Performance Measurement and Controls

8/14/2019 Performance Measurement and Controls

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PERFORMANCEPERFORMANCE

MEASUREMENTS ANDMEASUREMENTS AND

CONTROLSCONTROLS


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NAME ROLL.NO

TOPIC

ROOPESHYADAV

5 Introduction.

ASHWIN PATEL 15 Need for

performancemeasurementand SystemObjectives.

MANMEET GILL 55 LogisticsPerformanceLevels.


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PERFORMANCE MEASUREMENTPERFORMANCE MEASUREMENT

AND CONTROLS.AND CONTROLS.

INTRODUCTIONINTRODUCTIONNEED FOR PERFORMANCENEED FOR PERFORMANCE

MEASUREMENTMEASUREMENT

PERFORMANCE MEASUREMENT &PERFORMANCE MEASUREMENT &

SYSTEM OBJECTIVESSYSTEM OBJECTIVES

LOGISTICAL PERFORMANCE LEVELSLOGISTICAL PERFORMANCE LEVELS

LOGISTICAL AUDITLOGISTICAL AUDIT

LOGISTICS PERFORMANCE CONTROLLOGISTICS PERFORMANCE CONTROL


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INTRODUCTIONINTRODUCTION

Irrespective of the size of operational businessIrrespective of the size of operational business

organizations whether big or small needorganizations whether big or small need

performance measurement and control forperformance measurement and control for

efficient and effective utilization of resource.efficient and effective utilization of resource.

A well designed performance measurementA well designed performance measurement

system supported by logistics information willsystem supported by logistics information will

make cross functional coordination andmake cross functional coordination and

integration easier.integration easier.

It is a process which keeps track of the health ofIt is a process which keeps track of the health of

the logistical system.the logistical system.


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NEED FOR PERFORMANCENEED FOR PERFORMANCE

MEASUREMENTMEASUREMENTPerformance is broadly judged on the basis ofPerformance is broadly judged on the basis of

output with respect to input.output with respect to input.

When the ratio of output to the ratio of input isWhen the ratio of output to the ratio of input is

higher it indicates or is a measure of systemshigher it indicates or is a measure of systemsefficiency and effectiveness.efficiency and effectiveness.

But in accordance of output to input time periodBut in accordance of output to input time period

also has to be taken into consideration.also has to be taken into consideration.

In today's fast changing business environmentIn today's fast changing business environmentorganizations struggle to achieve competitiveorganizations struggle to achieve competitive

advantage for growth and survival.advantage for growth and survival.


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Resources have to be deployed by systemResources have to be deployed by system

operations irrespective of its application inoperations irrespective of its application in

functional areas of marketing, procurement orfunctional areas of marketing, procurement or

logistics.logistics.

Resources are very scarce so it becomes aResources are very scarce so it becomes a

major priority for companies to effectively andmajor priority for companies to effectively and

efficiently utilize themefficiently utilize them

Logistical operations require deployment of a lotLogistical operations require deployment of a lotresources for movement of goods andresources for movement of goods and

information across the supply chain.information across the supply chain.

Hence monitoring, controlling and improvingHence monitoring, controlling and improving

performance of logistical operations is veryperformance of logistical operations is veryimportant in order to achieve goals of costimportant in order to achieve goals of cost

reduction and customer satisfaction.reduction and customer satisfaction.


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PERPORMANCE MEASUREMENTPERPORMANCE MEASUREMENT

SYSTEM OBJECTIVES.SYSTEM OBJECTIVES.

There are certain criteria on the basisThere are certain criteria on the basis

of which performance is measured,of which performance is measured,

any performance measurementany performance measurement

system shall have the followingsystem shall have the following

objectives:objectives:

MonitoringMonitoring

ControllingControlling

DirectingDirecting


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MONITORINGMONITORING

It refers to the present status ofIt refers to the present status of

operation to the management.operation to the management.

