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Chapter 11: Strategic Leadership
Chapter 20
Controlling logistics performance
Chapter 11: Strategic Leadership
Outline
• Logistics performance should be continuously monitored to ensure efficient use of resources and financial control.
• Control can take place at technical, tactical and strategic levels.
• The concept of quality is related to customer service, with TQM often being used to achieve continuous improvement.
• Various types of performance measures can be used to track certain processes in the logistics framework.
• Benchmarking can be used to compare performance against competitors or best-in-class businesses.
• SCOR integrates business-process engineering, benchmarking and process measurement into a cross-functional framework.
Chapter 11: Strategic Leadership
Learning outcomes
• The cyclical nature of planning and control
• ISO standards applicable to logistics management
• Types of performance measures
• Specific performance measures used in various functional areas of logistics management
• Benchmarking exercises
• The SCOR model
• The role that BI can play in supply chain management
Chapter 11: Strategic Leadership
The process of control
Chapter 11: Strategic Leadership
Control processes and systems (1)
Aims of control systems:• Strategic control: achieve organisational objectives
• Tactical control: improve short-term performance
• Technical control: perform according to standards
Strategic and tactical control:• are predictive in nature;
• are wide in focus;
• consider future changes in cause-and-effect relationships;
• trigger entrepreneurial plans; and
• include budgetary control.
Chapter 11: Strategic Leadership
Control processes and systems (2)
Technical control:• Actual current performance
• Trigger corrective actions
• Narrow focus
Technical control systems:• Yardsticks
• Standards
• Range of satisfactory performance
• Frequency of measurement
• Reporting system
Chapter 11: Strategic Leadership
Quality
Concept of quality:• Closely related to customer service excellence
• Unseen process with impact on customer satisfaction
• Give customers what they want at price they will pay
• Consistent service/quality at contained cost
• Examples of quality control systems:
– TQM
– ISO 9000
– Six sigma
Chapter 11: Strategic Leadership
Total quality management (TQM)
• Definition of TQM: see p. 442
• Quality principles of TQM:• Customer focus and customer involvement
• Involvement of all employees
• Process-oriented
• Consistency of purpose
• Act according to facts
• Focus on continuous improvement
• Use problem-solving discipline (PSD) for systematic, gradual, team-based problem solving
Chapter 11: Strategic Leadership
The problem-solving discipline of TQM
Chapter 11: Strategic Leadership
Quality-control system: ISO 9000
ISO (International Organization for Standardization):• Network of national standards institutes
• Consistent application of specifications and criteria
• Facilitates trade and transfer of technology
• Assurance about quality, safety and reliability
ISO 9000:• Quality requirements in business-to-business dealings
• ISO 9001:2000 – conformity assessment
• Ensure consistency and regulatory compliance
• Various requirements
Chapter 11: Strategic Leadership
Performance measurement• Performance: efficiency, effectiveness and adaptability
• Quantify strategic, tactical and operational actions
• Objectives: monitor, control and direct
• Purpose of performance management system:– Support decision making
– Monitor effect of strategic plans
– Stakeholder requirements
– Advance warning
– Part of continuous improvement
– Motivate workforce
– ID performance gap
– Record-keeping
Chapter 11: Strategic Leadership
Performance measures
Types:• Hard direct and fact-based
– financial vs. non-financial
• Soft intangible and indirectly measured
Dimensions of performance:• Achievement: how was my past performance?
• Diagnostic: how am I performing now?
• Competence: how will I perform in the future?
Hierarchy of performance measures
Chapter 11: Strategic Leadership
Logistics performance measures (1)
• Define system and components that must be measured. Choose performance measures that can quantify identified functional requirements.
• Main logistics performance measures:- General non-financial - Asset utilisation
- Total cycle time
- Percentage defective
- Percentage of demand met
- Procurement - Price reduction quota
- Average cost per order
Chapter 11: Strategic Leadership
Logistics performance measures (2)
Supplier selection - Delivery reliability
- Complete shipments
- Percentage good parts
Inventory control - Inventory turnover
- Demand not met
- Inventory-carrying cost
Warehousing - Order picking time
- Warehouse throughput
- Utilisation of equipment
Chapter 11: Strategic Leadership
Logistics performance measures (3)
Transport - Total transit time
- Transit time variability
- Percentage of perfect shipments
Customer service - Service reliability
- Fill rate
- Number of customer complaints
Chapter 11: Strategic Leadership
Benchmarking (1)
• Form of comparative performance measurement
• Compare against industry competitors or best-in-class
• Characteristics:– Process of transformation
– Continuous improvement
– Products, services and processes
– Comparable, not identical
– Leading organisations
• Benchmarking partners:– Internal
– Industry competitors
– Non-competitor organisations
– Other (incl. databases, press articles, reverse engineering, etc.)
Chapter 11: Strategic Leadership
Benchmarking (2)
Conducting a benchmarking exercise:• Ensure management support and set objectives
• Find a benchmarking partner
• Assemble a benchmarking team
• Measure and understand your own performance
• Measure and understand partner’s performance
• Compare performances
• Develop best practices
• Continue with benchmarking process
Chapter 11: Strategic Leadership
The SCOR model (1)
Supply-chain operations reference model (SCOR):• Integration of:
– business-process engineering;
– benchmarking; and
– process measurement.
• Describes supply chains in a common language
• Identifies performance requirements
• Sets targets and measures performance
• ID improvement opportunities
• ID best practices and share learning
Chapter 11: Strategic Leadership
The SCOR model (2)
Types of level 1 SCOR processes:• Plan (P) – match resources to requirements
• Source (S) – connect with suppliers
• Make (M) – transform materials
• Deliver (D) – connect with customers
• Return (R) – return from customers or to suppliers
Enablers required to support above processes (e.g. transportation management must support delivery)
Chapter 11: Strategic Leadership
The SCOR model (3)
Chapter 11: Strategic Leadership
The SCOR model (4)
Basis of supply chain competition (performance attributes):• Reliability
• Responsiveness
• Agility
• Cost
• Asset management
• Performance measures developed by Supply-Chain Council (SCC) to measure achievement of goals
• Use thread diagrams to assist with configuration (see pp. 454–5)
Chapter 11: Strategic Leadership
Business intelligence (BI)
• Use software to collect, integrate, analyse and present business information from various sources
• QRA expanded to advanced analytics
• Data from various sources pulled into data warehouse
• Use queries to extract data that meets selected criteria
• Support decision making
• Use dashboards to consolidate, aggregate and arrange
• Automate way of rendering information from existing data
• Quality of output depends on quality and availability of supply chain data