Post on 26-Dec-2015
OMSAN LOJİSTİK
Performance Measurement in Logistics and Supply Chain
ProcessesStrategic Logistics Management
- Leadership Program -
04/19/23
Companies are complex logistics systems and interact within interdependent supply chains…
• Complex flow of materials, information and funds within the four walls of a company require a strategic approach to logistics considering performance measures, process design, infrastructure and systems requirements and organization development
• Logistics goes beyond the company frontier. Firms interact within interdependent supply chains along with distributors, manufacturers, third-party logistics providers, customers, etc.
• Internal and external coordination of logistics flows is critical to capture untapped savings and cost reduction opportunities in business.
04/19/23
Some upfront comments…
• There are not perfect performance systems, but there are BAD ones!
• Keeping discipline in creating, tracking and improving performance
pays off
• The theory of performance measures holds in any industry, any
country, any business process
• Be critical of your performance system, always try to reduce,
consolidate, eliminate redundant inefficient ratios
• Establishing key performance measures reflects the way you see things (your logistics strategy)…
04/19/23
… and this is the way we see the logistics function and its processes …
Consumption Point
(Factory, Store, User,
Consumer)
Sourcing Point(Supplier,
Factory, Store, User)
Fulfilling your service promise, while optimizing
system’s resources
Fulfilling your service promise, while optimizing
system’s resources
Logistics (bridge)
Logistics
04/19/23
… and logistics processes are the components of the bridge that holds the stream of materials,
information and funds…
04/19/23
Each logistics process has a specific role to assure the support of service levels and the optimization of resources.
Customer Service
Inventory Planning
SourcingTransportation & Distribution
Warehousing & DC Operations
Define logistics service policyCapture demand
Define inventory levels to fulfill demand
Select optimal sourcing mix to meet inventory requirements
Optimize O-D lanes to meet response time requirements
Fulfill orders with local
inventory to meet response
time requirements
04/19/23
Logistics performance measures will basically define success in fulfilling an overall role or a
specific role• Profiling
– Descriptive system of logistics activities– Neutral numbers, statistics
• Measuring System Design– Good vs. Bad– Action oriented numbers
• Auditing– Internal focus
• Benchmarking– External focus
• Logistics Projects Justification
04/19/23
Logistics activity profiling is the analysis of historical transaction data for the purposes of projecting activity and
determining resource requirements.
• Gaining understanding of your logistics activities• Stimulate creative thinking• Identify quick fixes
Sales Data. Item Data.
LogisticsProfilingPlatform:
Item ProfileCustomer
ProfileCustomer-Item
Sales ProfileOrder Profile
InventoryProfile
OperationsProfile
LogisticsActivityProfile.
•Sources of data
•Establish relationships
• Identify decisions to be made
OrderMaster
Order HeaderOrder Detail (Lines)
04/19/23
Some profiles will look like this. Customer segmentation and product segmentation are examples of it. Some
decisions based on profiles could be …
• Customer Response Measures• Customer Classifications• SKU Classifications• Customer-SKU Classifications• Customer Service Policy Design• Inventory Management
Performance Measures• SKU Categories for Inventory
Management• Inventory Turnover and Fill Rate
Targets by Logistics Segments• Forecasting Models by SKU
Category• Inventory Reduction Opportunities
by Logistics Segment
0
500,000,000
1,000,000,000
1,500,000,000
A B CBill-to Category
A DFUs
B DFUs
C DFUs
Total Customer/Item ABC
0%
20%
40%
60%
80%%
To
tal (In
ven
to
ry o
r S
ale
s)
A DFUs B DFUs C DFUs
6/18/93 Inventory "Snapshot"
% Sales by Category
Management Strategy
Inventory Strategy6/18/93 "Snapshot" versus Strategy
04/19/23
Item-Order Correlation Profile helps develop DC slotting rules. Before this analysis slotting was based on a
catalog product arrangement…
• This is the item-order correlation of a mail order retailer.
• It looks at the probability that 2 items were ordered together.
• First 3-digit code corresponds to item class
• Second 1-digit code corresponds to size
• Third 1-digit code corresponds to color
• Do you see the correlation? • What would you do different in
the warehouse?
