Transcript Case study of “benchmarking” logistics & supply chain mgt

Case study of “benchmarking” logistics
& supply chain mgt in Thailand
Asst. Prof. Ruth Banomyong
Head, Dept. of International Business, Logistics & Transport
Thammasat Business School
[email protected]
1
Agenda
•
•
•
•
Benchmarking?
Benchmarking logistics framework
Example of Thai output
Questions & Answers
2
What is benchmarking?
• Benchmarking is an improvement
technique that considers how others
perform a similar activity, task, process or
function.
• Benchmarking is not only a comparison of
key performance indicators (KPIs)
although benchmarking uses KPIs to
compare operations.
3
Reasons to benchmark
• The objective in developing the
benchmarking exercise was to gain
information on how organisations:
1.Defined current performance levels
2.Quantified the gap between current levels and
best practice.
3.Managed the logistics process from the
perspectives of inputs into the system and
logistics outputs.
4
Superior Performers Spend Less on Logistics
Best practice performers have 4-6% lower total logistics
costs (% of gross sales)
Total Logistics Cost (Procurement, Inventory Carrying costs,
Warehousing, Transport & Customer Service)
Best-in-Class
Average
% of
Gross Sales
12%
12
12%
11%
10%
10%
10
8
7%
6
4
<6
%
<7%
<6%
<6%
Distributors
Industrial
Suppliers
<5%
<3%
2
0
Pharma
ceutical
Manufact
urers
Retail
Suppliers
Supply
Source: Benchmarking Success, 2002.
5
Benchmarking logistics framework
• Benchmarking exercise conducted in 2002
with Thailand Productivity Institute.
• 18 Thai companies registered
• MNEs, State Enterprises & SMEs
• Use of SCAR framework
(Supply Chain Assessment Review)
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World Class Supply Chains
Service
19% of
Supply
Chains
deliver
>97%
in full
by line.
Only 8%
of supply
chains
match that
with on-time
Delivery
Of >97%
Only 4%
base that
on the
customer’s
1st request
Cost
Only half of these organisations do it at low cost!
Only 2% of supply
chains achieve world
class DIFOT & low cost
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DIFOT
Calculation of Delivery in-full and on-time (DIFOT)
This measure considers the performance of the order management process from the time the order is taken through to the time the
product is delivered to the customer.
EXAMPLE OF CALCULATION OF DELIVERY IN-FULL AND ON-TIME
Customer 1 orders
Total
Customer 2 orders
TOTAL ORDERS
5,000 units of product AAAA
7,000 units of product BBBB
8,000 units of product CCCC
9,000 units of product DDDD
29,000
DELIVERED ON TIME
And gets
And gets
And gets
And gets
5,000 units of product
6,000 units of product
8,000 units of product
8,000 units of product
27,000
AAAA
BBBB
CCCC
DDDD
2,000 units of product EEEE
And gets
7,000 units of product FFFF
And gets
8,000 units of product GGGG
And gets
17,000
ORDER 2 HOURS LATE
46,000
2,000 units of product
7,000 units of product
8,000 units of product
17,000
44,000
EEEE
FFFF
GGGG
IN FULL BY ORDER:
IN FULL BY LINE:
IN FULL BY UNIT:
1 order out of 2 orders are correct
5 lines out of 7 lines in full
44,000 out of 46,000 were delivered
= 50%
= 71%
= 96%
ON TIME ORDER :
ON TIME LINE
1 order out of 2 is on time
4 lines out of 7 are on
time
27,000 units out of 44,000 are in time
= 50%
=57%
ON TIME UNIT
=61%
In full and on time is the in full rate multiplied by the on time rate
IN FULL AND ON TIME BY ORDER: (.5 X .5):
IN FULL AND ON TIME BY LINE: (.71 X .57)
IN FULL AND ON TIME BY UNIT: (.96 X .61)
= 25%
=40%
= 59%
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Procurement Overview
Supplier Performance (Service)
Cost of Procured Product
Best Practice
Procurement
Trade Offs
Cost of Procurement Function
Manage Cross Functional Trade Offs
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Supplier Performance
Delivery
in-full
Ave 93%
X
Delivery
on-time
Ave 95%
-
Less
Rejects
Ave 1%
=
Supplier DIFOT
What’s yours?
