1. Introduction
Due to the expanding diapason of performances required by the current emulous environment, performance measurement and monitoring, as a subject, has been arousing growing interest in various scopes, especially in the field of logistics operations. Explicit performance measurements provide a common groundwork for decision-making in companies.
For performance measurement in Logistics operations, Key Performance Indicators are applied. “Key Performance Indicators, also known as KPI or Key Success Indicators (KSI), help an organization define and measure progress toward organizational goals (John Reh, 2012).” Among numerous different KPIs, there have always been confusions on which ones and how many to use. The application of different KPIs now proves to be contextual: the “Key” in the name KPIs indicates that only a few significant areas that are directly linked to the main goal of the business should be concerned. The aims for using key performance indicators in the industry are optimizing logistics processes as well as building sustainable and environment-friendly logistics systems (Kumar S, 2013).
Furthermore, the quantity of the existing KPIs is excessively large since all extant performances in businesses need to be measured. As stated before, distinct key performance indicators are used under individual environment.
The paper systematically introduces the concept of KPIs for logistics operations and provides 3 examples on performance measurements using specific KPIs in different environments. The purpose of the paper is to demonstrate how the use of KPIs can differ among individual cases and what lessons can be learned from them.
Performance Measurement in Humanitarian Logistics
With the increasi...
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Kumar S, S. (2013, April 11). Are you measuring the right metrics to optimize logistics processes?. . Retrieved May 1, 2014, from http://www.genpact.com/docs/resource-/are-you-measuring-the-right-metrics-to-optimize-logistic-processes
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...to deal with inbound and outbound logistics, one that is made up mostly of the personnel from outbound logistics. These professionals deal with the second core competency of Deere, logistics, separate from the manufacturing of tractors and lawnmowers. The creation of this team helps eliminate the risk Fedex’s poor performance (managers were not pleased with Fedex’s centralized transportation management service) and need to measure performance of a 3rd part continuously. As a result, performance is self-managed. We expect as the IT system is used to optimize and plan transportation routes amongst inbound and outbound trucks, cost savings will increase more rapidly. We believe internal continuous improvement, leaner logistics operations and synergies amongst all logistics activities will lead to the $69 million goal being met by the third year after implementation.
With the correct metrics in place information can be gathered and reported on in order to form knowledge. Data is raw numbers, information is data with context, and knowledge is the information with understanding, which leads to decisions (Hunter Whitney, 2007). Basing decisions on every metric is a waste of resources and time. As a result, Key Performance Indicators (KPIs) distill the vast amount of data into information that is pertinent to the decision making. Some KPIs could be the items per hour, visitors per day, customer retention rate, conversion rate, etc. However, not all companies need to know all of the indicators, that is why KPIs are based on the business model and needs of the company.
Tapinos, E., Dyson, R.G. & Meadows, M. (2005). The impact of performance measurement in strategic planning. International Journal of Productivity and Performance Management, 54(5/6), 370-384.
The simple measures to assess the progress of goal are Throughput, Inventory Management and
Performance Management offers real-time KPI (Key Performance Indicator) dashboards that relate to the company’s operational objectives in the form
There are a number of contemporary performance management tools that have helped P&G to effectively handle the performance of the teams working within the organisation. As a leader one should understand performance management not only a means to appraise the performance of the team but it also to implement a critical assessment on the individual’s performance. This will help with their professional issues and development (Nelson & Quick, 2012). Proctor & Gamble sets different kinds of Key Performance Indicators (KPIs) and personal objectives for different employee. This helps to effectively discuss the performance of the individual employees as well as the overall operations.
Operations are all the processes in transforming inputs into desired outputs. These processes must be efficiently and effectively coordinated by managers and eventually they must accomplish specific organizational goals. All operations, despite how well managed they are, are capable of improvement. In order for the operations to be improved however, weaknesses should be identified first. Therefore operations need some kind of performance measurement as a prerequisite for improvement.
The key performance drivers of Supply Chain Management (SCM) are - facility effectiveness, inventory effectiveness, transportation effectiveness, information effectiveness, sourcing effectiveness, pricing effectiveness, delivery effectiveness, quality effectiveness and service effectiveness. These drivers include various performance markers that may be measured quantitatively by gathering information and applying them in SPSS. The works here may principally be quantitative with spellbinding measurable investigation. In the current world, practical supply chain management to help the triple primary concern, (nature, domain, and economy) is likewise included in the extent of supply chain performance drivers. This is relatively a quite new research region.
This is the activity carried out by organizations that own production sites, and their performance has a major impact on product cost, quality, speed of delivery and delivery reliability, and flexibility [8]. As it is quite an important part of the supply chain, production needs to be measured and continuously improved. Suitable metrics for the production level are as follows. Order lead-time, the total order cycle time, called order to delivery cycle time, refers to the time elapsed in between the receipt of customer order until the delivery of finished goods to the customer. The reduction in order cycle time leads to reduction in supply chain response time, and as such is an important performance measure and source of competitive advantage [9]. It directly interacts with customer service in determining competitiveness. Range of product and services: According to [8] a plant that manufactures a broad product range is likely to introduce new products more slowly than plants with a narrow product range. Plants that can manufacture a wide range of products are likely to perform less well in the areas of value added per employee, speed and delivery reliability. This clearly suggests that product range affects supply chain performance. Effectiveness of scheduling techniques is another important measure of supply chain effectiveness. Scheduling refers to the time or date on or by which
Zanjirani F., Rezapour, S. & Kardar, L. (2011) Logistics operations and management concepts and models, 1st ed. London ; Elsevier.
For Key Performance Indicators (KPI) to be successful, it needs to have the following characteristics:
These benefits are best discovered and maximized if used in conjunction with KPIs. A KPI is a key performance indicator and they allow a company to measure and manage ...
Coyle, J., Langley, C., Gibson, B., Novack, R. and Bardi, E. (2008).Supply Chain Management: A Logistics Perspective. 8th ed. Cengage Learning, p.366.
Traditional performance measurement designs system of measures that mostly are cost-efficiency-oriented and are measured only in financial terms. This system does not provide non-financial measures that are also link to the organization’s business strategy. The application of this system is basically suitable for mass production companies with the purpose of minimizing cost.
As an outcome of the thesis, my professional interest on the issue associated with the development of logistics sector has been enhanced. Furthermore, I am planning to keep an eye on the sector to enhance my knowledge which will benefit me and the organization I work for.