www.emeraldinsight.com/0263-2772.htm
PM in the food
Performance measurement in the supply chain
food supply chain: a balanced
scorecard approach
249
Barbara Bigliardi and Eleonora Bottani
Department of Industrial Engineering University of Parma, Parma, Italy
Abstract
Purpose The primary objective of this paper is to develop a balanced scorecard (BSC) model that is
designed and delimited for performance measurement in the food supply chain.
Design/methodology/approach The research methodology is a combination of literature
analysis, Delphi technique and case study-based research. Starting from the literature concerning
performance measurement and metrics, the food industry and the BSC model, the relevant financial
and non-financial indicators, suitable to be used for companies belonging to the food industry, were
first identified. Indicators were submitted to a panel of experts, which operated following the Delphi
technique, to gather possible suggestions or amendments. In its final form, the resulting BSC model
was tested on two companies operating in the food industry, for a final validation.
Findings Results of the case studies show that the companies examined have a similar view for
three of the four perspectives of the BSC, which can be thus considered as validated. Conversely, some
diverging results were observed concerning the learning and growth perspective.
Research limitations/implications By focusing on the specific context of the food supply chain,
this study completes previous works, which proposed a generic BSC model for supply chain
management. On the other hand, the fact that a specific industry field was examined could be seen as a
limitation of the work as the results presented are not suitable to be generalized or extended to other
contexts, although some extrapolations can be made.
Originality/value The paper provides a structured performance measurement system tailored for
the food supply chain. The BSC model developed could serve as a reference for the food industry, to
establish applicable performance appraisal indicators, and it is believed that both researchers and
practitioners would benefit from the tool developed.
Keywords Balanced scorecard, Supply chain management, Performance management, Food industry
Paper type Research paper
1. Introduction
Supply chain management (SCM) describes the discipline of optimising the delivery of
goods, services and related information from supplier to customer. It is concerned with
the effectiveness of dealing with final customers demand by the parties engaged in the
provision of the product as a whole (Cooper et al., 1997).
A supply chain consists of different levels, namely supplier, manufacturer,
distributor, and consumer, and it is a network of companies which influence each other
and affect one anothers performance. Hence, an important issue in SCM is the
development of integrated performance measurement systems (PMS). PMS serve
different functions in supply chain and operations management. These are formal
devices to control, formulate and communicate the companys strategy, and, as such, Facilities
Vol. 28 No. 5/6, 2010
they primarily serve higher-level managers. But PMS can also support operational pp. 249-260
q Emerald Group Publishing Limited
managers, to motivate and enable them to improve operations. A performance 0263-2772
measurement framework assists in the process of performance measures building, by DOI 10.1108/02632771011031493
F clarifying measurement boundaries, specifying performance measurement dimensions
or views and may also provide initial intuitions into relationships among the
28,5/6 dimensions (Rouse and Putterill, 2003; Chan, 2003).
On the basis of the above considerations, this study aims at developing a PMS,
based on the well-known balanced scorecard (BSC) framework, suitable to be
implemented in the food supply chain. The reason for choosing this context is that the
250 supply chain of food products has received a great deal of attention in the last decade,
due to issues related to public health. It has become apparent that in the near future the
design and operation of food supply chains will be subject to more stringent
regulations and closer monitoring, in particular those for products destined for human
consumption. This implies that the traditional supply chain practices and the
corresponding performance measurement should be subject to revision and change
(Ahumada and Villalobos, 2009). As a further reason, the local industry of Parma
region (where our study was based) mainly encompasses companies directly operating
in the food industry, or related to this field, and offering a wide variety of products both
in the areas of first- and second-stage processing and all featuring a noteworthy
specialization in production techniques and high-quality finished products. Not by
accident the province of Parma is known as Italys Food Valley. As an indication of
the importance, it should be pointed out that the food industry represents the 35 per
cent of the total of industrial sectors, reaching a turnover of e6,500 million out of a total
of e19,200 million (Unione Parmense degli Industriali, 2007). Taken overall, food
manufacturing also has a significant impact on the overall Italian production. The
Parma Alimentare consortium is active in promoting this sector both within Italy
and abroad, because of the significant number of well-known typical and
designation of origin products. This sector has grown in recent years thanks to
major investments in research and new technologies and careful attention to safety and
quality, two fundamental aspects to food production in the province. Pertinent to this
context is the establishment in Parma of the European Food Safety Authority, the
major European agency that deals with identifying and evaluating potential risks
within the food chain, from production to sale to the consumer.
