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Companies can work together only if individuals work together. Since performance measurement systems influence behavior of individuals to a large extent, it must be structured to provide incentives for collaborative behavior.

Most importantly, supply chain as a concept can be successful only if we move from local optimization to overall optimization. Any company which is a part of the supply chain needs to focus on the value maximization, satisfaction and minimizing cost of serving the ultimate customer, irrespective of its own position in the chain. The real-life challenge however is to design chain-spanning performance measurement systems. The systems being used in industry as of now lend themselves best to a functional division. e.g. logistics, warehousing, production etc all use their own specific set of measures and these measures differ from company to company across the chain.

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* Contributed by -
Krishnakanth K. K. & Pankaj Ghai,
PGP Students.
IIM Lucknow.