What is the flow on effect to you?
More inventory?
Low service delivered to your customers?
Unnecessary costs?
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Balanced KPIs – Is Forecasting Important?
5 Strategic Level 1 Supply chain KPIs:
• Customer service – DIFOT
• Cost to deliver to service – total and functional % of
sales, Cash cycle.
• Sales Forecasting Accuracy.
• Inventory Turn Over.
• Supplier DIFOT (for distributor) or manufacturing
performance.
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A Benchmarking Model.
The Charts (service-cost and inputs-outputs) uses the results
from a Customer Order Fulfilment and Supply Chain Survey.
Questions selected are those that impact on logistics best
practice.
The Customer Order Fulfilment and Supply Chain Survey
consists of eight parts which include:
– Profile of operation
-DC/warehouse
– Logistics & SCM structure
-Transport
– Purchasing
-Customer service
– Inventory management
- Functional Costs
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KPI Summary
KPI
----------------------Performance------------------
DIFOT
(in-full x on-time)
<80%
90 – 94 %
Total
Logistics Cost
>8%
5 - 7%
Cash to
Cash Cycle Time
>80 Days
Customer
Claims
>3%
Stock
Turnover
3
CP
Disadvantage
CP >98%
CP
<4%
45- 55 Days
2%
5 CP
Parity
<40 Days
CP
<1%
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W
O
R
L
D
C
L
A
S
S
Comparisons
with Relevant
Grouping from
the Database:
e.g. 240
Manufacturers
Including:
IBM, HP, Campbells,
Black & Decker, Fuji,
3M, Honeywell, Mars,
Siemens, Kodak,
Nestle, Coca Cola,
etc
Advantage
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Cost & Service Chart
Cost/Service Trade Off Chart - 240 Australasian Manufacturers
80
3. Substantial Service
Improvement.
Some Cost Reduction.
Low
Cost
2. Significant Service
Improvement.
Some Cost Reduction.
This is the Cost and Service chart
for 240 Australasian and Asian
Pacific manufacturers.
1. Best Practice Supply
Chains.
Some Service
Improvement.
Some Cost Reduction.
This chart illustrates the service
delivered by the XXX Manufacturing
supply chain, balanced against the
costs incurred to deliver that service.
LFD
Logistics Cost
XXX
Manuf.
6. Substantial
Service
Improvement.
Significant Cost
Reduction.
40
5. Significant Service
Improvement.
Significant Cost
Reduction.
4. Some Service
Improvement.
Significant Cost
Reduction.
“This plots XXX Manufacturing as a
85th percentile (low) cost operation
delivering 95th percentile service
levels across the supply chain.
COST/SERVICE
TRADE OFF
9. Substantial Service
Improvement.
Substantial Cost
Reduction.
High
Cost
8. Significant Service
Improvement.
Substantial Cost
Reduction.
100th percentile is best practice.
The XXX Manufacturing supply chain
operates in the cost-service square
that indicates marginal service
improvement potential and some cost
reduction opportunity.
7. Some Service
Improvement.
Substantial Cost
Reduction.
0
0
40
Low
Service
Customer Service
80
High
Service
= Outlines the spread of other organisation's positions on the Champions-Challengers chart.
Note the darker colouring designates greater concentration of companies.
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Inputs & Outputs Chart
Inputs/Outputs Chart - 240 Australasian Retail Suppliers
Supply Chain Outcomes Delivered (Service & Cost)
100
High
3. Substantial potential
to further develop input
structure.
2. Significant potential
to further develop input
structure.
Delivering high outputs.
Delivering high outputs.
1. Best Practice Supply
Chains.
Well developed input
structure delivering
corresponding outputs.
LFD
XXX
Manuf.
This is the Inputs-Outputs chart for
240 Australasian and Asian Pacific
manufacturers.
This chart plots the XXX Manufacturing
supply chain as having 100th [best on
database!] percentile outputs.
100th percentile is best.