2. Literature analysis
Over the years, many methods and techniques have been suggested to evaluate the
performance of a firm in general; well-known financial measures such as return on
investment (ROI), internal rate of return, net present value and payback period have
been the most studied in literature. At present, research in the field of supply chain
performance measurement is receiving increasing attention by the scientific
community, due to the need of developing integrated PMS, taking into account all
the partners (i.e. the immediate supply network as well as the total supply network)
with which a company interacts. Comprehensive studies describing both quantitative
and qualitative performance metrics for SCM are provided by Chan (2003),
Gunasekaran et al. (2004) and Bhagwat and Sharma (2007). Based on those recent
works, a summary of the performance indicators suitable to be used for SCM is
presented in Table I.
Unfortunately, several authors agree that currently available PMSs suffer from two
main limitations. First, often performance measurement follows financial accounting
principles without any forward-looking perspective and measurement is restricted to
directly measurable or accountable indicators (Horvath, 1996). Such systems are not fully
PM in the food
Supply chain process Performance measures
supply chain
Plan Order entry method (Gunasekaran et al., 2004)
Order lead-time (Christopher, 1992)
Customer order path
Source Supplier selection
Manufacturing
Buyer-supplier relationship
Product cost, quality, speed of delivery, delivery reliability, flexibility
251
(Mapes et al., 1997; Slack et al., 1995)
Range of product and services (Mapes et al., 1997);
Capacity utilization (Slack et al., 1995)
Effectiveness of scheduling techniques (Little et al., 1995
Delivery Delivery performance (Stewart, 1995)
Number of faultless notes invoiced; flexibility of delivery systems to
meet particular customer needs (Novich, 1990)
Total distribution cost (Thomas and Griffin, 1996)
Customer Product development cycle time; machine/toolset up time; economies
of scope (Christopher, 1992)
Number of inventory turns; customer query time
Post transaction measures of customer service
Overall chain Total supply chain costs (Cavinato, 1992)
Total cash flow time
ROI Table I.
Total cost of inventory (Stewart, 1995; Christopher, 1992; Slack et al., A list of performance
1995; Lee and Billington, 1992; Levy, 1997) measurement for supply
Information processing cost (Stewart, 1995) chain management
253
Figure 1.
The balanced scorecard
model
supply chains was performed. The aim of the literature review was to analyse the
currently available PMS for supply chains, as well as to punctually examine specific
issues of the food supply chains, to identify key performance indicators (KPIs) to be
used in the industry investigated. In particular, the four dimensions of the BSC
proposed by Bhagwat and Sharma (2007) has been the starting point of our study.
As a result of this step, a set of KPIs suitable to be adopted in the context of food
companies emerged. Such indicators were used as a guideline during the second phase
of the research, where they were examined and validated by an appropriate panel of
experts, which operated according to the Delphi technique (Linstone and Turoff, 1975).
The Delphi technique is a systematic, interactive forecasting method, which allows
obtaining forecasts from an independent panel of experts, over two or more rounds.
Normally, an administrator provides an anonymous summary of the experts forecasts
and their reasons for them after each round. The process stops when experts forecasts
change slightly between rounds, and final round forecasts are combined by averaging
(Rowe and Wright, 1999). We adopted the Delphi technique with the aim of obtaining a
high degree of consensus on the KPIs to be included in our model.
An appropriate multidisciplinary panel of about 20 experts was set up to this
purpose. The panel encompassed few academics from the Industrial Engineering
Department of the University of Parma, chosen among people whose research studies
were mainly focused on SCM, performance measurement and food industry issues.
F Moreover, 15 managers from a major Italian company operating in the food industry
were included in the panel. Panel members were selected among people reporting
28,5/6 directly to the firms top management and operating in SCM, logistics, procurement,
production, information technology, planning and control and finance.
