global logistics and supply chain management

8/14/2019 Global Logistics and Supply Chain Management

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Global Logistics and Supply ChainGlobal Logistics and Supply Chain

ManagementManagement

John Mangan

Chandra Lalwani Tim Butcher

ISBN: 978-0-470-06634-8

1


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TThe Contents of the Bookshe Contents of the Books

(Chapter 11)(Chapter 11)

TThe Contents of the Bookshe Contents of the Books


Presented by Sean M Hsu

Advisor : Dr. Jr Jung Lyu


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3

Chapter 11Chapter 11

MeasuringandManagingLogisticsPerformance


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4

Learning objectivesLearning objectives

Understand basic forms ofperformance measurement used in a logisticscontext such as tacho-graphs ( / ) in road haulage ( ) and space utili-zation ( ; ) in warehousing

Illustrate the trend towards measurement of a wider array of activitiesand the eight driving forces behind this trend

Explain why many LSPs (logical signal processor ) nowroutinely share key performance data with customers

Understand the role of benchmarking in the context of logisticsperformance management

Identify how many and which KPIs to track, how they are embedded within the organization, how they fit with

widercompany objectives, where the requisite-data () will come from, and who (at what levels within the

organization) should receive the information generated by these KPIs

Understand in particular warehouse/inventory metrics and total landedcosts

[tqUh


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5

Basic measurementBasic measurement

LSPs traditionally employed measures that were

either very basic from an operational viewpoint,

or imposed on them by law


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The tacho-graphThe tacho-graph

Fitted to a truck to record its speed, distance

travelled and any breaks taken ( / )

Used by police forces to ensure that laws relating

to the maximum hours a truck driver can work are

observed

The rules are designed to limit continuous driving time

and detail minimum breaks and rest periods


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7

Resource utilization measuresResource utilization measures

At the broader company level the key inventory measure:

Inventory turnover (from a financial perspective)

Warehouse utilization measures

Total number of pallet ( ) or carton spaces consumed vs. totalavailable

Total space consumed within the warehouse

Throughput ( / ) , e.g. total number of

shipments received

Road transport utilization measures

Total number of deliveries successfully completed vs. dropped

deliveries (i.e. failed deliveries)


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A contemporary viewpointA contemporary viewpoint

Todays 3PLs not only have to display expertise inoperational management, they must also keep track of eachtransaction and ensure that they and their customers andagents can have access to information relating to this flow asand when it is required

Such is the importance of monitoring this information thatmany 3PLs now have dedicated staff whos job it is to recorddata that can be used in the development of metrics ( / ) SCOR Model Metrics

(metrics) PerformanceMetrics: The Measurement of Healthcare Delivery

Performance within a New Built Hospital USCERT

Security Scoring Standards of USCERTUS-CERT metric value metric value 0 180The Metric Value is used to score a vulnerability by USCERT, and the range of the metricvalue is from 0 to 180.


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9

Key performance indicatorsKey performance indicators

KPIs are shared with staff at all levels and in all

functions, with partners and agents, and most

importantly with customers

Most large customers now hold formal business

reviews with their 3PLs where the presentation of

KPIs is a key part of the meetings focus

Logistics businesses now see measurement of theperformance of all operational areas as a common

requirement from their customers


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(

)

(

)

KPIs

KPI


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KPIKPI --SMART--SMART

S Simple (or Specific )

M Measurable (or Money )

A Achievable (or Approachable )

R Realistic (or Result-oriented )

T Timely (Timing )

( )

KPI (%) - Money


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Fundamentals-Fundamentals-

NPV, ROI, EVA, BET (Break-Even Time )

/


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Driving forces forDriving forces for

performance measurementperformance measurement

Increased reliance on contract manufacturers Strategic importance ofLSPs to supply chain success Adoption of manufacturing management principles

Impact on customer experience Increased competition Information technology improvements Empowerment practices

( )

Employee motivation


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Selecting the best measuresSelecting the best measures

measure results, not activities

it is all too easy to focus on simply assimilating data (

/ ) without necessarily understanding how this

data may be used only Focus on KPI When setting KPIs, focus on what benefit one hopes to

gain as a result of having these measures in place tobe in proportion

Dont focus on what data may be easily available


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Quantitative vs. qualitative KPIsQuantitative vs. qualitative KPIs

The majority of measures should be focused onquantitative results ( )

Measures based on raw data can often be better for accurately

comparing performance over time, and indeed for predicting

future results

Quantitative results are more reliable when comparing over time,as long as the data used to generate them can be replicated without

error(Forecasting & Predicting) Forecasting :

