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Logistics Performance Metrics

Ing. Andrea Campagna. Logistics Performance Metrics. 2011. Questions. What are logistics metrics? Why to measure? How can metrics be classified? Which metrics are commonly used? How to develop metrics? How to measure?. Logistics metrics.

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Logistics Performance Metrics

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  1. Ing. Andrea Campagna Logistics Performance Metrics 2011 Corso di Trasporto delle Merci e Logistica

  2. Questions • What are logistics metrics? • Why to measure? • How can metrics be classified? • Which metrics are commonly used? • How to develop metrics? • How to measure? Corso di Trasporto delle Merci e Logistica

  3. Logistics metrics • Measure the performance of various logistics functions (internal and external) • Focus on time, quality, availability, cost, profit and reliability • May be financial (cost and revenue) or non-financial (service and productivity) • Include the critical success factors for all levels of the business Corso di Trasporto delle Merci e Logistica

  4. Trends in logistics measurement • Most United States firms do not comprehensively measure logistics performances • Even the best performing firms fail to realize their productivity and service potential available from logistics performance measurement • Logistics competency will increasingly be viewed as a competitive differentiator and a key strategic resource for the firm (Council of Logistics Management, 2001) Corso di Trasporto delle Merci e Logistica

  5. Why to measure logistics performance? • To reduce operating costs • Measuring operating costs helps identify whether and where to make operational changes to control expenses and identifies areas for improved asset management • To drive revenue growth • To attract and retain valuable customers, the price/value of products offered can be enhanced through cost reductions and service improvements in logistics activities • To enhance shareholder value • The returns on shareholder investments and the market value of the firm are impacted by the performance of firm logistics Corso di Trasporto delle Merci e Logistica

  6. The context of logistics metrics Corso di Trasporto delle Merci e Logistica

  7. Classification of logistics metrics Internal metrics measure the performance of the system or the internal components of the logistics system (production plant, warehouses, transportation equipment) External metrics reflect the expectations of the organization by external entities (customers, stockmarkets, government, third-party agencies) Logistics Metrics Internal External Corso di Trasporto delle Merci e Logistica

  8. Example of metrics • Internal metrics • External metrics Corso di Trasporto delle Merci e Logistica

  9. Internal metrics drive the external • For example, the % of on-time deliveries of shipments by a carrier is an external metric. • However it is driven by internal metrics: • on time departure of delivery trucks, • reliability of trucks, • % of time on road, • etc. • External metrics are tipically financially and service oriented Corso di Trasporto delle Merci e Logistica

  10. Strategic and operational level • Metrics are strategic and operational depending on the focus and level of detail • Strategic metrics focus on overall system-level performance • Operational metrics focus on unit-level or machine-level performance • Example • “% of travel time with full load” can be measured regarding the entire fleet (Strategic) or the single vehicle (Operational) • In both cases metrics can be the same Corso di Trasporto delle Merci e Logistica

  11. Analysis of commonly used metrics Logistics Metrics Internal External System-level Function-level Customers Government Investors Financial Non-Financial Corso di Trasporto delle Merci e Logistica

  12. Internal/System-level metrics Example of metrics at system-level. They can be divided into • Financial • Inventory turnover ratio • Non-financial • % of demand met Corso di Trasporto delle Merci e Logistica

  13. Financial:inventory turnover ratio • Useful to evaluate the speed of movement of goods through a company. It determines the number of times inventory is turned over during the year. • Higher ratio is better! Corso di Trasporto delle Merci e Logistica

  14. Non-financial: % of demand met • It is an indicator of the operational capabilities of a company • Reasons for low % can be poor forecasting, insufficient capacity, low inventory levels, poor quality and unreliable production and distribution system Corso di Trasporto delle Merci e Logistica

  15. Internal/Function-level metrics Example of metrics related to the main logistics functions in the supply chain • Transportation • Warehousing • Production • Maintenance • Vendor selection Corso di Trasporto delle Merci e Logistica

  16. Transportation: transit time variability • Non-financial metric that captures the variation in transit time (TTV) • Indicates the reliability of the transportation function • Less variability in transit time helps customers plan the work more efficiently Corso di Trasporto delle Merci e Logistica