KPIs resulting from the literature were structured into an appropriate
questionnaire, submitted to the panel members. Then, a two-round Delphi was
254 carried out to refine the proposed indicators. In the first round, the panel members were
asked to express their agreement with regard to the suitability of each KPI to be
adopted in the food industry. Moreover, panellists could indicate the need for further
specifications of KPIs (if required), as well as the main strengths and weaknesses of
each indicator identified. The results of the first round of Delphi led to several
modifications to the list of KPIs originally proposed. Hence, a second questionnaire
was organized, incorporating additional indicators proposed by the panellists and
removing non-relevant ones, and submitted to the panel members during the second
round of Delphi. Again, panellists were asked to refine each indicator emerged in the
first round, as well as to identify additional indicators suitable to be implemented in the
food industry. A general agreement was reached at the end of the second round. Then,
the panel members were involved in a final roundtable discussion, to confirm the
agreements on the results of the second questionnaire.
The final result of the Delphi technique is a BSC model for performance
measurement in the food supply chain. During the third step of the research, the BSC
model was tested on two companies, operating in the food industry, along with as
many exploratory case studies (Yin, 1984). The case studies had the primary aim of
validating the model developed, by providing empirical evidence of theoretical
assumptions emerged during the Delphi rounds (Creswell, 1994). They were carried
out with a series of semi-structured interviews, with the top management operating in
the in SCM business functions of each company, over a three-week period during April
and June 2009. Interviews lasted between one and two hours, and were taped and
transcribed. A primary research question was formulated to explore the structure and
characteristics of the company, in terms of the way each company measures its
performance (i.e. whether the company adopted a specific performance measurement
system or not). Then, we proposed the BSC model obtained from the previous steps, in
order to validate its contents by means of a ranking method. Specifically, we asked the
companys managers to rate the indicators proposed in the model on a six-point scale
(where 1 not important at all and 6 extremely important), as well as to
prioritise each perspective by assigning a score ranging from 0 to 10.
5. Conclusions
The main result of the research is the development of a set of KPIs embodied into a
BSC-based tool for performance measurement in the context of a food supply chain.
The model developed has been validated by both a panel of experts operating in the
food industry, and by means of two case studies, referring to as many food companies.
As a result of the case studies, it emerged that the two companies interviewed
perceived the BSC as composed by the four perspectives, those suggested by Kaplan
and Norton, with a number of measures that vary from 2 to 10. Moreover, outcomes of
the case studies provide validation of most of the KPIs proposed for the BSC model,
which can be thus considered as suitable for use as a tool for performance
measurement in the food supply chain. The learning and growth perspective
represents an exception in this regard, as some diverging results were observed
between the two companies. This is a current limitation of the study, and suggests the
need of better investigating this perspective in future research activities.
We recognize that ranking is not new in the food industry: many retailers, for
example, use this approach in their assurance schemes, such as Leaf UK that use a
score sheet in their audit for Leaf Marque, or the Global Good Agricultural Practice
(formally known as EurepGAP) that utilises a scoring method as compliance criteria
for farm assurance (Globalgap, 2009; Leaf UK, 2009). An additional limitation refers to
the research methodology adopted, which grounds on a limited sample of case studies.
Yin (1984) justifies the use of a single case study where a rare or unique event is
explored, to probe the how and why questions in greater detail. Furthermore, the
application of data from just one particular industry clearly reduces the number of
PM in the food
supply chain
257
Figure 2.
The balanced scorecard
model for Company 1
F
28,5/6
258
Figure 3.
The balanced scorecard
model for Company 2
observations, but has the advantage that firms are relatively homogeneous (Kraft, PM in the food
1990).
Finally, the case studies were exploited in this paper to validate the BSC model
supply chain
developed, but not to investigate its implementation in real cases. A further task is thus
to apply the resulting model on a wide sample of companies, to test its suitability of
adoption for food companies.
259
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Corresponding author
Eleonora Bottani can be contacted at: eleonora.bottani@unipr.it