Why Logistics Performance Measurement?

When describing the performance measurement system, it can best be compared with the control panel on a machine or the dashboard of a vehicle. These examples provide the insights into the designs of control measures, which are required in logical performance measurement system. Con­trol of the logistical system is not possible through a single

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Logistics Performance Measurement System Objectives

Any performance measurement system shall have the following objectives: Monitoring. Monitoring focuses on reporting on the current status of the operations. For exam­ple, a financial monitoring system will report to the management the total funds outgo and inflow on a particular day. Similarly, the monitoring system for marketing will report on the total orders

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Logistics Performance Levels

Broadly there are two levels of performance measures—the internal and external measures. According to Vijay Govindarajan and Robert Anthony,1 the firm must strike the balance between the external measures, such as customer satisfaction, and the internal measure, such as productivity, cost, quality, and asset management, because the companies normally ignore the external results in

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Logistics Audits

For enhancing the performance of the logistics system, it is necessary to take stock of the efficiency and effectiveness status of the various subsystems of the logistical chain. This process is known as logistics audit. The shortfalls, bottlenecks and gaps in the logistical supply chain can be identified with logistical auditing so as to

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Logistics Performance Control

To align the objectives of logistics with those of the organization, or to direct the logistical activities for competitiveness, a powerful control mechanism needs to be evolved and implemented. Invari­ably, organizations are going in for the following control systems: Budgetary Control. Irrespective of the organizational reporting structure, the firm fixes up the budget for

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Logistics Cost

In a competitive market, firms require more accurate and detailed logistics cost information from their cost accounting systems to work out the cost-benefits analysis of their logistics strategies in order to design a cost-effective supply chain. Logistics managers require detailed information to determine how different products, customers or supply channels affect the costs of

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Traditional Logistics Costing Method

Logistics is a source of competitive advantage. According to Porter, with cost leadership the busi­ness firm can gain competitive edge over its business rivals. Logistics has much scope for cost reduction and enhance the customer service simultaneously. Hence, logistics management must understand how the behaviour of one cost differs from the other. The conventional

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Logistics Activity-Based Costing

Activity-based costing is defined as: “[a] methodology that measures the cost and performance of activities, resources, and cost objects. Resources are assigned to activities, then activities are assigned to cost objects based on their use. Activity-based costing recognizes the causal relationships of cost drivers to activities.”2 ABC assumes that activities cause cost and that

Implementation of ABC in Logistics

Implementation of ABC can provide greater visibility of the profitability impacted by differ­ent products, customers or supply channels. The company can more accurately trace costs and determine areas generating the greatest profit or loss. The product and customer profitability analysis performed by firms using ABC has significantly altered management perceptions. Prof­itability analyses using ABC

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Logistics Performance Measurement

Performance measures appear as a logical consequence of an ABC system. Activity descriptions include financial and non-financial information. The financial view indicates the costs or resources necessary for performing the activity. The non-financial view describes the activity in terms such as the time required, quality, number of transactions, or schedule attainment. The company can

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Advantages of ABC to Logistics

ABC appears well suited for costing and measuring the performance of logistics processes. Many logistics costs remain buried in overheads; and logistics managers do not have adequate visibility or control over their costs. ABC would more clearly depict the critical linkage existing between corporate profitability and logistics costs and performance. Logistics confronts many of

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Forecasting Models for Optimization in Logistics

A forecast is an estimate of the future level of some variable. The variable is most often demand, but can also be supply or price. Forecasting is often the very fi rst step organizations must go through when determining long-term capacity needs, yearly business plans, short-term operations and supply chain activities. It would be

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Linear Programming for Optimization in Logistics

Linear programming (LP) is the central tool of mathematical programming. LP models are flexible enough to adequately describe many realistic problems arising in modern industrial settings, while at the same time take advantage of the considerable expertise in computational linear algebra that has been developed during the last 50 years. As a result, LP

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Assignment Problems for Optimization in Logistics

When a problem involves the allocation of some resources to different tasks, it comes under the purview of assignment problems. This is a special class of linear programming problem. The objec­tive of the assignment problem is to determine the optimum assignment of given tasks that a set of workers can perform with varying efficiency,

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Transportation Model for Optimization in Logistics

Transportation problem is a special type of linear programming problem and typically involves a situation where goods are required to be transferred from some sources or manufacturing plants to some distribution centres, markets or warehouses at minimum cost. Typically in such a problem, the matrix gives the sources row-wise and the destinations are given

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Queuing Theory

The queuing solution is suitable for solving a service-oriented problem where the customer arrives randomly to avail the service. In this service, time is a random variable. In a typical queuing situ­ation, customers arrive to avail the service at a service system, enter a waiting line, receive service and then leave. The queuing model

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Route Planning

Maintaining a low-cost route structure that meets both business constraints and customer service requirements is critical to the success of a demand-driven supply chain. For supply chain management (SCM), route planning is what you need to create the most efficient logistical routing plans to obtain the best results in asset utilisation and cost cutting.

Inventory Models

Inventory (stocks) is an integral part of every business operation. Inventories occur in all forms and for the most diverse purposes. In applications involving inventory, the manager must answer two important questions: 1. How much should be ordered? and 2. When should it be ordered? The inventories are normally considered as goods for sales,

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Simulation for Optimization in Logistics

According to T.H. Taylor, “Simulation is a numerical technique for conducting experiments on digital computers, which involves certain types of mathematical and logical relationships necessary to describe the behaviour and structure of a complex real-world system over an extended period of time.” When decisions are to be taken under conditions of uncertainty, simulation can

Need for Organization of Logistics

The traditional approach to managing a company was to take each functional area in isolation. So, the production manager managed his function to achieve his objective, which was probably achiev­ing the lowest unit cost of production. This was done by producing long runs of the same prod­uct. It invariably meant building up stocks of

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