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OMSAN LOJİSTİK. Management Applications of Performance Metrics. Track progress Benchmarking Investment justification Gain perspective on business and solutions. LCSR (17%/10%). 5. VU (65%/95%). LWFP (2.4/1). 4. 3. 2. POCT (24/72). IT (2/8). 1. Company X. 0. Goal. VAS (5/5).

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management applications of performance metrics

Management Applications of Performance Metrics

Track progress

Benchmarking

Investment justification

Gain perspective on business and solutions

auditing goal tracking

LCSR (17%/10%)

5

VU (65%/95%)

LWFP (2.4/1)

4

3

2

POCT (24/72)

IT (2/8)

1

Company X

0

Goal

VAS (5/5)

SD (8/6)

POP (45%/75%)

COCT (42/24)

IA (90%/97%)

Auditing & Goal Tracking
benchmarking corporate performance measures
Process vs. Performance Benchmarking

Internal vs. External Benchmarking

Public vs. Private vs. Competitive Benchmarking

Major Issues in Benchmarking

Selecting Partners

Selecting KPIs

Comparability Issues

Benchmarking Corporate Performance Measures
example of public benchmarking logistics cost components

Average

2003

Transportation

$.068

$.035

$.033

$.058

$.020

$.021

Inventory Carrying Charges

Warehousing

$.048

$.024

$.020

Admin. / Order Processing

$.015

$.016

$.012

Example of Public Benchmarking: Logistics Cost Components

Mfg

Cost Components

1975

2003

TOTALS

$.189

$.095

$.086

Herbert W. Davis, 2003

the amat benchmarking exercise story from public to private from standard to normalized
Increasing top management concern over inventory planning and financial implications

Decision to evaluate current performance at similar companies and operations

AMAT Inventory Turns = 1.8

AMAT Line Fill Rate = 92%

Logistics at AMAT qualified as a support organization for service parts in the high-tech electronics segment.

Some results…

The AMAT benchmarking exercise story: from public to private, from standard to normalized…
slide7
AMAT public benchmarking effort. We used sources such as Cass Logistics, Herb Davis, and the IOMA Report.
slide8

AMAT public benchmarking effort. In this case we were looking for line fill rate by industry, being careful with the way companies calculate this KPI

we are different sure we are more complex sure lets see what makes you more complex
1.number of commodities and part numbers

2.SKU introduction and purging rates

3.SKU substitutability and interchangeability

4.response time requirements

5.number of suppliers and customers

6.availability of timely, true consumption data

7.geographic spread of the logistics network

8.risk of obsolescence

9.demand variability

10. inventory management risk

We are different… (sure)We are more complex … (sure)Lets see what makes you more complex
grading complexity in all benchmarking data points using the 10 factor analysis
Grading complexity in all benchmarking data points using the 10 factor analysis.

Control points Coca-Cola (5) and Defense Logistics Agency (40).

slide12
We processed the raw data to create an Inventory Performance Index (IPR) and then plotted the IPR vs. Complexity
keep it in perspective
“A (potential) problem with benchmarking (to be sensitive to) is that it can restrict the team’s thinking to the framework of what is already being done in the company’s own industry. By aspiring only to be as good as the best in the industry, the team sets a cap on its own ambitions. Used this way, benchmarking is a tool for catching up, not for jumping ahead.”Keep it in perspective…

Hammer, M. & Champy, J. “Reengineering the Corporation: A Manifesto for Business Revolution”, 1993

logistics initiatives financial justification analysis

Logistics Initiatives: Financial Justification Analysis

Disney’s Distribution Center

Spartan Stores’ Logistics Operation

AMOCO’s Transportation Performance Analysis

slide17
Disney’s DC performance objectives show potential savings by improving productivity, quality, and velocity.
slide18
Spartan Stores computed financial savings through logistics initiatives using KPI improvements and resource reduction calculations
slide19
Amoco calculated a financial improvement of getting better fleet utilization numbers and tied those improvements to TMS functionality
benchmarking
A quality tool used to

identify best practices and performance

understand the processes used

determine if internal change is needed and how it should be modified

Process

Benchmarking

Decide What to Benchmark

Plan the Benchmarking Process

Study Other Organizations

Learn From the Data

Use the Findings

benchmarking identifies winners and losers
Benchmarking Identifies Winners and Losers

Desired

State

World Class

Winners

Country Class

Above average

Survivors

Below average

Slipping Organizations

Losers

Troubled Organizations

“High Performance Benchmarking: 20 Steps to Success” H. James Harrington

using the measurement results
Using the Measurement Results

Value is gained by:

  • Effectively defining objectives, processes and measurement methods
  • Customer
  • Value
  • Research
  • Process
  • Reengineering
  • Flowcharting

3. Using the knowledge to make changes

Value Chain

  • Performance

measurement

  • Benchmarking
  • Activity
  • Based
  • Costing

2. Accurately measuring costs, productivity, quality, and cycle time

productivity audit and control
Productivity Audit and Control

Goals

Monitor

Corrective

Actions

Performance

Reports

INPUTS ACTIVITIES OUTPUTS

key definitions
Auditing

Provides the information necessary for control

Quantify

Control

The process where planned performance is brought into line, or kept in line, with desired objectives

Key Definitions
control systems
Open-Loop System

Human intervention is required for corrective action.

Low cost, flexible, management discretion used

Time consuming, prone to bad judgment

Closed-Loop System

Automated intervention occurs to correct problems or make changes to system

Fast, accurate, able to handle numerous processes

Rigid rules, lacks flexibility

Control Systems
performance audits
Periodic examination of logistics activities to review productivity, quality, efficiency, and effectiveness

Customer service audits

Inventory audits

Cycle counting vs.once-per-year counting

Facility audits

Freight bill audits

Quantify improvement opportunities and prioritize needs

Performance Audits
audits vs day to day management
Operational assessment

periodic analysis of overall operations

upper management driven activity

formal review of practices/processes

look for major flaws or problems in system

Performance evaluation

daily review of individual operations

supervisor, middle management activity

basic analysis of productivity/quality

look for opportunities to improve operation

Audits vs. Day-to-Day Management
corrective action
Taking steps to rectify discrepancies between actual performance and goals or expenses and budgets

Minor adjustments (continuous improvement)

Major replanning (re-engineering)

Contingency planning (what-if scenario playing)

Corrective Action
performance improvement
Communicate with employees

Break down major operations

Study details of each operation

Plan methods and modifications

Retrain employees

Implement changes

Measure results and make adjustments

Performance Improvement
performance improvement1
Minor advances result from labor effort

Improve worker productivity

limited benefits from corrective action programs

Improve worker efficiency/utilization

keep people busy in productive functions

Improve worker accuracy

do things right the first time

Performance Improvement
performance improvement2
Effective management brings major results

Eliminate work

do only what is necessary

don’t duplicate efforts

Simplify work

find the easiest way

ask the experts for suggestions

train and retrain

reduce paperwork

Performance Improvement
performance improvement3
Effective management brings major results

Reorganize and reengineer work systems

Improve your operational knowledge

record & evaluate productivity every day

learn all functions

look for improvement opportunities

Staff operation properly

accurate forecasting

manage proactively, stretch people

use overtime and work rules to your advantage

Performance Improvement
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