Supply Chain Analysis: Utility, Performance Metrics, and Impact

This report provides an overview of supply chain management, focusing on the concept of utility and performance metrics. It defines and explains different types of utility, including place, time, and quantity utility, emphasizing their importance in making products readily available to customers. The report also explores various metrics for measuring supply chain performance, such as on-time delivery, manufacturing time cycle, supplier quality, and overall equipment efficiency (OEE). It highlights the significance of these metrics in identifying weaknesses, improving performance, and enhancing customer satisfaction and retention. The report concludes by emphasizing the importance of considering these metrics holistically, rather than solely focusing on the shop floor, to achieve overall supply chain efficiency and profitability.

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Introduction
Utility can be defined the satisfaction one receives from using a good or a service. Utility can be
difficult to measure but economists can use indirect means to quantify utility like, a customer's
economic choices. There are four types of utility and each require different types of information to
ensure smooth operations. The following are three types of utility.
Place utility is simply making your products readily and conveniently available to your potential clients
(Scerbinski 2009, p. 295). In business marketing, a place can mean the convenience of your distribution
or sales products. Logistics generates place utility basically by transportation and creates new market
boundaries that increases the economic value of the product (Christopher 2016). For example, if Mac
computers are transported from their manufacturing plant to the location of the demand. The
information required is attained from excessive up-to-date market research to determine the demand for
the product before moving it (Choudhary, Nayak, Malik, & Singh 2018, p. 45). The market boundary is
expanded by place utility. This ensures competition, which leads to lower prices and increased product
availability in the market.
On time utility, Products should not only be available where they are required but also when they are
required. This is time utility (Scerbinski 2009, p. 295). Logistics create time utility by proper inventory
management, good placement of those products and of course, transportation (Christopher 2016). There
is an immense economic advantage added to the product if it is available at a specific time as demanded
by the client. The information required is a detailed data of all the products that are frequently
demanded and their location. For example, highly advertised products are made available to customers
at the exact time it was rescheduled to be availed. This is usually done by keeping a strict inventory of
the products and keeping them close to the store.
Quantity utility is defined as the sum of products consumed by a customer to satisfy their needs. The

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total utility usually increases when the number of goods consumed increases. Logistics increases
quantity utility by inventory management, storage and transportation. A business keeps accounts of
their products that are most consumed, through inventory control, the business can then ensure that
more of that product is available in time to satisfy that demand. To ensure the economic stability of the
product, a business uses form utility to make an improvement to the product to keep the customers
interested (Choudhary, Nayak, Malik, & Singh 2018, p. 45).
Metrics for Measuring Supply Chain Performance.
There are several ways to measure the supply chain performance. Measuring this will assists in
identifying weak performance, determining performance, increasing employee motivation (Laihonen,
& Pekkola 2016, p. 5607). Below are just a few metrics for measurement.
On-time delivery commit- This measures the number of times the company has managed to deliver the
right products to their customer in the time committed to the clients (Tortorella, Miorando & Marodin
2017, p. 98). Same is done on the supply side by measuring the percentages of goods received in time.
Once this is done, one can then look at the data to try to deduce any sections that waste time. Another is
manufacturing time cycle, which is the amount of time taken to produce a finished product from the
time the production order is released.
Next, supplier quality- As extensively explained by Sukwadi, Wee, & Yang (2013, p.297), when raw
materials are tracked down from all over the world, it sometimes takes time for those raw materials
reach the manufacturing plant. Any sort of mishap will lead to a reduced supplier quality. By looking at
scrap, rework and inventory costs, one can easily calculate the cost of poor supply quality.
Finally, overall equipment efficiency (OEE)- In a manufacturing plant, most obvious causes of
operational inefficiency are downtime losses, speed losses, reduced yields and defects (Akyuz & Erkan

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2010). In that scenario, OEE is the measure of the operational efficiency with the consideration of those
factors. OEE, therefore, is the measure of how good a company is at turning inputs into fully produced
high-quality products (Tortorella, Miorando & Marodin 2017, p. 98). Other means of measuring the
performance of a supply chain are inventory measurements and working capital within the supply
chain. Eckstein, Goellner, Blome, & Henke (2015, p. 3029) lists these and others.
Conclusion
In conclusion, all these metrics should be taken into account instead of just focusing on the shop floor.
These metrics, if considered, have a great impact, especially on customer satisfaction and retention. It
is important to understand the relationship between customer retention and supply, quality and profit. It
is not just about creating or installing a complex system, sometimes one can just determine their
efficiency by implementing the following simple procedures.

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List of references
Scerbinski, JS 2009, 'Time And Place Utility And The Requirement For Spontaneity', Quarterly Review
Of Distance Education, 10, 3, pp. 295-298, Academic Search Premier, EBSCOhost, viewed 7 May
2018
Tortorella, G, Miorando, R, & Marodin, G 2017, 'Lean supply chain management: Empirical research
on practices, contexts and performance', International Journal Of Production Economics, 193, pp. 98-
112, Business Source Premier, EBSCOhost, viewed 7 May 2018.
Eckstein, D, Goellner, M, Blome, C, & Henke, M 2015, 'The performance impact of supply chain
agility and supply chain adaptability: the moderating effect of product complexity', International
Journal Of Production Research, 53, 10, pp. 3028-3046, Business Source Premier, EBSCOhost,
viewed 7 May 2018.
Sukwadi, R, Wee, H, & Yang, C 2013, 'Supply Chain Performance Based on the Lean-Agile Operations
and Supplier-Firm Partnership: An Empirical Study on the Garment Industry in Indonesia', Journal Of
Small Business Management, 51, 2, pp. 297-311, Business Source Premier, EBSCOhost, viewed 7 May
2018.
Christopher, M 2016, Logistics & Supply Chain Management, New York: FT Publishing International,
eBook Collection (EBSCOhost), EBSCOhost, viewed 7 May 2018.
Choudhary, S, Nayak, S, Malik, A, & Singh, D 2018, 'Important Issues in Supply Chain Management
and Development', International Journal Of Recent Research Aspects, 5, 1, pp. 45-54, Academic
Search Premier, EBSCOhost, viewed 7 May 2018.
Arzu Akyuz, G. A., and T. E. Erman Erkan 2010, 'Supply Chain Performance Measurement: A
Literature Review', International Journal of Production Research, 48, 17, pp. 5137–5155, viewed 7
May 2018.

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Laihonen, H, & Pekkola, S 2016, 'Impacts of using a performance measurement system in supply chain
management: a case study', International Journal Of Production Research, 54, 18, pp. 5607-5617,
Business Source Premier, EBSCOhost, viewed 7 May 2018.