Transcript Lecture 7: The legal environment

Supply Chain Performance
Measurement
“The more you measure, the more
you know!”
M.Tariq Yousafzai
Innovator and Business Creator (ILSCM)
[email protected]
Focus on ‘the story behind the
figures’
‘Eh, turnover has decreased 10% but fortunately costs also … so there is
no problem!’
Common Mistakes
 Recency
 Central Tendency
 Leniency
 Horns/Halo Effect
Measure the right things
 Critical Success Factor (KSF) =
an
organisational variable, critical for
successfully reaching the strategy
 Key Performance Indicator (KPI) =
a
measurable parameter for the CSF that
gives information about that CSF
Example CSF + KPI
Some conceptualities
 Difference between a measure and a
metric
 A measure is easily defined with no
calculations and with simple
dimensions
 A metric needs definition, involves a
calculation or is a combination of
measurements, and is often a ratio
Characteristics of Good
Measures
Lecture 7-7
Question????
Is it really true that logistics
affects all aspects of an
organization's performance?
Raising the Performance Bar
Lecture 7-9
Process Measure Categories
Logistics Quantification Pyramid
Dimensions of
Performance Metrics
 Establishing appropriate metrics is a
complex problem.
 Measuring inappropriate performance
can lead to a company chasing the
wrong goal.
 Metrics drive behavior --- what you
measure is what you get.
Common areas where there are
inefficiencies
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Quality –
Production level –
Processing –
Waiting –
Movement –
Stock –
Specific measures for logistics
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Product availability
Reliability of delivery
Total travel time and distance
Delivery cost
Prices and discounts offered
Information available
Order location and tracking
Orders received on time
Mistakes in deliveries
Mistakes in deliveries
Customer satisfaction
Flexibility and customisation
Frequency of delivery service
Loss and damage
Availability of special equipment
Specific measures for logistics
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Helpfulness of drivers
Handling of queries
Time to load and unload
Total weight moved
Number of errors in deliveries
Areas covered
Size and capacity of vehicles
Skills of drivers
Utilisation of vehicles
Advance warning of supply problems
Convenient delivery size
Consistency of service
Errors in processing and administration
Additional services provided
Performance of warehouses
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Order cycle time
Number of orders processed
Cost of each stock transaction
Time taken to prepare each shipment
Customer services
Errors in order picking
Damage and loss
Special storage facilities
Amount of product substitution
Performance of warehouses
 Average stock value
 Changes in stock value
 Utilisation of storage area and volume
 Proportion of orders met from stock
 Proportion of demand met from stock
 Weeks of stock held
 Stock turnover
Dimensions of
Performance Metrics
 Logistics cost metrics should focus on
the total supply chain, not on just one
link.
Other Useful Performance
Guidelines
 The metrics must
be consistent with
overall corporate
strategy.
 The metrics must
focus on customer
needs and
expectations.
 Prioritize your
metrics.
 Focus upon
processes not
functions.
 Use a balanced
approach in
selecting and
developing metrics.
 Precise cost
measurement is an
important aspect
for gauging
improvement.
 Use technology to
enhance efficient
performance Lecture 7-19
measurement.
Evolution of
Metrics Utilization
Most organizations go through several
phases in the development of meaningful
metrics:
Stage 1 – awareness of the
importance of using the appropriate metric
Stage 2 – developing the actual metric
Stage 3 – performance improvement
Stage 4 – integration internally and across
the supply chain
Supply Chain
Metrics
 Supply chain metrics are very different
from traditional logistics metrics in
that they measure inter-company
performance rather than just internal
performance.
 These measures of performance must
be common across the firms in the
supply chain to be meaningful.
Measures are often used in
comparisons against
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Absolute standards
Target performance
Historical standards
Competitors’ standards – typically through
benchmarking, which
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Identifies the logistics process to benchmark
Finds the competitor with the best performance
Compares operations and analyses differences
Finds reasons for the differences
Designs new operations to give improved performance
Implements the plans and monitors progress
Developing SC Metrics
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Should be result of team effort
Involve customers and suppliers
Executive dashboard or KPIS
Mteric owners identification
Establish a procedure to mitigate conflicts
arising from metric development and
implementation..
 Must be consistent with corporate strategy
 Establish management support
Characteristics of wellperforming organisations