OMSAN LOJİSTİK

Management Applications of Performance Metrics 1.Track progress 2.Benchmarking 3.Investment justification 4.Gain perspective on business and solutions

Auditing & Goal Tracking

Benchmarking Corporate 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 Issues

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, $.033 $.021 $.020 $.012 $ Average Mfg Example of Public Benchmarking: Logistics Cost Components

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…

AMAT public benchmarking effort. We used sources such as Cass Logistics, Herb Davis, and the IOMA Report.

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

“We look terrible, we are more complex that all of the other companies”

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).

We processed the raw data to create an Inventory Performance Index (IPR) and then plotted the IPR vs. Complexity

At the end, there were only one company we could truly compare AMAT with…

Process benchmarking may look like a gap chart against world-class practices

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 velocity.

Spartan Stores computed financial savings through logistics initiatives using KPI improvements and resource reduction calculations

Amoco calculated a financial improvement of getting better fleet utilization numbers and tied those improvements to TMS functionality

There are not perfect corporate performance systems, but there are BAD ones!

Benchmarking A quality tool used to –identify best practices and performance –understand the processes used –determine if internal change is needed and how it should be modified Process Decide What to Benchmark Plan the Benchmarking Process Study Other Organizations Learn From the Data Use the Findings

Benchmarking Identifies Winners and Losers World Class Country Class Above average Below average Slipping Organizations Troubled Organizations Winners Survivors Losers “High Performance Benchmarking: 20 Steps to Success” H. James Harrington Desired State Desired State

± Process Reengineering ¬ Customer Value Research ¯ Activity Based Costing ® Performance measurement ­ Flowcharting ° Benchmarking Value Chain Using the Measurement Results Value is gained by: 1.Effectively defining objectives, processes and measurement methods 2. Accurately measuring costs, productivity, quality, and cycle time 3. Using the knowledg e to make changes

Productivity Audit and Control Goals Performance Reports Corrective Actions Monitor INPUTS ACTIVITIES OUTPUTS

Key Definitions Auditing –Provides the information necessary for control –Quantify Control –The process where planned performance is brought into line, or kept in line, with desired objectives

Control Systems Open-Loop System –Human intervention is required for corrective action. Low cost, flexible, management discretion used Time consuming, prone to bad judgment Closed-Loop System –Automated intervention occurs to correct problems or make changes to system Fast, accurate, able to handle numerous processes Rigid rules, lacks flexibility

Performance Audits Periodic examination of logistics activities to review productivity, quality, efficiency, and effectiveness –Customer service audits –Inventory audits Cycle counting vs.once-per-year counting –Facility audits –Freight bill audits Quantify improvement opportunities and prioritize needs

Audits vs. Day-to-Day Management Operational assessment –periodic analysis of overall operations –upper management driven activity –formal review of practices/processes –look for major flaws or problems in system Performance evaluation –daily review of individual operations –supervisor, middle management activity –basic analysis of productivity/quality –look for opportunities to improve operation

Corrective Action Taking steps to rectify discrepancies between actual performance and goals or expenses and budgets –Minor adjustments (continuous improvement) –Major replanning (re-engineering) –Contingency planning (what-if scenario playing)

Performance Improvement Communicate with employees Break down major operations Study details of each operation Plan methods and modifications Retrain employees Implement changes Measure results and make adjustments

Performance Improvement Minor advances result from labor effort –Improve worker productivity limited benefits from corrective action programs –Improve worker efficiency/utilization keep people busy in productive functions –Improve worker accuracy do things right the first time

Performance Improvement Effective management brings major results –Eliminate work do only what is necessary don’t duplicate efforts –Simplify work find the easiest way ask the experts for suggestions train and retrain reduce paperwork

Performance Improvement Effective management brings major results –Reorganize and reengineer work systems –Improve your operational knowledge record & evaluate productivity every day learn all functions look for improvement opportunities –Staff operation properly accurate forecasting manage proactively, stretch people use overtime and work rules to your advantage