An example of an Internal Supply Chain Balanced Scorecard for a multi-enterprise beef production company 

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... such, the KPIs and metrics in this case needed to be developed within the context of how the activities of one component of the internal supply chain impact on other components. Implicit in this process of creating KPIs for self regenerating assets based on livestock, are the issues of animal welfare and sustainable land management which set limits on the scale of production and thus possible revenues (Slaughter, 2002). As such KPIs must be underpinned by flexible budgeting to allow for production and seasonal variation and land capability. The KPIs chosen include breeding performance, cattle transfers in and out, cattle purchases, cattle sales and production performance as well as corporate performance. Figure 5 sets out the proposed set of KPIs and the underlying metrics for the internal supply chain of ACGC, and shows how the proposed KPIs “cascade” across the internal supply chain. For example, breeding performance impacts on transfers to backgrounding in terms of numbers of animals. This in turn impacts on the number of purchases that need to be made to allow backgrounders to operate at optimal capacity given seasonal conditions. Transfers to finishers are then dependant on the numbers of stock backgrounded and as such impact on the numbers of cattle the finisher needs to purchase so that they in turn can operate at an optimal capacity. If the reader follows the cascading KPIs, as depicted by the arrows shown in Figure 5, it can be seen that by providing quantifiable, balanced measures that allow property managers to put in context the impact of their decisions on overall corporate performance, the emphasis is removed from transfer pricing and placed on the impacts of operational activities on overall company performance. This type of framework shows that an internal supply chain of a multi-enterprise organisation displays different characteristics to a whole of industry chain. In traditional industry supply chains the final component of the chain (e.g. the retail component) dictates volume requirements to meet demand i.e. a product pull situation (Beamon, 1998; Beamon and Bermudo, 2000; Cox, 1999, 2001). However, in the case of the internal supply chain the final component, e.g. the finisher in the case of ACGC, must still meet volume requirements for its markets, but it is in fact the first component, the breeder, which dictates purchasing strategies and tactics by their capacity to supply cattle into the internal supply chain (i.e. product push). As a consequence of this internal supply chain power dynamic, a fundamental role of the proposed KPIs must be to focus the attention of property managers on the whole internal supply chain process rather than maximising individual property performance. Therefore embedded in the evaluation process is the need for a tailored system that rewards performance that relates to good management. While good performance outcomes should be rewarded, both good and poor performance outcomes should be examined in context of factors such as seasonal conditions. In both cases any required responses should be developed in consultation with property managers so that they have ownership of the strategies and tactics to be employed. A key part of achieving good performance across the internal supply chain and the development of core competencies in this area is an inbuilt reflectiveness of actions taken, and the ability to analyse the impacts of those actions (OECD, 2005, Gray, 2007). To this end, in addition to the metrics involved, it was proposed that property managers should be required to report on variances against budgeted measures as well as their understanding of the underlying factors affecting their performance outcomes (e.g. seasonal conditions). Such reporting requires managers to reflect on the impacts that their management decisions have on their own production issues but also on the wider impacts of these decisions and associated variances on the efficiency of the internal supply chain and subsequently the effects on overall corporate performance in relation to such factors. This approach compels property managers to focus primarily on tactical management issues they have control and ownership over. Corporate management can then be in a position to effectively evaluate operational management performance as it aligns with strategic corporate goals and to provide constructive feedback. The approach also encourages property managers to focus on factors that influence the designated KPIs and associated metrics (in the context of seasonal and market conditions), thus aligning production goals with corporate goals. This results in the performance of each stage of the internal supply chain being measured in relation to its contribution to overall corporate performance. As such “balance” is created between measures of production performance within the internal supply chain and corporate performance resulting in an “Internal Supply Chain Balanced Scorecard” (ISCBSC) (Figure 6) which can be refined and adjusted as needed. While this approach does not do away with the need for the existing cattle trading account and income statement which are required for reporting purposes (Tables I-II), it presents data and information in a way that is more consistent with the day to day activities of property managers making it easier for them to relate to and make use of. Linking operational activities to corporate objectives in this way provides a bridge between the different skills and focus of operational and corporate managers and as such assists in building goal congruence (Figure 7). Operational managers are measured on KPIs that encourage them to focus on areas that will improve overall performance of the company, rather than on individual property performance, which can reduce overall company performance. In addition, the use of targeted KPIs and associated metrics supports the operational skills of property managers which allows them to more effectively contribute to corporate goals. Creating a tightly integrated and cohesive supply chain is regarded as a value creation mechanism for a business – the more tightly the chain is integrated, the more cohesive it is and the greater the value created (Tan, 2002; Bourguignon et al. , 2004; Cayla, 2006). Thus if goal incongruence (when individuals or groups within an entity may have only partly overlapping goals) amongst components of the supply chain develops, a risk to supply chain integration and thus to value creation for the business ensues (Foss and Christensen, 1996). This case study has demonstrated that such goal incongruence can easily develop even in well-managed supply chains if and when there are significantly divergent management issues associated with the operational and corporate arenas of a business – and when the reporting information used as performance metrics do not address these differences. Given the often divergent management issues of operational and corporate management in companies such as ACGC, goal incongruence will always be a potential issue and should be continually assessed. This case study has shown that appropriate performance indicators and measures can be created that relate directly to logical operational outcomes thus encouraging a more tightly integrated internal supply chain, a stronger coherence among the components and a better aligned set of operational and corporate goals. Moreover, the study showed that these performance indicators and measures can be created from company accounting systems despite these systems being fundamentally functionally based. Additionally the study has shown that a hybrid balanced scorecard framework can be used as a basis to develop indicators and associated metrics to facilitate more efficient management of the internal supply chain of a multi-enterprise business, and to thus better integrate the goals and activities of the autonomous business units. Implicit to this approach is the idea that while business units within the internal supply chain remain autonomous, key areas where integrated approaches are required can be strategically managed to promote the coherence of goals at all levels within the organisation. A concept that covers such a situation is that of “integrated autonomy” (IA) which originally comes from the Distributed Computing Systems literature where it is defined as: In supply chain management terms, IA could be developed as a strategy which would aim for a level of autonomy and expertise within each component of the internal chain but at the same time would promote the integration of key functions and processes across other components. As such, an IA strategy would create a multiplier effect of component expertise in order to achieve the broader strategic goals of the whole company/chain, i.e. a sum of the parts is greater than the individual components. In this study it has also been demonstrated that it is critical that the data stored in accounting systems for autonomous components, be adequate to fulfil the information needs of a holistic whole-of-company performance measurement system. This is particularly the case in a BSC because both financial and non-financial data (Griffis et al. , 2004) are needed to encompass both operational and corporate perspectives. Finally, this study has demonstrated that performance measures based on logical relationships between internal supply chain components does, as Nørreklit (2000) and Plummer and Rolfe (2002) suggest, facilitate the development of coherence between components of the internal supply chain and the development of synergies between corporate and operational goals (i.e. a state of IA). The main reason for this is that measures based on these types of relationships ensure that there is common understanding across the internal supply chain of the information used and the implications of decisions made with it on other components of the chain (Tan, 2002; Verdicchio and Colombetti, 2002; ...