Item Number
Item Number
Pair Frequency
189-2-4
493-2-1
007-3-3
119-2-1
999-1-8
207-4-2
662-1-9
339-7-4
112-3-8
189-2-1
493-2-8
007-3-2
119-2-7
999-1-6
207-4-4
662-1-1
879-2-8
112-3-4
58
45
36
30
22
15
12
9
6
04/19/23
DC Operations are full of opportunities to profiling. Be sure to avoid “paralysis for analysis” by making sure every profile is tied to a specific issue or decision to make
• Warehouse Performance Measures
• SKU Categories for Warehouse Master Planning
• Slotting• Storage Mode
Selection• Order Picking
Policies• Warehouse
Layout
2%
3%
5%
10%
15%
10%
5% 5%
10%
15%
10%
5%
1% 1% 1% 1% 1% 1% 1% 1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
10 25 50 75 90 99
% of Lines
% Pallet Ordered
04/19/23
Profiles are different from performance measures in the sense that they don’t “judge” the effectiveness of a
process, they just describe it!
Revenue $000s
Freight $000s
Weight 000lbs. Cases Shipments
Freight /Revenue
Japan 17,680$ 413$ 284 12,390 15 2.33%Taiwan 8,295$ 104$ 232 9,210 17 1.25%Hong Kong 1,375$ 16$ 42 1,670 9 1.17%Australia 883$ 36$ 30 1,335 9 4.12%New Zealand 395$ 11$ 11 511 6 2.81%Malaysia 1$ 1$ 0 3 1 56.25%
Asia-Pacific 28,630$ 581$ 599 25,118 57 2.03%
Canada 1,234$ 45$ 49 2,756 8 3.61%Mexico 226$ 8$ 10 344 3 3.65%U.S. 16,705$ 446$ - - - 2.67%
NAFTA 18,164$ 499$ 59 3,100 11 2.74%
Netherlands 1$ 4$ 13 366 2 387.50%Europe 1$ 4$ 13 366 2 387.50%
Guatemala 2$ 2$ 3 105 1 108.33%Latin America 2$ 2$ 3 105 1 108.33%
OVERALL 46,796$ 1,085$ 673 28,690 71 2.32%
0%
50%
100%
150%
200%
250%
300%
0
50
100
150
200
250
300
350
Standard Deviation/AverageDays in 1992 with Activity
A&B Items
Forecast profile for 2 SKU’s
Freight profile by location
04/19/23
A Logistics Performance System (LPS) has some
features to be considered…• Logistics Performance System looks at:
• Measurement Types (Porter)– Cost– Productivity– Response Time– Quality
• Perspectives (Kaplan)– Shareholders– Employees
– Customers– Suppliers– Society
• Measuring Context
• Control• Scope• Frequency• Level of Detail• Internal Coherence• Aggregation (and
dis-aggregation)• Alignment
04/19/23
Look at these next two charts… Both measure productivity at the warehouse. Same purpose, different context, scope,
detail and frequency
Detailed Report per Employee at the Warehouse
Date: 01/27/94 Shift 2Emp ID: 563 Sup ID: Bob Area: D2 Employee Name: Roman, Peter
START 9731 15:30 0 0 11 0 0 0 0 0 0 0 0 0
DRY 5779 15:41 98% 82 84 0 4 2 141 197 4108 118 197 84 141
MEET 1772 17:05 0 0 18 0 0 0 0 0 0 0 0 0
DRY 5842 17:23 B 95% 62 65 0 3 0 110 155 2489 106 150 65 154
DRY 6166 18:43 L 90% 64 71 0 3 2 102 169 3300 117 169 71 140
DRY 6637 20:24 107% 63 59 0 2 2 88 141 2749 114 148 59 141
BATT 7804 21:23 0 0 13 0 0 0 0 0 0 0 0 0
DRY 6671 21:36 B 20% 23 117 0 2 1 39 52 628 43 52 117 27
STOP 3829 23:48 0 0 0 0 0 0 0 0 0 0 0 0
**TOTAL** 74% 294 396 42 14 9 480 71413274 498 716 396 108
Job Document Start Perf Std Dir Ind Sel Sel PiecesCode Number Time B % Mins Mins Mins Aisle Pallets Items Pieces Weight Cube Pieces Mins /hour
04/19/23
This is a higher scope measurement, actually created from the individual output measures of the
warehouse workforce.
