Trang 1 LOGOChapter 6: Measuring performance SC Lecturer: Bui Thi Bich Lien Trang 2 MsC.. Logistics performance evaluation of CoylevQualityvCostvTime Trang 4 2.1 Qualityv Overall custo
4/13/20 Chapter 6: Measuring performance SC Lecturer: Bui Thi Bich Lien LOGO MsC Bui Thi Bich Lien Contents Introduction Logistics performance evaluation of Coyle Logistics performance evaluation of Lambert Logistics performance evaluation of M Hugos MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 Learning objectives vDefine a concise set of metrics for measuring the performance of a company’s supply chain operations vUse performance data to spotlight problems and opportunities MsC Bui Thi Bich Lien Introduction vTo get the performance desired from supply chains requires a company to monitor and control its operations on a daily basis MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 A Good Measure MsC Bui Thi Bich Lien Logistics performance evaluation of Coyle vQuality vCost vTime vOther/supporting MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 2.1 Quality v Overall customer satisfaction v Processing accuracy v Perfect orders fulfillment § On time delivery § Complete order § Accurate product selection § Damage free § Accurate invoice § Forecast accurate v Planning accuracy § Budgets and operating plans § Schedule adherence MsC Bui Thi Bich Lien 2.2 Cost v v v v v Finished goods inventory turns Days sales outstanding Cost to serve Cash to cash cycle time Total delivered cost § Cost of goods § Transportation costs § Inventory carrying costs § Materials handling costs v All other costs § Information systems § Administrative v Cost of excess capacity v Cost of capacity short fall MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 2.3 Time vOrder cycle time vOn-time delivery/receipt vOrder cycle time variability vResponse time vForecasting/planning cycle time MsC Bui Thi Bich Lien 2.4 Other/supporting vApproval exceptions to standard § Minimum order quantity § Change order timing vAvailability of information MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 Logistics performance evaluation of Lambert vCustomer satisfaction vCustomer value-added vTotal cost analysis vProfitability analysis, includes revenue considerations vStrategic profit model vShareholder value MsC Bui Thi Bich Lien Logistics performance evaluation of Michael Hugos vCustomer service vInternal Efficiency vDemand Flexibility vProduct development MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 4.1 Customer service vCustomer satisfaction: § Responsiveness § Efficiency vCustomer service evaluation indicators: § BTS § BTO MsC Bui Thi Bich Lien 4.1 Customer service BTS BTO - Complete order fill rate - Customers response time - On time delivery rate - On time delivery rate - Value of total back orders and number of back orders - Value of late orders and number of late orders - Frequency and duration of back orders - Frequency and duration of late orders - Return rate - Number of warranty returns and repairs MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 Customer service: some KPI Order entry accuracy Orders entered exactly as specified by the customer/total orders entered Order status communication accuracy Orders for which order status is communicated correctly/total orders with status communication request Invoice Accuracy invoices with perfect match of items, quantities, prices/total invoices MsC Bui Thi Bich Lien 4.2 Internal Efficiency vThe ability of a company or a supply chain to use their assets as profitably as possible vAssets include anything of tangible value such as plant, equipment, inventory, and cash vPopular measures of internal efficiency are: üInventory value üInventory turns üReturn on sales üCash-to-cash cycle time MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 vInventory value: § to match inventory availability (supply) with sales (demand) and not have excess inventory left over § let inventory exceed sales is in a growth market where the value of the inventory will increase vInventory turns (T&E-turn and earn): § measure the profitability of inventory by tracking the speed with which it is sold or turned over during the course of a year § Turns = Annual Cost of Sales / Annual Average Inventory Value MsC Bui Thi Bich Lien Inventory Turns Turns Average inventory Inventory carrying cost (1) = i VND (2) VND (3) 10 150,000,000 Incremental savings in carrying costs (tiết kiệm tăng dân VND (4) Cummulative saving in carrying cost (tiết kiệm luỹ tiến) VND (5) Assuming: ICC (inventory carrying cost) = 30% average inventory=> ICC (turn 1)= average inventory * 30% = 150 000 000 * 30% = 45 000 000 MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 4/13/20 Return on sales vReturn on sales: how well an operation is being run It measures how well fixed and variables costs are managed and also the gross profit generated on sales § Return on Sales = Earnings before Interest & Tax / Sales § The higher the ROS the better § There are times though when a company may deliberately reduce this number in order to gain or defend market share or to incur expenses that are necessary to achieve some other business objective MsC Bui Thi Bich Lien Cash-to-cash cycle time vThe time it takes from when a company pays its suppliers for materials to when it gets paid by its customers § Cash-to-Cash Cycle Time = Inventory Days of Supply + Days Sales Outstanding – Average Payment Period on Purchases § The shorter this cycle time the better § Accounts receivable may be large due to late payments caused by billing errors or selling to customers who are bad credit risks MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 10 4/13/20 v Inventory turns = !"#$ "& '""(# #")( *+,-.', ''-,'.$, +.)/, "& 01+,1$"-2 v Average aggregate value of inventory = (average inventory for item i)x(unit value item i) v Days of supply = *+,-.', ''-,'.$, +.)/, "& 01+,1$"-2 34565 47 84495 54:9 ;?5 MsC Bui Thi Bich Lien vCost of goods sold: $ 425 million vProduction materials and parts: $4,629,000 vWork in process: $17,465,000 vFinished goods: $12,322,000 vInventory turns? vDays of supply? MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 11 4/13/20 4.3 Demand Flexibility vActivity cycle time: the amount of time it takes to perform a supply chain activity such as order fulfillment, product design, product assembly, or any other activity that supports the supply chain vUpside flexibility: the percentage increase over the expected demand for a product that can be accommodated vOutside Demand flexibility: the ability to quickly provide the customer with additional products outside the bundle of products normally provided MsC Bui Thi Bich Lien 4.4 Product Development v Measures a company or a supply chain’s ability to design, build, and deliver new products to serve their markets as those markets evolve over time v Technical innovations, social change, and economic developments cause a market to change over § Percentage of total products sold that were introduced in the last year § Percentage of total sales from products introduced in the last year § Cycle time to develop and deliver a new product MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 12 4/13/20 www.themegallery.com LOGO MsC Bui Thi Bich Lien MsC Bui Thi Bich Lien 13