Understanding Logistics Performance Measurement And Importance Commerce Essay

Understanding Logistics Performance Measurement And sizeableness Commerce EssayProbably the first attempt to define logistic deed was made by Chow et al. (1994), and they presented some measures for measuring logistics procedure. Since then, most of the literature on logistics carrying into action appears to focus on models and frameworks (Clarke and Gourdin, 1991 Mentzer and Konrad, 1991 Rao and Grenoble, 1991) and on managing different aspects of logistics (Larson, 1994).Logistics performance may be thought as a deputiseset of the larger nonion of stanch or organizational performance. For Instance, Gleason and Barnum decided to distinguish between effectiveness and efficiency. They delimitate effectiveness as the accomplishment to which an objective has been achieved, while efficiency was defined as the degree to which resources have been used economically journal of logistics counsel. app arntly put, efficiency is doing things right, while effectiveness is doing the rig ht thing journal of logistics worry, 42, pp. 3, 4. Sink and his colleagues defined seven dimensions in run to illustrate the notion of what performance means they are effectiveness, efficiency, quality, productivity, quality of work bread and butter, innovation and profitability/budgetability journal of logistics management 43, pp. 266-7.Performance measurement in the logistics functions, like all the business functions, begins at the individual metric level. However, there is forceful get hold of for a method with which to evaluate the existing metrics as there is extensive abundance of metrics already in existenceLogistics performance IndicatorsComplex process of logistics is divided into activities which carried turn out at richly quality will not automatically turn a process into a high standard one but they offer chance.The logistics system has the following areas with quality concernsLogistics facilities,Logistics process and sub processesHuman services, organization, management.If we talk about the quality of logistics beyond the three areas mentioned above, then we have to involve the performance and productivity indicators.Quality of logistics facilitiesThese facilities includeDelivery Facilitieswarehousing facilitiespackaging facilitiesmaterial handling facilitiesQuality indicators of logistics facilities preventative capacity and performanceModern designSuitability to jobsMaintenance backgroundMan-facilities relation (environment protection)Good-facilities relation (specialties of goods, building block load, packaging, etc.)Ways-vehicles relationPerformance-price relationRelation of expected life and price of facilitiesSpecific energy and lubri slewt beSpecific performance costSpecific maintenance costReliabilityFeaturelessness (failure rate,)Longevity (general overhaul cycle, life span)Restorability (av. Restoring period, native break-down period)Storability, transportabilityQuality indicators of Transport waysCapacity, length, networ k, way leading (curves, slope etc.)Easy to survey, surface, illumination speed, sensitivity to weather, comfortInformation, signsSafety, help (telephone, helicopter etc.)Quality indicators of logistics process(es)Optimum combination of jobs (tasks) and facilitiesOptimum packaging and load unitOptimum logistics set up of mountainsOptimum route and judgment of convictionMinimum transfer of goodsMinimum warehousing time and eventOrganizing and managing logistics activities in environment-friendly wayCapacity contribute/capacity demandAppear time/ say timeDamage events/total activities (packaging also)Missing volume/total volume (packaging also)Error delivery/total delivery commitmentsPhysical processing timePerformed commitments/ demanded commitmentsNumber of clients/yearLogistics performance measures rouse be reason into two categories such as qualitative and quantitative measures. Qualitative measures include such as customer satisfaction and product quality etc., and quantitat ive measures include such as install-to-delivery lead time, supplement chain response time, flexibility, resource utilization, delivery performance, etc.Quantitative metrics of supply chain performance can be classified into two broad categories Non-fiscal and financial. In fact, in the late 1880s the main dialect was on financial measures such as return on investment (Christopher, 1992 Schermerhorn et al.,, 2000). However as the wink progressed during 1980s, the world market changed and companies began to lose market share to overseas competitors who were able to provide higher-quality products with lower costs and more diversity. To re- capture the competitive edge, companies not only directed their strategic focus from low-cost end product to quality, flexibility and short lead time, as non-financial measures (Bower Hout, 1988 Rushton Oxley, 1989 Stewart, 1995)..One of the studies conducted on performance measurement clearly suggests that severally entity or company on the supply chain needs to adopt a more equilibrise stead in its performance measurement and management approach. It is also suggested companies can measure more adequately non-financial indicators in addition to the financial ones (BSC).Companies need to recognize more the importance of drivers of strategic future performance as represented by the indicators within the internal process perspective and the learning and growth perspective. As it is, it would appear that though these non-financial drivers of growth indicators are recognized as important, they are often overshadowed by the financial indicators.Moreover, managing a exhibitn supply chains overall performance necessitates the coordination of measures across the different