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 measure. It requires multiple measures to direct the logistics operation for efficiency and effectiveness.
System performance is judged by its output with respect to the inputs. A higher output to input ratio is a measure of the system’s efficiency and effectiveness. However, the above ratio is also to be reviewed with respect to the time period. In today’s dynamic business environment, business firms strive to gain the competitive advantage not for growth alone but for survival as well. Owing to fierce competition, industries are being forced to focus on the effective and efficient use of scarce resources. Manufacturing and trading companies have to deploy a lot of resources in logistical operations for the movement of goods and information across the supply chain of the firm. Hence, it becomes necessary to monitor, control and improve the performance of the logistical operation so as to attain the set goals of cost reduction and customer satisfaction. The performance measurement system helps in either reducing or eliminating the non-value-added activities from the system. In the current competitive business scenario, the importance of accurately measuring and controlling the logistical performance cannot be denied, as logistical competency has become more critical in enhancing the competitiveness of the business process.
Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.
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