Predicting : ( )

Some qualitative measures can also be useful ( )


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BenchmarkingBenchmarking

Companies should always look to emulate// best in

class

This is the role of benchmarking

Logistics companies rely on referrals / / fromnot just customers, but also from competing firms

The referring company may not have the required capacity

but wants to fulfil their customers requirement

It is therefore important that some benchmarking ofperformance can first take place [qati


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BenchmarkingBenchmarking

To benchmark against the industry, the company needs to

use a similar set of measures in orderto map

performance against the companies being benchmarked

The time to first consider benchmarking is when acompany is initially putting together a set of performance

measures

It should be seen as a continuous process, and not as a

once off project Todays logistics industry is very dynamic and benchmark

levels of performance can constantly change


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18 OTD is on-time delivery; FTE is full-time equivalent, i.e. the equivalent of one employee

Figure 11.1Figure 11.1 Category of metric reportingCategory of metric reportingTop-down & Bottom-up : Strategy vs. KPI


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Figure 11.2 Goals and Metrics for use in a typical balanced scorecard. Source:

based on Kaplan, R. & Norton, D. (1992)

The balanced scorecard measures that drive performance,

Harvard Business Review, JanuaryFebruary


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&

Objectives Measures Targets Ini tiatives

To succeed

financially,

how shouldwe appear to

our share-

holders?


To achieve

our vision,

how will wesustain our

ability to

change and

improve?

Objectives Measures Targets Initiatives

To achieve

our vision,how should

we appear

to our

customers?


To satisfy our

shareholdersand customers,

what business

processes must

we excel at?

Source: The Balanced Scorecard Collaborative

,


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(Policy & Top-down)(Policy & Top-down)

- Mobilization- Mobilization

- Strategic Management- Strategic Management

(Continuous Improvement)(Continuous Improvement)

- Learning organization- Learning organization

- Analytics and IS- Analytics and IS

- Link budgets & strategy- Link budgets & strategy

(Top-down & Bottom-up)(Top-down & Bottom-up)

- Strategic awareness- Strategic awareness

- Personal scorecard &- Personal scorecard &

compensationcompensation

(Cop/ Sop/ Mop)(Cop/ Sop/ Mop)

- Corporate role- Corporate role

- Business unit synergies- Business unit synergies

- Support unit synergies- Support unit synergies

(( / SOP/ SIP)/ SOP/ SIP)

- Strategy maps- Strategy maps

- Balanced Scorecard- Balanced Scorecard

- Integrate operational tools- Integrate operational tools


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(Core-Tech, Top-down, and Strategic Matrix)

( )

, OLAP Reports

On-Line Analytical Processing

ERP, BI (Business intelligence, BI), ISO 9000, 6 BI

BI ( / )


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KPI

KPI

&

KPI


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e

:

:


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Strategy

Internal Customer Financial

Process T1

T2

T0

Learning

T3

Balanced Scorecard:Balanced Scorecard:

Causal RelationshipsCausal Relationships


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Inventory / warehouseInventory / warehouse

related metrics -related metrics - receivingreceiving

Generally the first to be recorded, because receipt of product is oftenthe most important transaction

If the receiving process is well thought out and implemented, then stockaccuracy and product in/tegrity should also be well managed

If product is received into the correct location, and in the correct quantity,

then the subsequent picking process too has a good chance of beingproblem free

Receiving metrics

Receiving time

Receiving On-Time Delivery

Delivery paperwork detail is correct Part numbers, lot numbers and purchase order numbers match that on the

paperwork and as against the ASN

Product is physically inspected with unit / carton or pallet countcompleted, product inspected forany signs of in-transit damage,repackaging, etc


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Inventory / warehouseInventory / warehouse

related metrics -related metrics - inventory accuracyinventory accuracy

Inventory metricsact as a measure of operational performance, andreflect the ad/herence to processes, rather than the performance of theinventory team who conduct cycle counts

Cycle-counting of product is an activity that customers usually take akeen interest in because the material being counted generally sits on

their balance sheet rather than the 3PLs balance sheet Cycle-counting measures the length of time that inventory is sitting

in the warehouse

An aged stock report, detailing the number of weeks product is in stock iseasiest to report

An overall view of stock movements within the warehouse can be given with areport outlining the number of inventory turns


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Figure 11.3 Total landed costsFigure 11.3 Total landed costs


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Logistics costs performanceLogistics costs performance

A purchasing decision should consider all related

costs:

Freight ( )

Carrying Costs ( )