300
400
500
600
700
800
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT
300
400
500
600
700
800
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEPT OCT
7.0
5.0
4.0
Cases
6.0
3.0
2.0
Ho
urs
Total Cases per Month (Thousands)Total Cases per Month (Thousands) Total Labor HoursTotal Labor Hours
04/19/23
Control is a principle in any good LPS. Nobody should be measured by things he/she can’t control. The control levels
will largely depend on your own logistics organization design.
V P M arke ting V P M a n ufa c tu ring
P la nn ing G ro up
O p era to r
C a ll C e n te r
O rd e r E n try
C u s tom e r S e rv ice
In ven to ry P la nn ing
M a nu fac tu rin g P la nn ing
B u yer
P ro cu re m e nt
S u pp ly M a n ag e m e nt
T ra nsp o rta tion
F o rk lif t O p e ra to r
D C 1
W a re h o us ing
D is trib u tion
V P L og is tics V P A dm in istra tion
P re s ide n t & C E O
B o a rd o f D ire c to rs
S h a re h o ld e rs
Management Planning
Supervisor Operator
+
+ ScopeControl
AggregationAlignment
FrequencyDetail
Coherence
04/19/23
Logistics financial measurements are the most common and intuitive type of KPIs. Accounting practices however
may restrain the possibility to compute logistics cost accurately.
• Cost of Logistics Resources + Cost of Holding Logistics Assets– People & Assets
• Logistics Expenses• Views by
– Resource, Activity (Output), Process
Logistics Decision Objective = Max (Corporate EVA)Logistics Decision =
Min (Operating Cost + Capital Cost + Lost Sales)
04/19/23
This financial measure applies to the DC, by process and
presented in a way relative to total warehousing cost
Receiving10%
Shipping20%
Order Picking
55%
Storage15%
Types of Financial MeasuresAggregateBy Unit
Relative (%)
04/19/23
Productivity is measured at the resource level, identifying the
expected output of its consumption.
What’s the resource?
What’s the Output?
Pr = Output r
Consumption r
04/19/23
The first step in determining productivity measures is identifying the logistics resources involved in
every process and activity…
HumanResource
Facilities
MachineryEquipment
Fleet
Inventory
Systems
04/19/23
Logistics Resources
CorporateLogisticsSystem
Logistics Output
In reality, logistics is a system which receives input (resources)
and after some activities (processes) generates output…
Can you tell what the logistics output should be?
04/19/23
Productivity measures could be use to predict additional resource consumption when output will
increase and performance remains equal
WHS Inventory Turn Projections
4.7
5.1
4.44.2
4.4
4.7 4.8
5.1
5.4
4.2 4.2 4.2 4.2 4.2
3.43.63.7
3.94.0
3.0
3.5
4.0
4.5
5.0
5.5
1994
1995
1996
1997
1998
1999
2000
2001
2002
Tu
rns
CASE I. WHS Turns Improve
CASE II. No Turns Improvement
CASE III. Turns Decrease 4% per year
Disney World was predicting additional warehousing space requirements based on inventory turns reduction and equal storage density
04/19/23
Time measurements in logistics report the velocity at which a certain process is conducted• A cycle time measurement will capture
the total elapsed time of an activity from beginning to end.
