3 CH3 Measures of Supply Chain Performance - Measures of...

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1Measures of Supply ChainPerformance1
Financial Measures Of PerformanceØFrom a shareholder perspec/ve, return on equity(ROE) is the main summary measure of a firm’sperformanceROE=Net IncomeAverage Shareholder Equity
Financial Measures Of PerformanceØReturn on assets (ROA) measures the return earnedon each dollar invested by the firm in assetsAssetsTotalAverageIncomeNet =ROA
Return on Assets (ROA) Net income/Total Assets Increase ROA with higher net income and fewer total assets Total assets Achieve the same or better performance with fewer assets Working capital Money to finance ongoing operations. Reduce working capital by reducing inventory investment, lead times, and backlogs Fixed assets Reduce the number of warehouses through improved supply chain design Net income Improve profits with greater revenue and lower costs Measures of Supply Chain PerformanceTotal revenue Increase sales through better customer service: on time delivery Cost of goods sold Reduce costs of transportation and purchased materials Operating expenses Selling, fixed expenses, depreciation. Reduce fixed expenses by reducing overhead associated with supply chain operations Net cash flows Improve positive cash flows by reducing lead times and backlogs : Cash to cash Inventory Increase inventory turnover 4

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