Duty ( )

Packaging ( )

Warehousing ( )

Locali/zation ( )


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3PL cost models3PL cost models

Cost plus margin( ; )

Often the preferred model for3PLs

Advantages:( )

It provides complete trans/parency for all parties involved

Risk is reduced for both parties

Disadvantages:( )

Often a reluctance for the 3PL to drive continuous improvement

Resources may be fixed at a level that meets the peak season demand

Resources employed may not be adequate to meet businessrequirements

Little opportunity for 3PLs to make high profits


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3PL cost models3PL cost models

Transactional Pricing

3PLs will use all their available resources across multiple

customers and quote a unit rate for standard warehouse activities

Advantages:

Resources are generally not fixed by the customer

The 3PL will be highly motivated to drive efficiency at all stages of

their process as any savings made will result in higher profits

Disadvantages:

The customer may not always get the customer service that they

require

The 3PL needs to ensure that special requests are charged separately

The customer does not have transparency ( ; )


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Service level agreementsService level agreements

A mutually agreed and understood agreement put in placebetween both the companybuying the service and the companyproviding the service

To include:

Roll-out and duration of the service or process beingpurchased

Scope of services

Areas of responsibility (i.e. who is responsible for what) -PIC

Performance metrics


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Supplementary MatterSupplementary Matter


Supplementary MatterSupplementary Matter


~ Some Additional Remarks ~


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Th C l i i f Q li


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The Cultivating for Quality( )

Top-Management

Division Managing

Dept. Managing

Dept. Managing

Unit Managing

Engineer Managing

Engineer Operating

Operator Operating

Top Down

Bottom Up

TQM (Total Quality Management)

Policy Deployment

QMU (Quality Management for Unit)

SPC/ SQC Training & Problem-solving

Manufacturing Consulting

QCC Training

Work Training

TQM

SQC

QCC


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XX

XX

XX

TQM

TQM S-W


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QMU

-- &

(COP-SOP-MOP)


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Matrix Organization & TQM


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BSC: Balanced Scorecard

CPM: Corporate Performance Management

KPI: Key Performance Indicator

ERP: Enterprise Resource Planning


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KPI


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(David Norton) (Robert Kaplan)

1992

(Balanced Scorecard, BSC)

Strategic Objectives

Strategy

Financial

Customer

InternalProcess

Key Performance Indicators

Learning &Growth

Vision

(Deployment Framework) (Deployment Framework)

?

?

?

(B l d S d)


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(Balanced Scorecard)


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(Characters) (Characters) (Benefit) (Benefit)

- - - -

- - - -

- vs. - vs. - vs. - vs.

- vs. - vs. - vs. - vs.


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/

/

EPS

/


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KPI

EPS

/

KPI

KPI KPI


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Gartner Research CPM/BSC


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(Strategy Map)(Strategy Map)


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(Strategy Map)(Strategy Map)


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(KPI)

Scorecard Builder ArchitectureScorecard Builder Architecture


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Scorecard Builder ArchitectureScorecard Builder Architecture

ScorecardScorecard

DBDB

Captures

information

about your

scorecard SQL Server

SourceSource

SystemsSystems

ETLETL

UI for

enteringyour

scorecar

d data Web

Service

ScorecardBuilder

Data

entryinterface

for

custom

targets

DataEntry

Deploy your

scorecards Customize

your views Sharepoint

Portal

Server BSC-

specific

web parts

ScorecardPresentation

ScorecardEngine

Understands

your BSC data Builds the

scorecard

ScorecardScorecard

CubesCubes

Scorecard-

created

cube(s) SSABI-based,

customizable

UI for

buildingyour

strategy

maps Visio

Strategy MapBuilder

Interface

to mapscorecar

ds to

data

sources

DataSources


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Next Step?Next Step?

ER

P

O

L

A

P

Data

Mining

ProcessProcess

StrategyStrategy

TechnologyTechnology


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Managing Supply Chain Information at HBOS:Managing Supply Chain Information at HBOS:

The SRM (Supplier Relationship Management) initiativeThe SRM (Supplier Relationship Management) initiative


Managing Supply Chain Information at HBOS:Managing Supply Chain Information at HBOS:

The SRM (Supplier Relationship Management) initiativeThe SRM (Supplier Relationship Management) initiative


~ with 3 Questions for the case ~

The case always generates much debate about the objectives of the system.

Taken at face value, the system is very successful, but a deeper analysis willreveal that are potential difficulties with it. In particular

Is the strategy chosen su/stainable?

