The Balanced Scorecard and SCOR Model for measuring performance

Traditional business measurements such as earnings per share or return on investments are important to the financial department but can be confusing as a measurement for operational activities. Managers and academics have tried to cure the shortfalls of pure financial measurements by incorporating other metrics in with financial metrics. Kaplan and Norton in The Balanced Scorecard, Measures that Drive Performance (1992) undertook a yearlong project with twelve leading edge companies and came up with the Balanced Scorecard concept. The balance scorecard combines financial with operational measurements to present a truer view of the organization to management. The balanced scorecard lets managers look at the organization from four dissimilar viewpoints, customer, financial, internal business, and innovation and learning. Within those four viewpoints, the balance scorecard has six measurements each or twenty-four total metrics. These metrics cover all-important aspects of the business. Management focuses effort equally in those important areas and looks at seemingly different areas of the supply chain in one report. In many organizations, there is a large gap between the mission statement and supply chain and operational measurements. The balanced scorecard concept help bridge this gap.

The Supply Chain Council (SCC) developed the Supply Chain Operations (SCOR) model and based it on a process interpretation of the supply chain using four separate management processes, Plan, Source, Make, and Deliver. This model served to increase supply chain performance. The model incorporates the theories of benchmarking, business process re-engineering (BPR), and process measurements into a cross functional structure. The SCOR model divides the top four plan, source, make, and deliver levels into smaller and more manageable components by dividing each into smaller measurable processes, beginning at a configuration level, then at a process component level. Lastly, at the fourth and last level and outside the range of the SCOR model, organizations define the local activities individually. Managers can use many other strategic tools such as lean concepts and others. Depending on what is important to them, managers can pick from a list of tools and use them to develop their organization. The balanced scorecard and SCOR models are just two of the many tools available.