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A STUDY ON SC PERFORMANCE MEASUREMENT IN
MANUFACTURING INDUSTRY THROUGH BALANCE SCORECARD:
A LITERATURE REVIEW
Ferdoush Saleheen1
Md. Mamun Habib2
Zurina Hanafi3
123
School of Quantitative Sciences, Universiti Utara Malaysia (UUM) 06010 Sintok, Kedah, Malaysia
1
(ferdoushsaleheen@gmail.com)
2
(mamunhabib@gmail.com)
3
(h.zurina@uum.edu.my)
___________________________________________________________________________
Abstract: Over the past few decades, business dynamics have been revolutionized that put the
arm on the legislative requirements to measure the performance management for
manufacturing industry where companies have been observing to find the tools that can
evaluate the supply chain management performance commendably. Organizations have
witnessed a rapid transformation in their performance measurement system in the last few
decades, amongst the most widespread tools adopted and implemented is the Balanced
Scorecard (BSC). Since its emergence, the mainstream of the Fortune 500 corporations was
implementing the BSC. Despite the widespread adoption, a growing body of supply chain
management authoritarians and practitioners uncovers constrains in the BSC, particularly in
its model, execution and practice. The same group of advocates opposes; these constrains
could either undermine the practicality of the BSC or trigger companies to refrain the BSC
altogether for better performance measurement alternatives. Hence, the principal objective of
this paper is to appraise the BSC as a performance measurement instrument and discuss
whether the BSC is in fact an undisputed resolution as a corporate performance measurement
model.
Keywords: Supply Chain Performance Measurement System (SCPMS), Balanced Score Card
(BSC), Buyer-supplier Partnership
___________________________________________________________________________
Introduction
Balanced scorecard was conceptualized in 1992 by Kaplan and Norton with a goal to resolve
the inadequacies of the conventional financial-based performance measurement tool that was
eventually endorsed by majority of the fortune 500 corporations and implemented as well
(Kaplan and Norton, 1996; 2001; 2002; 2004; Kraaijenbrink, 2012; 2015). Since then,
organizations have been adopting the BSC model to encounter the conventional performance
measurement methods which emphasizes the financial metrics on isolation (Basuony, 2014).
Besides, BSC stresses three performance metrics (learning and growth, internal process and
customer) to provide a comprehensive performance perspective. Despite its huge acceptability
and recognition within the organizations, on several occasions there are unsuccessful incidents
discovered in BSC (Hoque, 2014). A group of research scholars uncovers multi-dimensional
limitations in the BSC, particularly in its thoughts, execution; and usage (Hoque, 2014). The
same group of research scholar’s resists, these limitations could either undermine the
effectiveness of the BSC or trigger businesses to modify the BSC for improved and
comprehensive performance measurement substitutes. Hence, encouraged by the above, this
critique delivers a methodical assessment of the execution, usage, benefits and limitations of

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the model and practice of BSC that finally recommends a substitute performance measurement
model (Parmenter, 2012; Bhagwat and Sharma, 2007).
Balanced Scorecard (BSC)
Two distinguished Professors Dr. Robert S. Kaplan and Dr. David P. Norton of Harvard
Business School back in 1992 first developed the concept of Balanced scorecard to address
some of the flaws and ambiguity of previous management approaches. It conveys some precise
guidelines as to what companies should measure to align its vision, mission and strategy etc.
to assimilate performance across the organization that channels through company objectives
and measures all the business units. Subsequently it aligns all the members within an
organization when fully implemented so that, all members of the organization do understand
how and what they can do to support the strategy. The BSC model advocates to evaluate an
organizational performance measurement through four main perspectives: (I.) financial, (II.)
customer, (III.) internal business process, and (IV.) learning and growth (Hudson et al., 2001).
Figure 1. Balanced Scorecard framework (Kaplan and Norton, 2002)
General Electric, back in 1950 conducted a project to develop performance measures for GE’s
dispersed business units. It was suggested that through seven non-financial metrics,
performance measurement could be evaluated are as follows:
Profitability (measured by surplus income)
Productivity
Market share
Public responsibility (legal & ethical behaviour, responsibility to all stakeholders including
shareholders)
Product leadership
Employee attitudes
Personnel development
Balance between short-range and long-range objectives
The origin of Balanced Scorecard could be apprehended through these eight objectives.