Is it in the long term interest of the bank to institutionalize adversarial

relationships ( ) with its suppliers via thesystem?

Is the architecture future-proof? ( )


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Question 1Question 1Question 1Question 1

1. Which procurement decisions and activities

(Strategical, Tactical and Operational) and least well

supported by the new system?

A general way of SRM in Taiwan is having a series ofEstablishing OutsourceeEvaluation Item Systems, including selection, counsel, guidance and assistance,

adopting QSA, QPA, etc. to do Surveying and Auditing. The approval system, forSuppliers, Outsourcees, Offshorers, and Subcontractor is combined with Global

Logistics System and SCM, as one part of an integrated operation system.

I t l B i P M


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Service

to the

Customer

Internal Business Process Measures

& the Balanced Scorecard(Source: Kaplan & Norton, 1996)

Model of Internal Business Process Logistics

Customer

Need

Identified

Innovation

Process

Operations

Process

Post-Sale

Service

Process

Customer

Need Satisfied

Identify

Market

Create

Product

Build

Product

Deliver

Product

Relevant

Metrics:

Development

Cycle Time

Quality

Defects

MCE

Delivery

Cycle

Time

Service

Satisfaction

St t i l l ( )


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Strategic level : ( )

According to Walters (2002) the logistics strategy of an organization consists of all thestrategic decisions, policies, plans, culture relating to the management of its supply chain.

Strategic decisions in purchasing will therefore be concerned with determining the mission ofthe purchasing function, decisions about principles and decisions about implementation.

HBOS seems to have set out (begun) on a cost reduction mission. The main strategic benefitof the system is that it enhances HBOSs power over its suppliers.

Through the system, HBOS has the ability to realize the combined purchasing power of the 2merged banks. Ultimately this could lead to a cost advantage for HBOS.

Tactical level : ( )

The system aids analysis by presenting information to the purchasing team in a way that aidstactical decisions and explore opportunities for saving. For instance, buyers have moreinformation available about suppliers and their performance, which helps the negotiation process.

Again is can be useful to add depth to the discussion here by asking students how supplierperformance seems to be measured by HBOS at the moment. More insightful answers would willrecognize that supplier performance only seem to be measured through price at the moment. Tan etal. (2002) have shown that is increasingly becoming unusual with Quality levels, Service levels and

on-time delivery (QCD) ranked as the most important supplier evaluation practices by the companiesthey surveyed.

Operational level : ( )

At an operational level, the system is of limited use in so far as ( ... )

no information exchange is currently taking place with suppliers. More insightful answers argued

that other secondary operational benefits are likely such as enhanced reporting information.


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2. Explain what is likely to have contributed to the success

of the project.

DeLone and McLeans model (1992; 2003) is useful to explore system success.


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3. What challenges are facing HBOS on the road to true

Supplier Relationship Management?

Ward and Griffiths (or McFarlans) Grid show that the system is evolving,and the objective is to expand its true SRM functionality beyond thedecision support functions that are currently in use.

Some people will have realized that the system is seemingly designed to

improve HBOSs bargaining power. This is recognized by Taylor when heargues: Unless purchasing is delivering significant savings, all itsother work is devaluated.

There are no features in the system that seem to support relationships.The new move into eauctions seems to confirm this strategy. We know forinstance that little or no electronic information exchange takes place with

suppliers. In moving to true SRM, HBOS may realize that its suppliersare demanding more of a win-win situation and they are unlikely to relishcollaborating with a system designed solely to drive prices down. At anarchitecture level, the data-warehousing solution implemented is unlikely tobe well suited to supporting e-purchasing, and information exchange withsuppliers. It is therefore likely that the move to true SRM would requiresubstantial additional investment.

xRM definedxRM defined


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xRM definedxRM defined(Extended Relationship Management)(Extended Relationship Management)

1. PRM - Partner Relationship

2. CRM - Customer Relationship

3. ERM - Employee Relationship

4. SRM - Supplier Relationship

5. ChRM - Channel Relationship

S li R l i hi MS li R l i hi M


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Supplier Relationship ManagementSupplier Relationship Management-- OObjectives (SRM)bjectives (SRM)

Source: JDEdwards.com

S SS S


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System SuccessSystem Success

Source: DeLone, W. H. & McLean, E. R. 2003

R hR t h


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Recent research:Recent research:

opportunities and obstacles to SRMopportunities and obstacles to SRM

Increased customer service

Increased Switching costs

Increased Geographical Reach

Be viewed as a technology leader

Network and System instabilities

Integration Difficulties

Security Risks

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