An innovative supply chain performance measurement system incorporating Research and Development (R&D) and marketing policy Felix T.S. Chan a,⇑ , Ashutosh Nayak b , Ratan Raj b , Alain Yee-Loong Chong a , Tiwari Manoj b a Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, Hong Kong b Department of Industrial Engineering and Management, Indian Institute of Technology, Kharagpur, India article info Article history: Received 14 October 2011 Received in revised form 31 May 2013 Accepted 28 December 2013 Available online 7 January 2014 Keywords: Supply chain management R&D Marketing policy Bass diffusion model Performance measurement system abstract Various performance measurement techniques have been developed and applied in their respective fields, but the existing performance measurement methods have failed to provide significant assistance in the context of marketing strategies and innovation levels of a firm. In this paper, we have considered an important aspect of marketing policy involving examining the decision of a firm to distribute products and services to its consumer. The model developed in this paper is an extension to the Bass diffusion model which is generalized to incorporate the effects of marketing policy of the firm. In order to examine our model, computer simulation is conducted in order to measure the effect of innovation level and dis- tribution of products and services on the change in the sales of a firm from its previous products and sup- ply chain system. The performance measurement was developed by examining firm’s level of innovation achieved by their Research and Development (R&D) performances, and sales of the products and services. Ó 2014 Elsevier Ltd. All rights reserved. 1. Introduction The concept of supply chain management (SCM) represents the most advanced state in the evolutionary development of purchas- ing, procurement and other supply chain activities (Thomas & Griffin, 1996). The operational level of SCM integrates activities like seeking of raw materials and production, marketing and distri- bution of goods. The highest level of integration of these activities is achieved through SCM. With the evolution of time, the opera- tional activities have individually become ‘‘virtual business’’ enti- ties and their integration has become more significant making SCM critical. A supply chain is a network of organizations involved in different processes and activities producing value in the form of products and services for the ultimate customer (Chen, 2008). SCM appears to treat all organizations within the value chain as a unified ‘virtual business’ entity. It includes activities such as plan- ning, product design and development, sourcing, manufacturing, fabrication, assembly, transportation, warehousing, distribution, and post delivery customer support. In a truly ‘integrated’ supply chain, the final consumers pull the inventory through the value chain instead of the manufacturer pushing the items to the end users. Businesses today are facing intense international competi- tions, demanding and sophisticated customers, and diverse trans- forming technological change to succeed in a global market. As a result, the aim of firms is no longer to develop and produce high quality products at the right-time, but to use scientific information to explore the market. While much research attention has been focused on understanding how knowledge within firms contrib- utes to performance differences, little is known about the perfor- mance enhancement offered by supply chain knowledge (Min & Zhou, 2002). This is puzzling given the strong focus on the reasons why some firms outperform others (Nag, Hambrick, & Chen, 2007), coupled with the increasing importance of the supply chain. Some even argue that rivalry is becoming more ‘‘supply chain versus supply chain’’ and less ‘‘firm versus firm’’ (Slone, 2004). The performance of the firms can be improved significantly by understanding the information provided by the supply chain. The procurement and usage of this information is hindered by many different barriers. These barriers include inability to capture cus- tomer’s feedback, improper maintenance of selective data, poor market research leading to failure in assessment of market changes and unstandardized performance measurement within a firm. In this connection, firms require a performance measurement system in order to proactively react to these barriers. This calls for the need to devise a PMS which provides integrated, precise and help- ful information to boost efficiency and to periodically check the performance of the supply chain in the firm (Ahmed & Abdalla, 2002; Bhagwat & Sharma, 2007; Brookes & Backhouse, 1998). Existing research in PMS’s does not have the scope for quantifying Research and Development (R&D) in terms of innovation level and in optimizing the marketing policy of the firm, that is the decision of the firm to sell products and services at their own stores or retailers in a supply chain. R&D, innovation and productivity 0360-8352/$ - see front matter Ó 2014 Elsevier Ltd. All rights reserved. http://dx.doi.org/10.1016/j.cie.2013.12.015 ⇑ Corresponding author. Tel.: +852 2766 6605. E-mail address: f.chan@polyu.edu.hk (F.T.S. Chan). Computers & Industrial Engineering 69 (2014) 64–70 Contents lists available at ScienceDirect Computers & Industrial Engineering journal homepage: www.elsevier.com/locate/caie