• It’s like having customers and suppliers with mental stop watches…
t1t4t0 t2 t3
t5
04/19/23
Customer order cycle times will begin at the first point of contact with a customer until the order is delivered and collected
24
72
24
48
2
2
Order Entry Time
Order Processing Time
Purchase Order/ManufacturingCycle Time
Warehouse Order Cycle Time
In-Transit Time
Collections Time
Elapsed Time in Hours
04/19/23
Total Manufacturing Cycle Time… This chart comes from a Coca-Cola Bottler computing their real
Unscheduled Stops2%
Cleaning2%
Unloading Material1%
Replenishment3%
Reviews0%
Decontamination1%
Corrections2%
Maintenance3%
Loading Material2%
Test Batch6%
Calibration2%
Production76%
Replenishment
Unloading Material
Cleaning
Decontamination
Loading Material
Test Batch
Calibration
Production
Maintenance
Corrections
Unscheduled Stops
Reviews
04/19/23
This is Amoco’s Rail Car Cycle Time Analysis. It’s used
to predict real vehicle utilization…Rail Car Cycle Times(Days)
Commodities
Feedstock Intermediate Polymers Total
Rail Car TripPreparation Time
2.1 5 7.1
Loading Time 0.1 0.1 0.2Staging Time 2.1 22 24.1Transit Time 9 6.3 9 24.3Trip Delay Time N/A N/A N/A N/AUnloading Time N/A N/A N/A N/ADetention Time 7.3 21 28.3Return Time 8.2 10 18.2
Sub-Total 9 26.1 67.1 102.2
Maintenance* 1 1 2Detention** 0.6 0.6 1.2
Total Rail Car CycleTime (Days)
9 27.7 68.7 105.4
04/19/23
The DC is full of response time measurements. Dock-to Stock times, Order Picking Times, Warehouse Order
Cycle Times, etc.
55%
15%10%
20%
0%
10%
20%
30%
40%
50%
60%
Traveling Searching Extraction Other
04/19/23
“Manufacturing” perfect orders is the real goal of a logistics system. LPS includes quality measures to address this objective. The “POP” is a close
approximation to TQM in Logistics
C o m m u nica tio n S ta tus
O rd e r P ro ce ss ing
P ro d uc t A va ila b ility
Q u an tity P ro du ct
O rd e r Fu lf illm en t @ D C
L o ca tion D a m a ge -F ree
O rd e r D e live ry
In vo ice & C o llec tion
P e rfe c t O rd e r !!!
O rd e r E n try
Wha
t is
take
s to
“cr
eate
” a
perf
ect o
rder
?
04/19/23
The probability of shipping a perfect order is the multiplication of the probabilities of the 8 independent
events. All logistics functions are represented in this KPI!
• is entered correctly• has available inventory • has the right amount of the right products• is damage free• arrives on-time• arrives at the right location• is communicated electronically • has no invoice/collections errors
• IS PERFECT:
• 97%
• 80%
• 95%
• 96%
• 72%
• 94%
• 89%
• 93%
• 48%
04/19/23
Perfect Order in Food Logistics by Grocery Manufacturers of America and Food Distributors
International (FDI)
• Complete Order (Discrete Measure 1 or 0, Not Continuous Measure as Case Fill)
• On-Time Delivery (1 hour +/- range (FDI) or 30 min +/- range (GMA))
• Damage-Free Shipment
• Accurate Invoice (Non-Invoiceable Items have Accurate Invoice =0)
04/19/23
One key quality measurement in logistics is fill rate, yet this specific measurement can be
computed in several different ways• Fill Rate (by unit of measurement)
– Total Fill (Binary)– Unit Fill (Percentage)– Case Fill– Order Fill
• Fill Rate (by location)– Global – Local
• Fill Rate (by time period)– Initial – At x-hours– Final
04/19/23
If the LPS is designed around processes and measurement types, it might look like this…
Entry Error %Status Error %Invo ice Error %
OrderEntry Tim e,
OrderProcessing Time
Custom erOrders
per Hour
Custom er ServiceCosts
Custom er Service
Fill Rate %Forecast
Accuracy%
Days ofInventory
InventoryTurnover
InventoryCarrying Cost
Lost Sa lesCost
Inventory P lanning
PerfectP /O%
PurchaseOrder CTSupplier
Lead Time
PurchaseOrders
per Hour
ProcurementCosts
Supply
On-Tim e%Damage-Free%
PerfectDocum entation%
In-TransitTime
Loading/UnloadingTime
FleetUtilization
Shipm ents perPerson-Hour
TransportationCosts
Transportation
ShippingAccuracy%Inventory
Accuracy%
W arehouseOrder
Cycle Time
Units perM an-Hour,
S torageDensity
W arehousingCosts
W arehousing
PerfectOrder
Percentage
LogisticsCycle Time
Cash-to-CashCycle Time
PerfectsOrders
per Log isticsFTE, ROLA
TotalLog istics Cost
LogisticsValue Added
Logistics
LogisticsPerform ance
System
Page 34
Once the LPS is in place a company can begin the auditing process with itself or other companies. A good way to capture
the disparities found in an audit is through a Gap Analysis
• The logistics performance gap analysis is used to compare logistics key performance indicators with benchmark indicators.
