Intended learning outcomes: Present the basics of the measurement, meaning, and practical applicability of logistics performance indicators. Describe performance indicators in the target areas of quality, costs, delivery, and flexibility. Produce an overview on performance indicators of the primary entrepreneurial objective.
A performance indicator or performance criterion is the specific characteristic to be measured for estimating performance.
A performance measurement system collects, measures, and compares a measure to a standard for a specific performance indicator.
A performance measure, or performance measurement, is the actual value measured for the indicator ([ASCM22]).
Appropriate performance indicators are meant to show the degree to which entrepreneurial objectives (see Figure 1.3.1.1) are fulfilled or not fulfilled.
Logistics performance indicators analyze the effect of logistics on entrepreneurial objectives in the four target areas of quality, costs, delivery, and flexibility.
Descriptions of logistics performance indicators can be found in [OdLa93] or [Foga09], Chapter 5, and in the following. Whenever possible, a logistics performance indicator will give direct indication of fulfillment of one of the individual objectives within a target area. A performance indicator relates to a logistics object and thus becomes an attribute of that object — and sometimes it becomes a logistics object in its own right.
Global measures measure the overall performance of a company or supply chain (such as cash flow, throughput, utilization, inventory).
Local measures relate to a single resource or process and usually have a small influence on global measures (i.e., volume discount on an item, lead time for stock entries, utilization of a storage location).
In the following, we introduce a balanced set of global measures from a logistics perspective. This balance is one of the requirements of the balanced scorecard, an approach that pointed out the one-sidedness of performance indicators in the financial sector, which (too) often only refer to the company’s primary entrepreneurial objective of return (see [KaNo92] and Section 1.3.2). A systematical derivation of the balanced set of performance indicators from the company’s strategy can be found in [Schn07]. Together with indicators from other areas of the firm, such as finance, marketing, and R&D, the logistics indicators form a complete set of measurements of performance, and thus a basis for improving company performance.
Course section 1.4: Subsections and their intended learning outcomes
1.4 Performance Indicators and Performance Measurement
Intended learning outcomes: Present the basics of the measurement, meaning, and practical applicability of logistics performance indicators. Describe performance indicators in the target areas of quality, costs, delivery, and flexibility. Produce an overview on performance indicators of the primary entrepreneurial objective.
1.4.1 The Basics of the Measurement, Meaning, and Practical Applicability of Logistics Performance Indicators
Intended learning outcomes: Identify central problems in terms of the meaning and applicability of performance indicators in practice.
1.4.2 Scrap Factor, Yield Factor, and Complaint Rate — Performance Indicators in the Target Area of Quality
Intended learning outcomes: Differentiate between the indicators scrap factor and yield factor. Present the indicator complaint rate.
1.4.3 Stock-Inventory Turnover, Work-in-Process-Inventory Turnover, Work Center Efficiency, Capacity Utilization, and Administration Cost Rate — Performance Indicators in the Target Area of Costs
Intended learning outcomes: Present the performance indicators stock-inventory turnover, work-in-process-inventory turnover, work center efficiency, capacity utilization, and administration cost rate.
1.4.4 OTIF, Fill rate, Customer Service Ratio, Delivery Reliability Rate, Lot Size, Capacity Utilization, Order Confirmation Time — Performance Indicators in the Target Area of Delivery
Intended learning outcomes: Present performance indicator fill rate, also called customer service ratio, or OTIF (on-time and in-full). Identify the performance indicators delivery reliability rate, batch size or lot size, capacity utilization, value-added rate of lead time, variance in work content response time and order confirmation time.
1.4.5 Bid Proposal Success Rate, Order Success Rate, Breadth of Qualifications, Temporal Flexibility, Supply Chain Flexibility, Supply Chain Adaptability, Overall Value at Risk (VaR) — Performance Indicators in the Target Area of Flexibility
Intended learning outcomes: Present the performance indicator bid proposal success rate, order success rate, breadth of qualifications, and temporal flexibility. Describe the SCOR indicators upside supply chain flexibility, upside supply chain adaptability, downside supply chain adaptability, and overall value at risk (VaR).
1.4.6 Cash-to-cash cycle time and RONA — Performance Indicators of the Primary Entrepreneurial Objective
Intended learning outcomes: Present the performance indicator cash-to-cash cycle time and return on net assets (RONA).
Course 1: Sections and their intended learning outcomes
Course 1 – Logistics, Operations, and Supply Chain Management
Intended learning outcomes: Describe basic definitions, issues, and challenges. Identify business partners and business objects. Explain strategies in the entrepreneurial context. Disclose how performance is measured.
1.1 Basic Definitions, Issues, and Challenges
Intended learning outcomes: Produce an overview on terms of the working environment and of business life. Explain service orientation in the classical industry, product orientation in the service industry, and the industrial product-service system. Disclose the product life cycle, the synchronization of supply and demand, and the role of inventories. Produce an overview on supply chain management, the role of planning and control as well as the SCOR model.
1.2 Business Objects
Intended learning outcomes: Present business-partner, and order-related business objects in detail. Explain product-related, process-related, and resource-related business objects. Produce an overview on rough-cut business objects.
1.3 Logistics, Operations and Supply Chain Management Strategies in the Entrepreneurial Context
Intended learning outcomes: Differentiate between various entrepreneurial objectives in a company and in a supply chain. Explain resolving conflicting entrepreneurial objectives. Describe the customer order penetration point (OPP) and the coordination with product and process design. Produce an overview on the target area flexibility: investments in enabling organizations, processes, basic technologies, and technologies toward personalized production.
1.4 Performance Indicators and Performance Measurement
Intended learning outcomes: Present the basics of the measurement, meaning, and practical applicability of logistics performance indicators. Describe performance indicators in the target areas of quality, costs, delivery, and flexibility. Produce an overview on performance indicators of the primary entrepreneurial objective.
1.5 Summary
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1.6 Keywords
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1.7 Scenarios and Exercises
Intended learning outcomes: Describe improvements in meeting entrepreneurial objectives. Differentiate between entrepreneurial objectives and the ROI. Assessing the Economic Value Added (EVA) of Supply Chain Initiatives. Derive rough-cut business objects from detailed business objects.
1.8 References
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