Monitoring system varies from oneMonitoring system varies from one

department to another department.department to another department.

E.g.: Financial monitoring system reportsE.g.: Financial monitoring system reports

to the management regarding inflowto the management regarding inflow

and outflow of funds.and outflow of funds.


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But in case of logisticBut in case of logistic

monitoring system it reportsmonitoring system it reportson cost breakup acrosson cost breakup across

various logistical activitiesvarious logistical activities

like:like:WarehousingWarehousing

TransportationTransportationPackagingPackaging

Material handling etc.Material handling etc.


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CONTROLLI NGCONTROLLI NG

Every firm or business organization has aEvery firm or business organization has aset standard for performanceset standard for performancemeasurement.measurement.

The objective of controlling measuresThe objective of controlling measuresactual performance or output with that ofactual performance or output with that ofthe set standards.the set standards.

It measures the variance, difference orIt measures the variance, difference or

deviation from the set goals.deviation from the set goals.For e.g.: out of 100% if the control systemFor e.g.: out of 100% if the control systemhas 60% of the order fulfillment rate then ithas 60% of the order fulfillment rate then itindicates 40% deviation.indicates 40% deviation.


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DIRECTINGDIRECTING

Without proper direction there can be noWithout proper direction there can be no

satisfactory output in spite of the input.satisfactory output in spite of the input.

Motivation plays an important role in enhancing andMotivation plays an important role in enhancing and

improving the performance measurement system.improving the performance measurement system.

Rewards and incentives are one of the fewRewards and incentives are one of the few

motivators that enhance individual efficiency.motivators that enhance individual efficiency.

For e.g.: the ware workforce engaged in materialFor e.g.: the ware workforce engaged in material

handling may be motivated through rewards forhandling may be motivated through rewards for

crossing the targeted dispatches in a specified timecrossing the targeted dispatches in a specified time

frame or even before that.frame or even before that.

LOGISTIC PERFORMANCEL I TI PERF RMAN E


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LOGISTIC PERFORMANCEL I TI PERF RMAN ELEVELSLEVELS

In logistics performance measurement isIn logistics performance measurement isdone two different levels:done two different levels:

A.A. Internal measureInternal measure

B.B. External measureExternal measure

There should be a balance between bothThere should be a balance between both

internal as well as external measure.internal as well as external measure.

The internal and external measuresThe internal and external measures

include various factors which shouldinclude various factors which shouldalso be taken into account they are:also be taken into account they are:


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EXTERNALEXTERNAL

MEASURESMEASURES::

1.1. CustomerCustomer

satisfactionsatisfaction2.2. After sale serviceAfter sale service

3.3. Customer demandCustomer demand

INTERNALINTERNAL

MEASURESMEASURES::

1)1) CostCost

2)2) QualityQuality

3)3) ProductivityProductivity

4)4) AssetAssetmanagementmanagement


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FINANCIAL MEASURES:FINANCIAL MEASURES:

1.1. Operating CostOperating Cost

2.2. Return on investmentReturn on investment

NON-FINANCIAL MEASURESNON-FINANCIAL MEASURES::

1.1. ProductivityProductivity

2.2. Asset ManagementAsset Management

3.3. Order fulfillmentOrder fulfillment

4.4. QualityQuality

CUSTOMER PERCEPTION MEASURESCUSTOMER PERCEPTION MEASURES::

1.1. Customer feedbackCustomer feedback

2.2. Value added servicesValue added services

INNOVATIONS:INNOVATIONS:

1.1. BenchmarkingBenchmarking


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AUDITAUDITThe general definition of an audit isThe general definition of an audit isan evaluation of a person,an evaluation of a person,

organization, system, process,organization, system, process,enterprise, project or product.enterprise, project or product.

Audits are performed to ascertain theAudits are performed to ascertain thevalidityvalidity andand reliabilityreliability of information;of information;also to provide an assessment of aalso to provide an assessment of asystem'ssystem's internal controlinternal control..

