Discuss how Performance Measurement can affect Supply Chain ...

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Discuss how Performance Measurement can affect Supply Chain Management.

Question 2

Profit maximization occurs when marginal revenue equals
 a. marginal profit.
  b. marginal sale.
  c. marginal cost.
  d. cost-plus pricing.

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Answer to Question 1

Most organizations have measures of performance or metrics in place to analyze and evaluate their efficiency and progress over different time periods. Sometimes, such measures are used for setting baseline performance objectives or expected outcomes, for instance, orders filled and shipped per day. Measurement is important, and at this juncture, it is important to recognize that lower-level metrics in an organization must connect directly to the high-level performance measures of the organization and the supply chain, which are usually net profit, return on investment, or assets and cash flow. In some instances, metrics are set that appear logical for the subunit of the organization but are suboptimal for the overall organization or supply chain. For example, the warehouse manager who is measured by the cost per cubic foot of units stored will be motivated to fill the warehouse to the ceiling.

Answer to Question 2

c