Logistics Organization & Performance Measurement - Introduction to Logistics Management | Logistics Management - B Com PDF Download

Logistics Organisation& Performance Management

Logistics Interface with Marketing 

Outbound logistics plays an important role in selling the product of the company through the distribution system. Relation of logistics with 4Ps of marketing can be explained as follows:

1. Price: Logistics enables marketing to quote a competitive price by providing discount opportunities on account of transportation cost savings. Logistics Management has to balance inventories to tackle anticipated price-triggered sales.
2. Product: Size and shape of the product are quite important for logistics. Weight/volume ratio plays very important role in deciding economics of logistics.
3. Promotion: Logistics Manager and Marketing Manager need to work closely in deciding promotional strategies for the product in order to manage inventory needed to match sales triggered by promotional activities in the market.
4. Place: Marketing decision to distribute the product directly to retailers or through wholesalers has a great impact on logistical operations. Retailers’ demand often requires time sensitive transportation methods, which are expensive.

RESPONSIVE ORGANISATION 

The competitive scenario at marketplace necessitated the logistics organisation to be responsive. It seeks to put customer at the center of business and design new systems and procedure to improve the response. Logistics organisation should change its systems:

1. From function to process: emphasis on managing processes rather than managing resources.
2. From profit to performance: emphasis on efficient performance, profit will follow.
3. From products to customers: emphasis on customer value and not on brand value.
4. Form transaction to relationship: emphasis on long-term relationships with customer and supplier rather than just having business transactions.

LOGISTICS PERFORMANCE MEASUREMENT

Performance measurement is a process of monitoring and evaluating activities to determine their conformance to the requirements.

OBJECTIVES 

1. Monitoring Measures: To track historical logistics performance for reporting to management and customers mainly on service level achieved and logistics cost components. It may be monitored daily, weekly, or monthly depending upon the volume and criticality.
2. Controlling Measures: To track ongoing performance and refine a logistics process in order to bring it into compliance when it exceeds control standards. To compares the actual performance with the set standards. E.g. transportation damages tracking. If a system can periodically report the product damage, logistics management can identify the cause and adjust the packaging and loading process as needed.
3. Directing Measures: To motivate the warehouse or transportation personnel to enhance their performance. E.g. pay for performance practices to encourage achieving higher levels of productivity. When such directed measures are used, it is important that both positive and negative performance to be measured.

Internal Performance Measures 
Internal performance measures focus on comparing activities and processes to previous operations.

Elements 

A] Financial Measures:

1. Operating Cost: It reflects the efficiency of effectiveness of the logistics system. It is measured in terms of percentage of sales value.

Return on Investment: It indicates whether the investment made in logistical assets like warehouse, material handling etc. is paying dividends.

B] Non-Financial Measures:

Customer Service: It examines firm’s capacity to satisfy customer. It is measured by fill rate, stock out, or cycle time etc.

Productivity: It is a relationship between the goods and services produced and the amount of input utilised by the system.

Time: It indicates the system’s efficiency in terms of response time, lead-time, on time product shipment, etc.

Quality: It determines the effectiveness of series of activities rather than an individual activity.

External Performance Measures 

The main objective of external performance measures is to understand, maintain, and monitor customer perspective.

Elements 

Customer’s Perception: Customer’s feedback on delivery, reliability, and responsiveness of the company needs to be regularly obtained to achieve competitiveness in logistical operations.

Competitor’s Performance: Customer’s feedback provides the company a comparative analysis of service level and value added services offered by its competitors.

Benchmarking:

BENCHMARKING 

Benchmarking is a process of measuring organisation’s overall performance against the other organisation from the same industry or other industries. It is a part of external performance measurement.

History

In the late 1970s When the Japanese competitors Canon and Mitsubishi etc. entered into US market, the Xerox company pioneered the process of benchmarking its manufacturing costs against these competitors. This concept has become widely accepted in the late 1980s.

Steps in Benchmarking 

Identify the items to be benchmarked and define them categorically i.e. never take broad subject area.

Create a benchmarking team and define rules and responsibilities of each member.

Trace out the benchmark partners, who may be a world-class benchmark leader, articles from magazines or newspapers, publications of consultancies, trade literatures.

Identify the data collection process from different sources such as postal surveys, direct interviews, questionnaire, and research through Internet etc.

Finalise the benchmark study, after analyzing all the data discarding the irrelevant and inaccurate data. Compare your company’s strength and weaknesses with those of benchmarking partners. If you find any performance gap between yours and the benchmarking partners, fill that gap.

Implement the findings into the task force of predetermined operation, function or service.