship’.
Figure A4.
The citation network entitled ’Social and Environmental’.
Figure A5.
The citation network entitled ‘Financial’.
Appendix C
Table A1.
List of input performance indicators.
| Indicator | Description | Standardized Regression Weights |
|---|---|---|
| SQ1 | Modern equipment | 0.535 |
| SQ2 | Physical facilities are visually appealing | 0.518 |
| SQ3 | Employees always look neat | 0.497 |
| SQ4 | Appearance of the physical facilities are consistent with the type of service industry | 0.526 |
| SQ5 | Accuracy of documents | 0.431 |
| SQ6 | Short transit time | 0.558 |
| SQ7 | Consistency of the service | 0.701 |
| SQ8 | Fast responses to customers’ requests | 0.462 |
| SQ9 | Provide enough information to customers | 0.789 |
| SQ10 | Good care of the customers | 0.558 |
| SQ11 | Fast and easy order and document processing | 0.423 |
| SQ12 | Quick respond to customer claims | 0.707 |
| SQ13 | Staff’s willingness to provide service | 0.389 |
| SQ14 | Clear policy on warranty, security | 0.748 |
| SQ15 | No damage goods while in transit | 0.542 |
| SQ16 | Staff’s knowledge and expertise | 0.743 |
| SQ17 | High standard service | 0.414 |
| SQ18 | Keep customer’s information confidentially | 0.579 |
| SQ19 | Care for customer’s need and interest | 0.742 |
| SQ20 | Assess customer’s future need | 0.394 |
| SE1 | There is a current health and safety action plan for the company | 0.556 |
| SE2 | The company keeps any statistics on lost time accidents, lost workdays resulting from incidents or total staff hours worked | 0.469 |
| SE3 | Any health and safety training have been provided for company personnel during the previous 2 years | 0.471 |
| SE4 | The company employs any personnel under the age of 18 | 0.568 |
| SE5 | There is any labor exacted under force, or not performed voluntarily by the workers | 0.511 |
| SE6 | There have been any strikes in the last 2 years | 0.802 |
| SE7 | The company pays a basic salary that is equal or higher than the legal local minimum wage | 0.717 |
| SE8 | The company provides all workers with legally required social security and benefits e.g., health insurance, pension, maternity leave, etc. | 0.752 |
| SE9 | The company have an Environmental Management System (EMS) | 0.783 |
| SE10 | The company have an environmental action plan outlining key actions and targets for the current year | 0.498 |
| SE11 | Any environmental training has been provided for company personnel during the previous three years | 0.734 |
| IR1 | There is a cooperation within the organization through joint learning processes/activities | 0.703 |
| IR2 | There is incentives for personnel to be able to achieve their goals | 0.464 |
| IR3 | Management level is involved in activities to create engagement at all levels | 0.714 |
| IR4 | There is a delegation of the power to make decisions on the actions to the personnel of various parties | 0.706 |
| IR5 | There are opportunities for personnel to participate in the development of the organization | 0.741 |
| IR6 | Trustworthiness among partners | 0.746 |
| IR7 | There is an exchange of information with each other such as co-planning work and joint decisions | 0.778 |
| IR8 | Knowledge and technology transfer | 0.751 |
| IR9 | Risk sharing | 0.739 |
| IR10 | There is a written contract agreement | 0.775 |
Table A2.
List of output performance indicators.
| Indicator | Description | Standardized Regression Weights |
|---|---|---|
| FN1 | Current Ratio (times) | 0.805 |
| FN2 | Return on Asset (%) | 0.815 |
| FN3 | Operating profit margin (%) | 0.818 |
| FN4 | Debt-to-equity ratio (times) | 0.828 |
| EE1 | Order cycle time (days) | 0.744 |
| EE2 | Transportation cycle time (days) | 0.749 |
| EE3 | Cash conversion cycle (days) | 0.763 |
| EE4 | Delivery in-full and on-time (%) | 0.777 |
| EE5 | Return rate (%) | 0.743 |
| EE6 | Number of accidents (%) | 0.689 |
| EE7 | Fatal accident (%) | 0.683 |
| EE8 | Truck utilization (%) | 0.674 |
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Figure 1.
Research methodology.
Figure 2.
Input performance. Adapted from Varadejsatitwong et al. [58].
Figure 2.
Input performance. Adapted from Varadejsatitwong et al. [58].
Figure 3.
Output performance. Adapted from Varadejsatitwong et al. [58].
Figure 3.
Output performance. Adapted from Varadejsatitwong et al. [58].
Figure 4.
Results of structural equation modeling. Adapted from Varadejsatitwong et al. [58].
Figure 4.
Results of structural equation modeling. Adapted from Varadejsatitwong et al. [58].
Figure 5.
Proposed Performance-Measurement System.
Table 1.
