Supply Chain Management

Coursework Report

By XYZ

ID:

Title: Supply Chain Management

Contents
Types of Logistic Performance Indicators ............................................................ 3

Cost Indicators .................................................................................................. 3

Quality Indicators.............................................................................................. 3

Importance of Developing Logistic Performance Indicators ............................... 4

References ............................................................................................................. 8

Types of Logistic Performance Indicators

Organisation for Economic Co-Operation and Development (2002, pp 34) has distributed the logistics performance indicators into two types. First type is cost indicators and second type is quality indicators.

Cost Indicators
These include the following costs Costs incurred in transportation Cost incurred on inventory Cost incurred on sorting and packing Costs incurred on packaging

Quality Indicators
These include the following

Goods & customer services knowledge Availability of any goods Order to delivery lead time and its accuracy Response time for special orders Ability in organising information Ability to organise time Ability to organise accuracy Response time in the event of a mistake.

Importance of Developing Logistic Performance Indicators

The basic purpose of developing logistic performance indicators is to enable a company to evaluate the efficiency and sustainability of its logistics systems. In addition to this, a company can enable itself to monitor how successful it has been in achieving its logistics policies. Furthermore, such indicators help a company to explore any possible improvements. There are different players in a logistic chain and each of them has to play a different role. Every player sets his objectives and the best way to be successful in achieving these objectives is to evaluate every objective. It is usually noticed that in private sector, the management aims to optimise the supply chain to stay competitive in global markets. In public sector firms, the basic aim of the management is to fulfil the assigned responsibilities with the help of such policies that can help it to stay competitive in the international markets. (Organisation for Economic CoOperation and Development, 2002, pp 47).

It is very important for every business to assess its progress in logistics as it is not only important for its own or national competitiveness but it is important from global and social optimisation point of view as well. Logistics performance indicators can be very helpful in evaluating the performance of all the major players including customers, shipping companies, service providers and government. It is not possible to evaluate the logistics systems completely but a

relative evaluation is always possible that can help a company to compare its performance with other countries of the world (Schonslebn, 2004, pp 192).

Supply chain benchmarking and a rigorous approach towards logistics is beneficial for a business as it helps a company to take critical measures for improving its performance. There are many tasks that need to be evaluated and the idea of key performance indicators is useful in doing this evaluation. The recent years have witnessed much interest in the Balanced Scorecard concept. The basic idea behind this concept of Balance scorecard is the fact that there are so many performance indicators and most of these are non financial and it can provide the management with better means to achieve their targets (Christopher, 2005, pp 278).

Logistics plays an important role in improving the firm performance. It enhances the value of a firm, reduces capital consumption and expenses. Considering all this, financial performance of any firm decides its existence. It is very important for any business to measure and improve its financial performance. A constant evaluation of performance can help a business to stay competitive in the market and produce better results than its competitors (Frazelle, 2001, pp 40).

Lohman et al. (2004) has quoted the example of DHL (a leading world courier company). The authors have highlighted the use of logistics performance indicators in DHL and the benefits company has gained through all this process. The company has a comprehensive system of evaluating logistics performance. It monitors the performance of every player involved throughout all the operations. All this process has helped the company to address the issues immediately and improve all the supply chain process as and when required. Effective supply chain management has enabled the company to remain one of the leading courier companies in the world. The customers feel satisfied with the company and they prefer to send their consignments through DHL.

Kleinjen and Smits (2003) conducted a research on the effects of logistics performance evaluation and the financial performance of different firms. The research involved the data of 200 firms between 1998-2000. The results of the research indicated that the firms that had effective logistic performance evaluation methods in place showed better financial performance as compared to those that had limited systems in place. The authors suggested that it is vital for every business to evaluate its costs incurred on different activities and quality of the products it offers to its customers. The authors further argue that constant evaluation of product delivery to the customers results in better customer satisfaction and ultimately more loyal customers and better financial performance for a business.

Beamon (1999) analysed the data of 67 firm in Belgium. The purpose of this research was to find out if the effective time management evaluation and monitoring system in a firm affects its financial performance. The results of this research indicated that the firms that had an effective time management evaluation system in place produced better results than others. Though the relationship was positive but it was not very strong. The author concluded that its not only monitoring of timely delivery of goods to the customers that results in better performance but there are some other logistic performance indicator that are vital for the financial performance of a company. The author suggests that the most important performance indicator that improves the performance of a firm is evaluation of product quality. In addition to this, the author suggests that a company can gain competitive advantage over its competitors if it evaluates the costs on manufacturing and delivering each product as it can help in reducing the costs and transmitting the incentive to the customers.

References
Beamon. M, 1999, Measuring Supply Chain Performance, International Journal of Operations and Production Management, Volume 19, Number , pp 275-292 Kleijnen. C, Smits. T, 2003, Performance metrics in supply chain management, Journal of the Operational Research Society, Volume 54, Number 5, pp 507-514 Lohman. C, Fortuin. Wouters. M, 2004, Designing a performance measurement system: A Case Study, European Journal of Operational Research, Volume 156, Number 2, pp 267-286 Frazelle. E, 2001, Supply Chain Strategy: The Logistics of Supply Chain Management, 1st Edition, McGraw-Hill Professional. Schonsleben. P, 2004, Integral Logistics Management: Planning & Control of Comprehensive Supply Chains, 2nd Edition, CRC Press Christopher. M, 2005, Logistics and Supply Chain Management: Creating Value-added networks, 3rd Edition, Pearson Education Organisation for Economic Co-operation and Development, 2002,

Benchmarking intermodal freight transport, 1st Edition, OECD Publishing Organisation for Economic Co-operation and Development, 2002, Transport Logistics: Shared solutions to common challenges, OECD Publishing