entities on the supply chain. In nutshell, requires all entities on the supply chain to adopt a common balanced perspective in their performance measurement and management in order to facilitate the overall performance and fight of the entireBusiness logi stics performance metrics could also be classified asOperational performance metricsDay to day technical representationadherence to developed schedule ( important to give time and location dimensions for quality pledge)Ability to avoid complaints(means minimizing the possible complaints)Achievement of defect free deliveries blood line carrying cost(Levy (1997)Information carrying cost (Steward (1995)Tactical performance metricsEfficiency of purchase order (using economic order quantity and other approaches)Cycle timeBooking in proceduresCash flowQuality assurance methodologyCapacityflexibilityTotal transportation costStrategic performance metrics appreciate of return on Investment (is the ratio of money gained or lost (whether realized or unrealized) on an investment relative to the amount of money invested)Total cash flow timelead time against industry norm,Quality levelCost saving initiativessupplier pricing against market(Gunasekaran et al. (2004)Customer query timeImportance of performance MeasurementThe importance of performance measurement cannot be denied as one of the manufacturing and management consultant said that you get what you inspect, not what you expect. (Melnyk et al. 2004)It has also been affirmed that organizations would gain competitive advantage, through logistics, when they anticipate and achieve excellence in the twin peaks of cost and service leadership (Christopher (1992, pp. 8-10). Similarly, another states that in trading operations scheme, organizations can compete not only on productivity, but also by giving comprehend value through innovation and quality (Garvin (1992, pp. 126, 204, 321).Metrics are required to evaluate work through and to direct the activities, since what we measure indicates how we intend to deliver value to our customersPerformance measurement can be defined as the process of quantifying the efficiency and effectiveness of action (Neely, Mills, Platts, Gregory, Richards, 1994).Pressures (severe competitio n, globalization, and rapidly changes in customer requirements) are significantly driving force to organizations in order to re-focusing on utilizing of people and resources based on organizational objectives. Organizations need to provide a performance measurement system to evaluate the resource utilization so that they can strategically manage and properly control to achieve their objectives and goals. it has been pointed out that performance measurement is vital expound of controlling process in order to take action for ensuring desired results. (Schermerhorn and Chappell ,2000)Case Example galore(postnominal) people are surprised how Wal-Mart is able to charge such low prices and continue to make a profit. There are several factors in their business model that contribute to this ability, but a large-mouthed one is their ability to adapt to an ever-changing global marketplace and running an efficient supply chain system. Moreover, the giant retailer is implementing the most ad vanced technological solutions and measures to be efficient market player. This ability requires a flawless logistical system that allows product to be shipped anywhere at a moments notice.Wal-Marts commitment to meliorate operations, lowering costs and improving customer service is making it efficient and effective retailer. However, Wal-Marts success lies in its ability to drive costs out of its supply chain and manage it efficiently. Wal-Mart is considered to be a supply chain-driven company that also has retail stores.Running the whole business model on the low prices strategy and low cost transportation enables Wal-Mart to sell its products at the lowest possible prices. Wal-Mart operates each of its stores like a small company. Trained store managers manage one store at a time, one incision at a time, and one customer at a time. Wal-Mart has implemented advanced logistics solutions like RFID (radio frequency identification). These solutions assist in maintaining lower costs, identifying out-of-stocks and increasing sales. Wal-Mart has successfully established Distribution centers (DC) instead of warehouses, cross-docking technology and automated replenishment also reduce inventory carrying costs. (Anonymous, 2007)ConclusionThe logistics challenge is that organizations have to be more responsive, with high levels of flexibility in delivery. The emphasis should be on processes and performance rather than on functions and profit. The competitive field of view will be in the fields of quality, productivity, speed and innovation. Progress towards performance excellence will be aided greatly by relevant and integrated measurement frameworks and models (Christopher (1994). It has been proclaimed that when you can measure what you are speaking about, and expresses it in numbers you will know something about it (Lord Kelvin, 1996)Realizing the importance of performance measurement in logistics, many big market player are trying to be more efficient by investi ng huge resources in latest financial as well as non financial toolsMoreover, logistics costs take 18-23% of total product costs (in a wider sense even 40%).For this reason production companies are going to make these activities more effective and efficient. Big companies have third partners (forwarders) make it. A forwarder can comprehend and optimize a longer interval of logistics chain. The share of distribution and production logistics is not right. The border is not sharp. In the case of quality the question is how and not where.