• The gaps are used to assess strengths and weaknesses; to identify complementary logistics benchmarking partners; and to develop a cost-benefit justification of a world-class logistics initiative.
POCT (24/72)
VU (65%/95%)
COCT (42/24)
LCSR (17%/10%)
LWFP (2.4/1)
IT (2/8)
SD (8/6)
IA (90%/97%)
POP (45%/75%)
VAS (5/5)
0
1
2
3
4
5
Company X
World-Class
04/19/23
The architecture of the LPS (Excel Spreadsheet)…
Corporate Param eters
Logistics O utput
SourceData
W orkforce Cost W age Rates
W orkforce
Space Equipm ent Fleet
Logistics Assets
* Carrying Rate
Asset Cost
Third-Party Expenses
ResourceConsum ption
Response System
Inventory P lanning
Supply
Transportation
W arehousing
ProcessCosts
Logistics Financials
Logistics Productivity
Quality
Response Tim es
Gap Analysis
Financial Justification
LogisticsPerform ance
Logistics Performance System
04/19/23
Benchmarking Logistics Performance Measures
• Process vs. Performance Benchmarking• Internal vs. External Benchmarking• Public vs. Private vs. Competitive
Benchmarking
• Major Issues in Benchmarking• Selecting Partners• Selecting KPIs• Comparability
04/19/23
$0
$100
$200
$300
$400
$500
$600
$700
$800
Billions
USA
Germany
France UK
$900
Japan
$1000
Robert Delaney, Cass Information Systems, Inc
Some public, performance benchmarks: Global Logistics Cost & Logistics Cost as a % of GDP in the
U.S.
15.7%
12.311.4
10.4 10.3 10.1 10.1 9.9 10.1
1980198019851985 19901990 19951995 19961996 19971997 199819981999199920002000
$1 Trillion+$1 Trillion+
04/19/23
WALL STREET & SUPPLY CHAIN GLITCHES WALL STREET & SUPPLY CHAIN GLITCHES
861 companies reviewed 1989 through 1998: Georgia Institute of Technology, http://gtresearchnews.gatech.edu/newsrelease/CHAINR.html
Stock drop of 8.62% = $120 million decrease in shareholder value
04/19/23
0
2
4
6
8
10
12
14
16
1995 1998 2000
52 Wholesalers 189 Manufacturers 40 Retailers
6.2 8.1 10.2
8.4 11.3 14.4
10.3 12.1 14.5
65% increase!!!
WERC, 2001
Data source for DC Inventory Turns in the U.S. is WERC (Warehousing Education and Research Council)
04/19/23
Cost Components 1975
Transportation
Inventory Carrying Charges
Warehousing
Admin. / Order Processing
$.068
$.058
$.048
$.015
$.035
$.020
$.024
$.016
TOTALS $.189 $.095
Herbert W. Davis, 2001
2000
$.033
$.021
$.020
$.012
$.086
2000
Average Mfg
Logistics cost components have evolved over time. Herb Davis database has been recording Total Logistics Cost since 1970. This could be a good source of public,
performance benchmarks
04/19/23
Department Stores Publishing HardwareTelecommunications & Utilities Medical Electronics Manufacturing
Service Parts Health, Beauty & CosmeticsFood & BeverageMail Order Public Warehouses
Department Stores Publishing HardwareTelecommunications & Utilities Medical Electronics Manufacturing
Service Parts Health, Beauty & CosmeticsFood & BeverageMail Order Public Warehouses
ORDERS / HOURORDERS / HOUR.1 to 6.1 to 6
LINES / HOURLINES / HOUR2.5 to 13.22.5 to 13.2
