Balanced Scorecards can play a role in supply chain recovery strategies

Supply chains have faced huge impacts from the pandemic effects and now are going to be required to reboot their strategies. The new strategy rollout is crucial to reestablish supply chains’ performance from the COVID-19 pandemic aftermath, requiring a deep understand of the environment and clear strategic objectives establishment across the different perspectives which are needed to be taken into consideration in the supply chain’s scope.

In order to effectively support this process, Balanced Scorecard – BSC may be considered as one of the most successful approaches to the strategy deployment and measurement by its clear rationale regarding the link between the strategic objectives in a bottom-up structure. Since 1990’s when Kaplan & Norton have proposed the BSC, it has been largely and successfully used in different types of business, not only from the single organizational perspective but also to the business network scope.

The BSC considers the four main perspectives: Learning & Growth, Business Process, Customers and Financial. These four main perspectives may be also considered for the supply chain scope, with some due adaptations. For each perspective of the BSC, strategic objectives linked to the supply chain’s recovery scope must be set up. Moreover, these strategic objectives must be linked one each other in a rationale framework.

For this, a strategic map has to be elaborated. The strategic map links each strategic objective in a clear cause-and-effect rationale, following a bottom-up perspective. The strategic objectives of the BSC are the basis for the actions which will drive the successful supply chains recovery. Those actions have to be measured through a performance measurement system seeking to verify their effectiveness.

The Learning & Growth perspective, encompasses the main capabilities which will support the second perspective, the Supply Chain’s Processes. The idea is to set up strategic objectives that will ensure the continuity and excellence of the supply chain processes. In the context of the pandemic effects, the supply chain’s leadership must be able to understand which are the main capabilities in terms of people, technology, compliance, infrastructure and innovation (i.e., the requirements for the excellence of the supply chain’s processes), with the aim to achieve the supply chain recovery by the performance excellence of its processes.

Once the strategic objectives of the Learning & Growth perspective are defined, supply chain’s leadership has to devote time to understand what has to be changed in terms of the performance of supply chain’s processes (e.g. efficiency, flexibility, reliability, responsiveness) in order to achieve a fully recovery. This will be the basis to establish the strategic objectives for this perspective. For this perspective, the SCOR – Supply Chain Operations Reference framework may be used by supply chain’s leadership to think about recovery requirement. That means the strategic objectives needs to be defined to the process such as supply chain plan, source, make, delivery and return. Supply chains are designed to deliver value to the customers and these processes must be designed by this orientation.

Actually, in a BSC perspective, supply chain’s processes are the basis to sustain and enhance customers of the business. Then, more than just look at the supply chain’s processes themselves, the strategists of supply chains must be able to identify the requirements from customers in the pandemic aftermath, seeking to structure strategic objectives and actions for the processes that will support those requirements.

Regarding the Customer’s perspective of the BSC structure, the supply chain’s leadership has to closely work with marketing department. Customers’ expectations may change due to the post-pandemic environment. Supply chains must be able to meet these requirements. Moreover, post-pandemic may bring huge opportunities in terms of businesses and new customers.

Supply chains play a crucial role on generating competitive advantages in order to increase market share as well as create new markets from this new environment. Therefore, customers’ perspective has to consider those aspects of new requirement and opportunities for the strategic objective’s establishment.

Financial perspective is on the apex of the BSC structure, as shown in the Figure below, although it only may be effectively ensured from the three ones below. More than increased revenues from the customers to the organizational outcomes, supply chains can also improve the value-added margin by the increase of the gap between revenues and supply chain costs.

Figure 1.

Figure 1- BSC framework for the Supply Chain Strategy Recovery

It is certainly the case that the pandemic has generated many operational costs as well as inflation issues to the resources involved in the supply chain operations. The new reality, requires that the leadership defines feasible financial tied goals tied to the shareholders’ expectations, considering how capable supply chains are in order to achieve them. Therefore, the holistic view of the BSC framework is appropriate to the support of leadership, on establishing a transparent path of the supply chain actions for the upcoming recovery times.

Much more than just putting out fires on the pitfalls from the pandemic’s effects, the current times strongly demands from supply chain’s leadership to think strategically by means of effective management methods. BSC may be an option to allow more transparency and assertiveness in the strategy deployment process in supply chains for the upcoming and hopeful times.

Guilherme F. Frederico is a professor of Operations, Supply Chain and Project Management at Federal University of Paraná – UFPR – School of Management, Curitiba, Brazil. He can be reached at [email protected].

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