Presented by the GE metric based financial aspects, productivity, market share, public
responsibility, product leadership, employee attitude, personal development and the 8th metric
captures the essence of the Balance Scorecard between short range and long range objectives

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etc. have been placed in respective order. Regrettably, the project didn’t get imbedded into the
management performance appraisal and incentive structure of GE’s business units due to
priorities for short-term profits, compromise with long-term visions as well as corporate
obligations (Kaplan and Norton, 2002; Trivedi & Kumar, 2014).
Strengths of Balanced Scorecard
The foremost objective of BSC was to support corporations to develop effective business
strategies (Kaplan and Norton, 2002). Despite a group of researchers who were skeptical to
understand the straightforward relationship between the BSC and business performance, the
majority practitioners recommend that its usage is beneficial, whether perceived or real,
thousands of corporations that have implemented the model, BSC has an overall positive
impact on the performance of an organization but it also reveals that BSC is not favourable in
all circumstances (Madsen and Stenheim, 2014). In some aspects or uses, the BSC assist to
improve the performance, whereas in many other aspects it hinders performance. However, the
model is still emerging and researchers and the practitioners should appreciate considering that
BSC is not yet a mature concept and its interpretation and usage varies across researchers and
practitioners respectively. The researcher also confirmed that BSC has three common benefits
to management. First, the BSC assists managers to focus on strategy, structure and vision. The
focus is important for management to understand and to guide strategy implementation.
Second, the BSC assimilates financial and non-financial-based metrics to support managers,
emphasis on business process and confirm current business activities and events that provides
customer values and long-term organizational strategy. Third, the model helps business
professionals to oversee the implementation of a strategy by representing cause-and-effect
relationships between employee activities and strategy implementation (Madsen and Stenheim,
2014; Basuony, 2014; Giannopoulos et al., 2013).
Limitations of Balanced Scorecard (BSC) Implementing in Manufacturing Industry
(Pessanha and Prochnik, 2006) noted that BSC performs for the interests of the shareholders
while overlooks the benefits of other key stakeholders such as suppliers, the government and
the environment. BSC fails to acknowledge the engagement with the employee in its definition,
objectives and measures. And in its internal process and learning & growth performance
metrics tough it involves employees, but it does not include employee support at all, the BSC
is also unfamiliar to the employees. (Kurien et al. 2011; Tangen 2004) noted that performance
measurement system should be appropriately focused on short and long-term results, different
types of performances (e.g. cost, quality, delivery, flexibility and dependability), various
perspectives (e.g. the customer, the shareholder, the competitor, the internal and the innovative
perspective) and various organizational levels (e.g. global and local performance). The
researcher emphasized that BSC failed to focus on green organizations, sustainability, resilient
supply chain due to increased uncertainties and risks, agility in supply chain due to increased
competition and short product life and quality improvement initiatives etc. (Thakkar et al.,
2009) noted that strategy, leadership, culture, and capability are the four critical factors to
implement SCPM. Each of these factors are inter connected with each other and simultaneously
exercise the influence on implementation of the suggested frameworks. The researcher also
recommends several reasons for the failure of SCPM’s, such as lack of attention on supply
network and strategy. In reality, the concept of supply chain is not merely a supply chain on
isolation rather it is a chain of supply networks. In this networking process, building rapports
are sometimes difficult to describe. Incapability of many organizations to make SC visible due
to technical and system problem, unstable association between marketing and supply network
activities, lack of managerial awareness to engage the organization’s performance

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measurement system as a vehicle for organizational change etc. (Neely et al.,2002; 2004; 2010)
argued that although BSC is a valuable framework suggesting important areas where
performance measures might be useful. However, it provides little guidance on appropriate
measures to manage business. (Rajesh et al. 2012) noted that BSC is still out of reach to most
of the small and medium-sized organizations, because it requires lot of skill and management
expertise, time and money. The author stated that BSC overlooked many factors such as
government regulations, competitive environments, environmental and social aspects of
industry etc. (Reefke and Trocchi, 2013) noted that environmental and social aspects can be
integrated in the current four perspectives by establishing strategic priorities that influence the
formulation of targets, measures and respective indicators representing strategically important
factors etc. BSC cannot be compared and benchmarked against each other and it fails to suggest
the best practice at an activity level. The other limitation is the exclusion of suppliers and key
stakeholders especially the government and the environment that is also a key to the success of
any project.