The goal of an audit is to express anThe goal of an audit is to express anopinion on the person /opinion on the person /organization/system (etc) in question,organization/system (etc) in question,under evaluation based on work doneunder evaluation based on work doneon a test basis.on a test basis.
http://en.wikipedia.org/wiki/Validity_(statistics)http://en.wikipedia.org/wiki/Validity_(statistics)http://en.wikipedia.org/wiki/Reliability_(statistics)http://en.wikipedia.org/wiki/Reliability_(statistics)http://en.wikipedia.org/wiki/Internal_controlhttp://en.wikipedia.org/wiki/Internal_controlhttp://en.wikipedia.org/wiki/Internal_controlhttp://en.wikipedia.org/wiki/Reliability_(statistics)http://en.wikipedia.org/wiki/Validity_(statistics)


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LOGISTICAL AUDITLOGISTICAL AUDIT

For enhancing the performance of theFor enhancing the performance of thelogistical system it is necessary to takelogistical system it is necessary to takestock of the efficiency and effectivenessstock of the efficiency and effectivenessstatus together, this process is calledstatus together, this process is called

Logistical Audit.Logistical Audit.It reveals the weak link in the logisticIt reveals the weak link in the logisticsupply chain.supply chain.

A logistic audit measures the capabilitiesA logistic audit measures the capabilities

and qualities of the logistic operationsand qualities of the logistic operationsand highlights resources forand highlights resources forrationalization and cost reductionrationalization and cost reduction..


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Auditing in Logistic terms is done on theAuditing in Logistic terms is done on the

following basis or criteria:following basis or criteria:

1.1. QualityQuality2.2. TechnologyTechnology

3.3. ProductivityProductivity

4.4. Packaging systemPackaging system5.5. AutomationAutomation

6.6. Warehouse capacityWarehouse capacity

7.7. Strategic logistical planningStrategic logistical planning8.8. External factorsExternal factors


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LOGISTICS PERFORMANCELOGISTICS PERFORMANCE

CONTROLS.CONTROLS.

To direct the logistical activities forTo direct the logistical activities for

competitiveness in an organization, acompetitiveness in an organization, a

powerful control mechanism needs topowerful control mechanism needs to

be evolved and implemented.be evolved and implemented.Usually organizations go for theUsually organizations go for the

following two types of Control Systems:following two types of Control Systems:

A.A. Budgetary Control SystemBudgetary Control SystemB.B. Structural Control SystemStructural Control System

BUDGETARY CONTROLBUDGETARY CONTROL


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BUDGETARY CONTROLBUDGETARY CONTROL

SYSTEMSYSTEMEvery firm fixes up a budgetEvery firm fixes up a budget

for each of the logisticalfor each of the logisticalactivities.activities.

These budgets areThese budgets areirrespective of the originalirrespective of the originalreporting structures.reporting structures.

Earlier these specified limitsEarlier these specified limitson application of funds onon application of funds oneach cost center.each cost center.

Any difference in costs areAny difference in costs areacutely supervised.acutely supervised.

Here emphasis is more onHere emphasis is more oncost saving instead ofcost saving instead ofcustomer service.customer service.


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STRUCTURAL CONTROLSTRUCTURAL CONTROL

SYSTEMSYSTEM..Controls are exercised through proper organizationalControls are exercised through proper organizational

structure.structure.

An organization having cost as its differentiationAn organization having cost as its differentiation

strategy will have various levels of reporting structurestrategy will have various levels of reporting structure

to cut cost at higher levels of investment proposals.to cut cost at higher levels of investment proposals.

But customer focused organization will have a flatBut customer focused organization will have a flat

reporting structure.reporting structure.

It focuses on improving and tracking the health of theIt focuses on improving and tracking the health of the

supply chain to remain competitive.supply chain to remain competitive.


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Thank youThank you

Performance Measurement and Controls

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