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 use the non-financial information to develop performance measures for the activity. The performance measures describe the work done and the results achieved in an activity. Performance measures can be used to track product returns, damage, claims or data entry errors. The linkage between the performance measures and the activity provides a relatively straightforward means for computing the cost of poor or improved performance.

The ABC model can be used to re-engineer business processes by eliminating redundant or unnecessary tasks and optimizing resource allocations to activities adding the most value to the product or customer. The ABC baseline model identifies the inputs, outputs, resources, costs and activities employed in the enterprise. The information can be used to concentrate on “big cost items” for improvement or to develop actions to simultaneously attack waste at multiple levels within the organization.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.

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