Intended learning outcomes: Identify central problems in terms of the meaning and applicability of performance indicators in practice.
In actual practice, the measuring of logistics performance varies in difficulty and usually requires that certain aspects be counted. With the exception of local measures, it is generally not possible to assess these aspects without expending a lot of time and energy. In addition, integrating and compressing the local measures into global measures, covering several levels, for example, can be very problematic.
The following sums up central problems in terms of the meaning and practical applicability of performance indicators in the form of practical methods. The problems are typical of any quality measurement system and, in part, costing systems as well.
- General performance indicators: Simple, measurable performance indicators are often so general and qualitative in meaning that no practical steps can be derived from them without making additional, nonquantitative, and implicit assumptions. An example of such a performance indicator is customer satisfaction.
- Lack of comprehensive measurement methods: Simple, applicable performance indicators often cannot be measured directly. They require various, at times complicated or inexact measurements that are combined with nonmeasured, implicit methods to yield the desired indicator. A good example is flexibility potential.
- Distortion of the processes: Each measurement affects the process being measured. The disturbance can be so great that the process would behave differently under nonmeasurement conditions.
- Meaning of the performance indicators: The absolute value of a performance indicator has little meaning as such. Only repeated comparison of measurements of the same performance indicator over time can make the performance indicator an instrument of continual process improvement (CPI).
- Comparability of performance indicators: Benchmarking with other companies, in the same supply chain, has meaning only if the competitor has used the same bases of measurement. In practice, it is common to find that companies use different reference objects, the objects to which certain performance indicators refer. An example is fill rate or customer service ratio (see Section 1.4.4). Fill rate can refer to either order positions or items; its measurement can be based on quantity units or value units. Before making comparisons, therefore, it is essential to know how another enterprise defines the performance indicator.
It makes sense to weigh the value of the potential application of the measurement against the time and effort required by the measurement. In practice, a few simply measured performance indicators have proven worthwhile. Employees must then apply the measurement using a multitude of means that cannot be directly derived from the measurement.
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).
