3.2 Cost
- Cost in trade Activities
- Port charges
- Documentation charges
- Border management charges
3.3 Complexity and Risk Factors
- Quantity of documents in a single trade deal
- Number of signs in single trade deal
- Average Container inspections
- Degree at which customs examination is carried out
Time indicators consist of the average time it takes in finishing a shipping transaction, filing documents, customs workout, shipping and trade procedures, and the time it takes on delivery, because if the time for delivering goods is longer, the costs will incur.
The cost is a crucial factor in logistics performance. If the competition is to be won, costs must be in control. Budgets must be defined and customer service must be provided within those budgets. Cost Indicators can include cost of transporting goods, cost per unit, shipping and handling costs as well as storage costs.
Other than cost, the important factor is risk factor. In logistics performance risk cannot be ignored. Risk factors i.e. shutdowns of ports, delays in delivery or sometimes cancellation of delivery is of greater challenge to logistics performance management. In such scenarios additional resources should be stored in order to implement Plan B to save the goodwill of the firm.
4. Importance of Performance Measurement & Management:
The performance measurement in business logistics is of extreme importance. Following concerns are of main importance as they help and broaden the logistics performances improvement. They measure following:
- Clients’ degree of satisfaction, their character of services as well as activity of logistic performance.
- This is foremost important measure helping gain the marketplace. Certain Models and methodologies explain the above mentioned aspects.
- Performance measurement helps enhance following aspects of i.e. the customer trustworthiness, their exactness, the time, cost, effectiveness and many others.
- From the start (Agreeing on contract) to the end (delivery) of business activity, Performance Measurement helps as well as improve proposed values and proposed goals and missions.
Management in logistics performance is about “Processing of stuff, their storage and movement as well as data crosswise supply chain, from acquisition of raw materials and components, through manufacturing, to delivery of finished products to end users”.
Management in supply chain is essential and focuses above the traditional business system, expands value across boundaries and old fashioned management controls.
In logistics management an important factor to include is Geography. There are several issues in reaching remote target global market, several issues become of greater concern and access to that geography gets impractical but with detailed analysis of product requirements and a study of feasible way of reaching that geography can make it happen. As mentioned above that with advancement in technology improves logistics performance therefore with the introduction of airplane technology, such tasks are thing of past now, but there are other factors that need concentration i.e. costs.
5. Examples:
5.1 A Plane Analogy:
In reality if an aeroplane takes off from Lisbon towards Dallas, and the plane is only 1° away from its direction, the plane will land up in Mexico. Fascinatingly, around 90% of planes move off-course and by more than 1°, due to factors as wind circumstances, type of plane i.e. Passenger or cargo etc. But how they manage to arrive on the desired destination then?
The firms also face turbulence due to advancing conditions in the market. Similarly in relation to the planes, firms also tend to divert from their course and end up in failure.
This is where performance measurement comes into action for the business to come to their proposed directions, in spite of all the variations that they will encounter along the way (Srinivas 2005, 2007). A plane has following things during flight:
- Start Direction
- End Direction
- Course / Path
- The degree he is off the coarse
- How to get back to coarse
Organisations also have a start point, they know their ending point as well and the coarse or path which they will take to reach their desired point. The problem comes when the business is away from its direction due to changing market conditions and the procedures to get back to the coarse. This is where Performance Measure comes in and helps businesses maintain their performance as well as divert back to the track with effective performance and reduced costs.
5.2 J&J Mouth Wash
In Kalakota and Robinson (1999), they defined management introduction to e-commerce. It concerns the processes involved in getting a bottle of J&J mouthwash to the shelves of a retail chemist. It consists of the following steps:
- Eucalyptus oil is extracted from the leaves sold by a farmer in Australia.
- A distributor buys the oil in New Jersey.
- In mean time, Alcohol is produced from natural gas, which was drilled in desert in Middle East, which is then used to produce mouthwash as a raw ingredient.
- The factory which produced mouth wash in California, receives the alcohol through ships from Middle East.
- Surbiton is grown in Africa and is a raw material that sweetens and adds bulk to the mouthwash is harvested and when finished then sent to the same factory in California.
- After processing ingredients, mouthwash is manufactured.
- Wholesalers buy the completed product, or sometimes product stays in warehouses before delivering to wholesalers and then delivered to individual retail outlets as well as distributed globally.
The whole life cycle is shown below:
5.3 Peugeot
This company produces several types of cars. They reviewed their logistics performance in 2005. They work with 200 suppliers. They wanted to streamline their supply chain management. They worked out performance measurement techniques in order to simplify and enhance their supply. This helped them in minimized inventory costs. The group were able to get 40% improvement in their logistics performance.
6. Conclusion
Logistics performance helps firms extensively reduce their extra stock in stores, boost up capital, to lessen product costs as well as focus on customers satisfaction etc. But sometimes there are certain external factors that affect the logistics performance therefore a firm cannot be blamed for the poor performance of its logistical approach, i.e. strict customs laws/ poor border management etc.
Still with the help of successful Performance Measures and Management following can be achieved:
- Successful performance measurement structures could be implemented
- Business Metrics could be easily defined
- Business targets could be effectively achieved
- Performance measurement system could be applied
- Develop, implement, and benchmark logistics performance measures
- The monetary, productive, and rotation time performance could be measured.
The greater concern of Logistics performance is to lessen the costs and enhance customer service. If resources can be managed properly the above mentioned goals can be effectively achieved. A few of organisations have managed to achieve both (low costs and greater customer services) by using their resources against goals to be accomplished.
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