PIECES / HOURPIECES / HOUR1.2 to 14351.2 to 1435
CASES / HOURCASES / HOUR.7 to 117.7 to 117
ORDER CYCLE TIMEORDER CYCLE TIME2 to 24 HOURS2 to 24 HOURS
ORDER CYCLE TIMEORDER CYCLE TIME2 to 24 HOURS2 to 24 HOURS
ERRORS PER LINEERRORS PER LINE.03 to 1.2.03 to 1.2
ERRORS PER CASEERRORS PER CASE.15 to 1.15 to 1
INVENTORY ACCURACYINVENTORY ACCURACY95.5 to 99.9895.5 to 99.98
INVENTORY ACCURACYINVENTORY ACCURACY95.5 to 99.9895.5 to 99.98
ERRORS / ORDERERRORS / ORDER.05 to 3.5.05 to 3.5
DOCK TO STOCKDOCK TO STOCK4 to 48 HOURS4 to 48 HOURS
DOCK TO STOCKDOCK TO STOCK4 to 48 HOURS4 to 48 HOURS
GEORGIA TECH METRICSGEORGIA TECH METRICS
The AMAT benchmarking exercise story: from public to private, from standard to normalized…
• Increasing top management concern over inventory planning and financial implications
• Decision to evaluate current performance at similar companies and operations
• AMAT Inventory Turns = 1.8• AMAT Line Fill Rate = 92%• Logistics at AMAT qualified as a support
organization for service parts in the high-tech electronics segment.
• Some results…
04/19/23
AMAT public benchmarking effort. We used sources such as Cass Logistics, Herb Davis, and the IOMA Report.
1.8
5.85 4.6
5.3 5.1 4.6 4.33.7 4
30
5.54.3 4.8
1.5
6.5
11.5
16.5
21.5
26.5
31.5
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s
Japan E
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s
Industry Category
Inven
tory
Tu
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92.0%
90.0%
97.0%96.0%
92.0%
94.0%
86.0%
88.0%
90.0%
92.0%
94.0%
96.0%
98.0%
App
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Fill
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AMAT public benchmarking effort. In this case we were looking for line fill rate by industry, being careful with the way companies calculate this KPI
Good, but not good enough. We look terrible, we need more specific comparison points, because we are more complex that all of the other companies…
1.8
10
2
7.1
1.7
6.5
3.7
7
36
30
2.5 2.2 2.8
6.8
4.40.947 3.6
92.0%
98.6% 98.5%
94.7%
97.4%95.0%
97.0%95.0%
97.0% 97.0%
80.3%
83.4%
88.0%
65.0%
1
6
11
16
21
26
31
36
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Kod
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John
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IBM
Company
Turn
s
60.0%
65.0%
70.0%
75.0%
80.0%
85.0%
90.0%
95.0%
100.0%
Fill
Rat
e
We are different… (sure)We are more complex … (sure)
Lets see what makes you more complex
• 1. number of commodities and part numbers • 2. SKU introduction and purging rates • 3. SKU substitutability and interchangeability • 4. response time requirements • 5. number of suppliers and customers • 6. availability of timely, true consumption data • 7. geographic spread of the logistics network • 8. risk of obsolescence • 9. demand variability • 10. inventory management risk
Grading complexity in all benchmarking data points using the 10 factor analysis. Control points Coca-Cola (5) and Defense Logistics Agency (40).
