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