Lecture supply chain management chapter 6 measuring performance sc

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

Chapter 6: Measuring performance SC

Lecturer: Bui Thi Bich Lien

MsC Bui Thi Bich Lien

Contents

Introduction

1

Logistics performance evaluation of Coyle

2

Logistics performance evaluation of Lambert

3

Logistics performance evaluation of M Hugos

4

MsC Bui Thi Bich Lien

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

1 Introduction

vTo get the performance desired from supply chains requires a company to monitor and control its operations on a daily basis.

A Good Measure

MsC Bui Thi Bich Lien

2 Logistics performance evaluation of Coyle

vQuality vCost vTime vOther/supporting

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 Finished goods inventory turns

v Days sales outstanding

v Cost to serve

v Cash to cash cycle time

v 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

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

3 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

vCustomer service vInternal Efficiency vDemand Flexibility vProduct development

4 Logistics performance evaluation of Michael Hugos

4.1 Customer service

vCustomer satisfaction:

§ Responsiveness

§ Efficiency

vCustomer service evaluation indicators:

§ BTS

§ BTO

MsC Bui Thi Bich Lien

- 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

repairs

4.1 Customer service

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

Customer service: some KPI

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

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

inventory

Inventory carrying cost

Incremental savings in carrying costs (tiết kiệm tăng dân

Cummulative saving in carrying cost (tiết kiệm luỹ tiến)

2 3 4 5 6

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

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

;<= 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?

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

www.themegallery.com

MsC Bui Thi Bich Lien