Process for developing the performance-measurement system for the LSPs under study.
| PDCA | EBM | Proposed Procedural Framework | Research Instruments Used in the Study |
|---|---|---|---|
| Plan: identifying a problem. | Ask: translate practical problems into answerable inquiries. | Obtain requirements from FIRM. | Interview with the management team of FIRM. |
| Do: carrying out the Plan. | Acquire: systematically search for and retrieve the evidence. | Search and review relevant performance-measurement literature. | Conduct a systematic review of literature on performance-measurement for LSPs. |
| Identify performance dimensions and key performance indicators (KPIs). | Conduct a social network analysis, to reveal key performance dimensions and a main-path analysis to identify relevant KPIs. | ||
| Develop preliminary-version performance of the structural-measurement framework for FIRM and its subcontractors under study. | Choose the system model as a theoretical foundation for a preliminary framework, using the Q-sort technique to sort the key performance dimensions and KPIs into a preliminary framework. | ||
| Appraise: critically assess the reliability and significance of the evidence. | Validate the preliminary framework with FIRM under study. | Interview and discuss with FIRM, to refine the preliminary framework to fit with the FIRM context. | |
| Carry out data collection. | Collect data from FIRM’s subcontractors, using a questionnaire survey via telephone interviews. | ||
| Check: analysis of data. | Aggregate: weigh and pull evidence together. | Validate the measurement model and the structural model. | Analyze the obtained data, using confirmatory factor analysis and structural equation modeling. |
| Act: activities to close the gaps and evaluations of the outcomes of these actions. | Apply: incorporate the evidence in the decision-making process. | Conduct model correction. | Present findings to academic conference, and to the management team of FIRM. |
| Assess: analyze the outcome of the decision made. | Analyze the results of the developed structural framework to propose supply-chain strategies. | Brainstorm between the authors, to derive supply-chain strategies for FIRM. |
Table 2.
Findings from the case of LSPs under study.
| PDCA | EBM | Proposed Procedural Framework | Evidence-Based Findings |
|---|---|---|---|
| Plan | Ask | Obtain requirements from FIRM. |
|
| Do | Acquire | Search and review relevant performance-measurement literature. |
|
| Identify performance dimensions and key performance indicators (KPIs). |
| ||
| Develop preliminary-version performance of the structural-measurement framework for FIRM and its subcontractors under study. |
| ||
| Appraise | Validate the preliminary framework with FIRM under study. |
| |
| Carry out data collection. |
| ||
| Check | Aggregate | Validate the measurement model and the structural model. |
|
| Act | Apply | Conduct model correction. |
|
| Assess | Analyze the results of the developed structural framework to propose supply-chain strategies |
|
Table 3.
A structural framework for FIRM.
| Dimension | Input Performance | Output Performance | |||
|---|---|---|---|---|---|
| Service Quality | Social and Environmental | Inter-Organizational Relationship | Financial | Efficiency and Effectiveness | |
| KPI |
|
|
|
|
|
Table 4.
Proposed strategies for the LSPs under study.
| Dimension | Indicator | Examples of Supply-Chain Strategies | Examples of Operations Strategies |
|---|---|---|---|
| ‘Service Quality’ | Provide enough information to FIRM (SQ9). | Improve the effectiveness of the information-sharing system between FIRM and subcontractors, in terms of day-to-day operational information. |
|
| ‘Social and Environmental’ | Encounter any employee strike in the past two years (SE6). | Increase collaboration between FIRM and subcontractors, to develop collaborative workforce management. |
|
| Adopt an Environmental Management System (EMS) (SE9). | Promote sustainable resources management between FIRM and subcontractors. |
| |
| ‘Inter-organizational Relationship’ | Exchange information with each other, such as co-planning work, and joint decisions (IR7). | Improve the effectiveness of the information-sharing system between FIRM and subcontractors, in terms of joint decision making, planning, and research and development programs. |
|
| Implement knowledge and technology transfer (IR8). | Initiate knowledge- and technology- sharing orientation between FIRM and subcontractors. | ||
| Have a written contract agreement (IR10). | Adopt efficient legal enforcing contracts and agreements. |
|
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Varadejsatitwong, P.; Banomyong, R.; Julagasigorn, P. A Proposed Performance-Measurement System for Enabling Supply-Chain Strategies. Sustainability 2022, 14, 11797. https://doi.org/10.3390/su141911797
AMA Style
Varadejsatitwong P, Banomyong R, Julagasigorn P. A Proposed Performance-Measurement System for Enabling Supply-Chain Strategies. Sustainability. 2022; 14(19):11797. https://doi.org/10.3390/su141911797
Chicago/Turabian StyleVaradejsatitwong, Paitoon, Ruth Banomyong, and Puthipong Julagasigorn. 2022. "A Proposed Performance-Measurement System for Enabling Supply-Chain Strategies" Sustainability 14, no. 19: 11797. https://doi.org/10.3390/su141911797
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