Am
erite
ch
Bak
er H
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s
Bel
lSou
th
IBM
Xero
x
Lani
er
John
Dee
re
Luce
nt
Tech
nolo
gies
Toyo
ta S
ervi
ce
Part
s
Mits
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Serv
ice
Part
s
Ford
App
lied
Mat
eria
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Kod
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PC
Cat
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Cat
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Logi
stic
s
Coc
a-C
ola
DLA
Con
trol
Number and Range of Commodities and SKUs 3 4 3 3 3 3 5 2 4 4 4 4 3 5 4 1 5 5
Rate of Introduction/Purging of New SKUs 3 5 3 4 4 4 5 3 4 4 4 5 4 5 4 1 5 5SKU Substituability/ Interchangability 3 5 3 4 4 4 3 4 3 3 3 5 5 3 3 1 5 5Response Time Requirements 3 5 3 3 3 3 3 3 3 3 3 5 2 3 3 4 3 5Number of Suppliers & Customers 4 2 4 5 5 5 5 5 5 5 5 2 3 5 5 2 4 5
Availability of Timely, True Demand Data 3 4 3 4 4 4 3 4 2 2 2 4 3 3 2 1 4 5
International vs. Domestic Logistics Network 2 5 2 5 5 5 5 5 4 4 4 5 4 5 4 1 5 5Obsolesence Risk 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 2 2 5Demand Variability 2 3 2 2 2 2 3 4 2 2 2 3 3 3 2 1 3 5Inventory Management Risk 2 4 2 2 2 2 3 4 3 3 3 4 3 3 3 2 4 5
Totals 26 38 26 33 33 33 36 35 31 31 31 38 31 36 31 16 40 50
We processed the raw data to create an Inventory Performance Index (IPR) and then plotted the IPR vs. Complexity
Turns Fill Rate Turn Ranking
Fill Rank
IPR Complexity Complexity Index
Complexity Weighted
IPR
Applied Materials
1.8 92.0% 3 4 7 38 0.76 5.32
Baker Hughes 2 65.0% 4 1 5 38 0.76 3.80 John Deere 2.2 97.0% 5 9 14 36 0.72 10.08 Caterpillar 1.7 94.7% 2 5 7 36 0.72 5.04 Lucent Technologies
4 95.0% 8 6 14 35 0.70 9.80
Caterpillar Logistics
6.5 97.4% 9 13 22 33 0.66 14.52
Xerox 7 97.0% 11 11 22 33 0.66 14.52 Lanier 2.5 97.0% 6 10 16 33 0.66 10.56 IBM 3.6 88.0% 7 3 10 33 0.66 6.60 Toyota Service Parts
36 97.0% 15 12 27 31 0.62 16.74
Mitsubishi 30 95.0% 14 7 21 31 0.62 13.02 Ford CS 6.8 83.4% 10 2 12 31 0.62 7.44 Kodak SPC 0.947 96.0% 1 8 9 31 0.62 5.58 Ameritech 10 98.6% 13 15 28 26 0.52 14.56 BellSouth 7.1 98.5% 12 14 26 26 0.52 13.52
At the end, there were only one company we could truly compare AMAT with…
Inventory Performance Ranking vs. Logistics Complexity
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33 3331 31 31 31
26 26
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IPR
IPR
Complexity
Process benchmarking may look like a gap chart against world-class practices. This is an example from Disney’s Warehousing Audit
3,5
3,5
3
3,5
3
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4,5
0
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DC Performance
Measures
Receiving & Putaway
Storage
Order PickingUnitizing & Shipping
WMS
Workforce &
Workplace
World-Class
Disney Merchandise DC
Keep it in perspective…
• “A (potential) problem with benchmarking (to be sensitive
to) is that it can restrict the team’s thinking to the
framework of what is already being done in the
company’s own industry. By aspiring only to be as good
as the best in the industry, the team sets a cap on its
own ambitions. Used this way, benchmarking is a tool
for catching up, not for jumping ahead.”
Hammer, M. & Champy, J. “Reengineering the Corporation: A Manifesto for Business Revolution”, 1993
Logistics Initiatives: Financial Justification Analysis
Disney’s Distribution Center
Spartan Stores’ Logistics Operation
AMOCO’s Transportation Performance Analysis
Disney’s DC performance objectives show potential savings by improving productivity, quality, and response time.
04/19/23
Spartan Stores computed financial savings through logistics initiatives using KPI improvements and resource reduction
calculations
04/19/23
Amoco calculated a financial improvement of getting better fleet utilization numbers and tied those improvements to TMS functionality
Final words…
• Logistics measures must be “in harmony with a company's overall business strategy”. For example, “Speedy delivery (and timely) order status (updates) are part and parcel of Amazon's brand identity. If Amazon drove its logistics activities with measures focused solely on reducing delivery costs, it would cripple its ability to serve customers. (Smart managers) are fusing their logistics plan(s) with their business strategies, ensuring that what is measured in the field is valued at the top of the organization”.
From Keeping Score: Measuring the Business Value of Logistics in the
Supply Chain, CLM, 1999