Research Methodology
Comprehensive overview on supply chain performance measurement (SCPM) practice is
investigated through reviewing widespread research papers and conference papers have been
appraised from international journals such as PROQUEST, EMERALD, EBSCO, IEEE, ACM,
JSTOR etc. Meanwhile few interviews were conducted amongst senior executives to
understand their experience and the challenge faced while implementing the BSC model.
Discussions
BSC does not consider leadership and employee capacity building aspects in its model. It also
failed to address employee motivation, employee engagement and team building issues
etc. (Thakkar et al., 2009; Kurien et al., 2011; Saleheen et., 2018). BSC does not consider
recent global issues such as continuous improvement issues (Taticchi et al., 2010),
sustainability and green supply chain issues in the business, society and environment
(Cagnazzo, et al., 2010); Wanger, 2007). (Thomas, 2003) mentioned that agility issues to
remain competitive, (Cagnazzo, et al., 2010) mentioned on business resilience factors in order
to avoid risk and disasters (Cagnazzo, et al., 2010), government regulation issues for borderless
business economy, uncertainty factors in the dynamic economy, collaboration and visibility
factors (Cagnazzo, et al., 2010) to ensure seamless operations from supplier, manufacturer,
distributor and customer and finally future business trends and market competitions
perspectives etc. (Kurien et al., 2011; Tangen, 2004; Taticchi et al., 2010; Saleheen et., 2018)
BSC is devised as a monitoring and controlling tool for strategic level instead of tactical or
operational level and it is challenging to construct comparisons within and across firms. It also
delivers little guidance on how the appropriate measures can be identified to manage business.
(Kurien et al., 2011; Tangen, 2004; Taticchi et al., 2010; Saleheen et., 2018).It does neither
stipulate any mathematical logical relationships among the individual’s scorecard criteria nor
provide any cause and effect relationship over time and provides mechanism for selecting best
measures of performance. BSC model completely fails to identify buyer and supplier
relationships, supplier network and strategy factors. (Kurien et al., 2011; Tangen, 2004;
Taticchi et al., 2010; Saleheen et., 2018). It is not effective for small and medium-sized
organizations, because it requires a lot of skill and expertise of the management, time and
expenditure of money (Kurien et al., 2011; Tangen, 2004; Taticchi et al., 2010; Saleheen et.,
2018)

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Future Research
Future study is recommended to design a comprehensive model and performance measurement
attributes to overcome the constrains and limitations where BSC completely failed to address
in order to bridge the constraints in the academic as well as in the industry (Saleheen et., 2017,
2018)
Contribution
This study unlocks the frontier, particularly model development for the perspective researches
in the area of supply chain performance measurement (Saleheen et., 2017, 2018).
Conclusion
In past two decades since the commencement of BSC model, it is now broadly acknowledged
across all industrial sectors, from manufacturing to service industries, from large to small
businesses and from public to private projects. The strengths of the BSC model is integrating
three non-financial metrics – customer, internal process, and learning and growth – with the
traditional financial metrics. The common practices of the BSC are performance measurement,
strategic management and project management. The benefits of the BSC include overcoming
inadequacies of the traditional financial-based performance measurement tools, providing a
holistic performance outlook, transforming strategy into a tangible performance measures,
aligning organizational activities to strategy and providing a deeper insight into business
operations and ways of creating value. Simultaneously, a handful of companies have been gone
through uphill challenges and required extensive modifications in order to implement it in their
operations. The BSC model could not distinctly explain the correlation with organizational
performance and the objectives, the description of measures also eliminates key stakeholders,
the definition of key success factors that necessary in order to identify KPIs is also not
elaborated and the four categories of the BSC restricts the view of the organization perception
as well. In practice, the BSC concentrates its resource to attain its objectives towards
optimizing organizational potential beyond the targets of the BSC; it also ignores inter-
organizational innovation; perceives an organization has already hierarchical structures, job
responsibilities are also defined and organization has one-way linear cause-and-effect
relationships. These constraints hinder the effectiveness of the BSC and fuels the organizations
to revaluate the ultimate use and gives a second thought whether to abandon the BSC altogether
for better alternatives (Kraaijenbrink, 2015; Saleheen et., 2017)
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