  17. Warehousing: operating cost per unit • Financial measure of the cost-effectiveness of operating a warehouse; depends on warehouse size and throughput • Fixed cost (increases with size) • Building, equipment, fixed payroll • Variable cost (increases with loads processed) • Contract manpower, variable utilities, fuel • Overhead cost • Heating, lighting, insurance, taxes Corso di Trasporto delle Merci e Logistica

  18. Production: defectives • Defectives not fixable have to be scrapped, bringing down the production rate • The unit cost of production increases • cost of repair + cost of labor + cost of material • The related metric is: Corso di Trasporto delle Merci e Logistica

  19. Maintenance: mean time to repair • The average active maintenance time to perform corrective maintenance • It depends on the type and frequency of failures Corso di Trasporto delle Merci e Logistica

  20. Vendor selection: % of good parts • Measure of the reliability of the supply in terms of the quality of the delivered parts • If not 100% it leads to shortage of parts and additional costs (reverse logistics) Corso di Trasporto delle Merci e Logistica

  21. External/Customers • Customer service has 3 dimensions • Quality (Number of good parts sold, % of shipments delivered on time,…) • Time (Leadtime) • Cost (unit cost of providing a service) • Metrics • Service reliability • Customer complaints Corso di Trasporto delle Merci e Logistica

  22. External/Government • Governments tend to measure industry performance based on • Number of new jobs created • Revenues from taxes • New infrastructures development • Impact on other industries • They also evaluate negative aspects such as • Pollution • Congestion • Crimes Corso di Trasporto delle Merci e Logistica

  23. External/Investors • View in monetary terms of the company performances • Metrics Corso di Trasporto delle Merci e Logistica

  24. How to design the metrics? • Define the system that has to be measured and its components • Determine the functional requirements or expectations of the system • Identify metrics that can quantitatively measure the functional requirements Make sure to understand the relationship between metrics! Corso di Trasporto delle Merci e Logistica

  25. Issues in logistics metrics • Simple and easy to understand in terms of measuring, calculating and interpreting • Measurement units • Data availability • Reporting on measures (charts or graph, trend analysis) • Quality of measures (perceived accuracy, actionability, and internal comparability and compatibility ) • Understanding the drivers of the performance Corso di Trasporto delle Merci e Logistica

  26. How to measure the metrics? • Manually • Data collection by means of paper forms • Time measurement of logistics processes • Financial documents analysis • Automated • Information System (ERP, DB analysis) • Communication Technology (Tracking&Tracing) • Dedicated software (“Cockpit” of Key Performance Indicators, KPI) Corso di Trasporto delle Merci e Logistica

  27. Costi di distribuzione e controllo delle prestazioni in un’azienda di trasporto Esempio di definizione di un sistema di misura delle prestazioni in un caso reale

  28. Struttura dei costi del trasporto

  29. Il costo di trasporto è influenzato da: • geografia del territorio; • tipologia del prodotto trasportato; • economie di scala; • consumi energetici; • dotazione infrastrutturale; • modalità di trasporto utilizzate per effettuare la spedizione; • concorrenza e regimi di regolazione.

  30. Metodologia di calcolo • Analisi delle attività • Suddivisione dei costi tra fissi e variabili • Riconduzione dei costi alle varie attività • Calcolo dei costi

  31. Suddivisione dei costi • Costi fissi • Costo del personale; • Assicurazioni; • Licenzeditrasporto; • Ammortamentomezzi; • Affittoparcheggio. • Costi variabili • Costo del carburante; • Costiamministrativi; • Straordinariopersonale; • Costopneumatici; • Failure; • Costolubrificanti.

  32. Riconduzione dei costi alle attività • Si calcolano sulla base dei dati storici dell’azienda i costi unitari medi (per km / al giorno) • Si ripartiscono i costi in % di incidenza sulle attività aziendali

  33. Esempio di riepilogo costi

  34. Esempio dati per calcolo indicatori

  35. Esempio dati per calcolo indicatori Fresco e scatolame sono i tipi di servizio di distribuzione

  36. Cruscotto indicatori

  37. Questioni • Come fa l’azienda a misurare gli indicatori visti in precedenza? • In che modo l’azienda può usare gli indicatori per migliorarsi? Corso di Trasporto delle Merci e Logistica

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