LOGISTICAL PERFORMANCE MEASUREMENT 312021 1 What is logistical

LOGISTICAL PERFORMANCE MEASUREMENT 3/1/2021 1

What is logistical performance measurement? üMeasurement of performance of logistical functions üAssessment of logistical performance üAuditing logistical performance üAn activity of Logistical Management 3/1/2021 2

Why logistical performance measurement is done? üTo improve level of logistical competency üTo gain competitive edge in business üTo raise the level of Customer Service üTo identify weak areas of performance 3/1/2021 3

When is it done? Measurement/Assessment/Auditing is an on going scheduled activity 3/1/2021 4

Why logistical performance measurement is important? ü Logistical competency is crucial ü Logistical resources are scarce üMeasurement is important for achieving objectives – direct, control, monitor, measure ü Measurement leads to improved performanceperiodic tests 3/1/2021 5

How is this done? By following logistical performance measurement system ü Measurement system is a set of mathematical measures like ratios, percentages 3/1/2021 6

Objectives of logistical performance measurement systems ü Monitoring: tracking historical performance ü Controlling: tracking ongoing performance ü Directing: encouraging performance by employees 3/1/2021 7

Measures to track above dimensions of performance ü Monitoring measures ü Controlling measures ü Directing measures 3/1/2021 8

Types of measures based on perspective of measurement Activity based & process based ØActivity based measures measure first level efforts in performance at individual activity level üNo of trucks loaded per day üOrders booked per day üDelivery time per order 3/1/2021 üDelivery time per product 9

ØProcess based performance measures measure customer satisfaction process üTotal performance cycle time (customer lead time/order cycle time) üResponse time to customer query üNumber of O T Ds üNumber of perfect orders 3/1/2021 10

Types of measures based on availability of information Internal Performance Measurement & External Performance Measurement Internal Performance Measures üMeasurement is done inside the organization • Activities of customer satisfaction process • Internal customer satisfaction 3/1/2021 11

Classification of Internal performance measures in categories Cost, customer service, productivity, asset management & logistical quality 3/1/2021 12

ØCost üLogistical cost as percentage to sales or as cost per unit of volume üResources expended to meet specific operating objectives. Examples: Cost per unit, Cost as a percentage of sales, Inbound freight, Outbound freight etc 3/1/2021 13

ØCustomer service Service levels indicating a firms ability to meet customer expectations examples: Fill rates, Stock outs, Shipping errors, On-time delivery etc 3/1/2021 14

ØProductivity üEasily understood and extensively used. üSome times difficult to obtain all relevant details üIndicate resource utilization Classification of productivity measures static, dynamic and surrogate 3/1/2021 15

ü Static productivity measures are calculated across one span of time, example: total factor productivity ü Dynamic productivity measures compare one static measure against another representing another span of time. 3/1/2021 16

ü Surrogate productivity measures consider factors correlated to productivity like customer satisfaction, profit, quality, efficiency. Examples: OTD, Lead time, ROI etc 3/1/2021 17

ØAsset Management indicate management performance of fixed as well as current logistical assets. Logistical fixed assets and inventory are major portion of company’s assets Examples: inventory turns, inventory carrying costs, inventory levels, return on investment 3/1/2021 18

ØLogistical Quality Perfect Order üComplete delivery of all items requested üOTD within tolerance range üComplete and correct documentation üProduct faultlessly installed 3/1/2021 19

Obstacles in delivering Perfect Order order entry errors, incomplete information, damaged shipment, invoice error, problems in installation. Examples: number of customer returns, rupee amount of damage, frequency of damage 3/1/2021 20

External performance measures üCustomer perception üBench marking ØCustomer perception measurement üSurveys and polls sponsored by firm or industry üDone by the firm, by consultant 3/1/2021 21

üInformation about firms and competition’s performance in specific areas • Product availability • Performance cycle time • Information availability • Problem resolution • Product support 3/1/2021 22

ØBest practice bench marking As a tool to calibrate logistical operations ü Bench mark a comparable organization ü Bench mark a competitor company • Analyze the competitor’s product • Attract competitor’s resources 3/1/2021 23

ü Bench-marking a non competitor company • Comprehensive study being bilateral • Proprietary knowledge adds value mutually • Systems • Practices 3/1/2021 24

Bench-marking methods üPublished logistical data, published by periodicals and university research üData sharing by alliances of organizations üClosely examining a non competitors practices with mutual consent 3/1/2021 25

üInformation received from • Vendors • 3 rd party service providers • Customers 3/1/2021 26

Examples of bench-marking: asset management, cost, customer service, productivity, quality, strategy, technology, transportation, warehousing order processing 3/1/2021 27

Characteristics of an ideal measurement system ØCost/Service Reconciliation: ü An ideal measurement system should reconcile cost and service [eg. freight bill and shipment] ü Time separation ü Cause/effect relationship 3/1/2021 28

ØDynamic knowledge based reporting: ü To reveal current situation. ü To reveal data in the extended past ü To reveal trend in future. An ideal system should do all these to enable appropriate action proactively. 3/1/2021 29

ØException based reporting ü Exception from anticipated logistical results. ü Indicator of process deviating from desired ü Ideal report enables manager to act proactively 3/1/2021 30

Logistical Reports Logistical reports Status report 3/1/2021 Trend report Ad hoc report Diagnostic report Position paper Policy report 31

Report Structures ü Reports are generated from information revealed by measurement for effective decision making ü Three types of logistical reports are status, trend ad hoc 3/1/2021 32

Status Reports Information in detail to ascertain current situation of a chosen aspect like inventory or material handling etc Trend Reports Required at a higher level, indicates trend in future with respect to the chosen logistical aspect 3/1/2021 33

Ad hoc Reports Specifically ordered for decision making Information in detail on specific areas of performance Ad hoc Reports are diagnostic report, position paper and policy report ØDiagnostic report detailed information about some phase of 3/1/2021 logistical performance like backorders 34

ØPosition paper ü Prepared by lower levels of management for executives at higher levels üAlternative courses of action for an anticipated or current problem with resource requirements ØPolicy report Ordered by CEOs whenever a policy modification is requested for change in objectives 3/1/2021 35