6. Substantial potential
to further develop input
structure.
5. Significant potential
to further develop input
structure.
Significant potential to
deliver higher outputs.
Significant potential to
deliver higher outputs.
50
4. Well developed input
structure.
Significant potential to
deliver higher outputs.
INPUTS/OUTPUTS
CHART
9. Substantial potential
to further develop input
structure.
8. Significant potential
to further develop input
structure.
Substantial potential to
deliver higher outputs.
Substantial potential to
deliver higher outputs.
7. Well developed input
structure.
Substantial potential to
deliver higher outputs.
The XXX Manufacturing supply chain
operates in the inputs – outputs square
that indicates some potential to
further develop the input structure,
in order to provide a robustness that
will ensure XXX Manufacturing
continue to deliver high outputs.
Does the level of complexity require
more sophisticated inputs? Would
XXX maintain high outputs given a
20% surge in demand.
Low 0
0
50
High
100
Supply Chain Enablers (That Deliver the Outcomes)
= Outlines the spread of other organisation's positions on the Champions-Challengers chart.
Note the darker colouring designates greater concentration of companies.
15
Supply Chain Inputs
The chart below illustrates the performance of supply
chain inputs (enablers) that XXX use to achieve their
current service and cost structure.
Underdeveloped inputs equate to close to the centre
while best practice is extreme outside of web.
Definitions:
Plans: Business (including
customer) plans & deployment.
KPI: KPI reporting, integration
deployment & alignment (operat
ional & customer management).
Culture: People, Leadership,
communication, deployment, &
relationships with customers &
suppliers.
XXX Supply Chain Inputs
Plans
100%
Evaluation Tools: Strategic
evaluation & management tools,
e.g. Product Port Folio
Technique (PPT), Pareto
analysis of inventory (ABC),
Customer research, supplier
evaluation, etc.
80%
60%
KPI
Culture
40%
20%
0%
Evaluation Tools
Enabling Tech
XXX
Enabling Technologies:
Processes, applications &
technologies that enable.
Management processes & IT
enablers (ERPs, EC, WMS).
Structure: Organisational
structure and responsibility and
structure of supply chain.
Structure
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Thailand Inputs & Outputs Chart
Inputs/Outputs Chart - 18 Thai Supply Chains
Supply Chain Outcomes Delivered (Service & Cost)
100
High
3. Substantial potential
to further develop input
structure.
2. Significant potential
to further develop input
structure.
Delivering high outputs.
Delivering high outputs.
6. Substantial potential
to further develop input
structure.
5. Significant potential
to further develop input
structure.
Significant potential to
deliver higher outputs.
Significant potential to
deliver higher outputs.
50
1. Best Practice Supply
Chains.
Well developed input
structure delivering
corresponding outputs.
4. Well developed input
structure.
Significant potential to
deliver higher outputs.
INPUTS/OUTPUTS
CHART
9. Substantial potential
to further develop input
structure.
8. Significant potential
to further develop input
structure.
Substantial potential to
deliver higher outputs.
Substantial potential to
deliver higher outputs.
This is the Inputs-Outputs chart for 18
Thai Supply Chains. Compared to other
Thai companies:
This chart illustrates the outputs delivered
by Thai companies’ supply chains (an
aggregate of service and cost), and the
inputs structure (plans, systems,
technologies, culture) in place to deliver
those outputs.
7. Well developed input
structure.
Substantial potential to
deliver higher outputs.
Low 0
0
50
High
100
Supply Chain Enablers (That Deliver the Outcomes)
= Outlines the spread of other organisation's positions on the Champions-Challengers chart.
Note the darker colouring designates greater concentration of companies.
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Peer group methodology
1
Define and agree on
“critical success factors”
of business
9
Continue to monitor
performance
8
2
Develop relevant
KPIs to measure
performance
Plan
Review implementation
plans and activities
3
Collect and compare
individual performance
Change
Measure
7
4
Transfer and
implement best practice
processes across sites
Identify and discuss
performance gaps and
benchmark KPIs
Analyse
6
Develop Best
Practice Report
5
Review business
process behind
benchmark
KPI
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