Performance Measurement and Customer Accommodation - Essay Example

Introduction Operational performance is focused on the improvement of the outcomes of the core business which include safety, financial, people and environmental outcomes. The performance of an organisation is measured against prescribed indicators or standards of efficiency, effectiveness and environmental responsibility for instance, productivity among others (Kuei, Madu & Lin 2001). The objectives of a measurement system in regard to logistic operations include; monitoring, controlling, directing, and improvement of the value of shareholder. The performance of the system is monitored through establishment of suitable metrics for tracking and reporting. Performance of the system is controlled through appropriate performance standards in relation to the metrics that are being monitored. Employees are directed to focus on the performance of the system through reward and motivation. The value of the shareholder is improved through superior performance logistics (Slack et al. 1995). Performance measurement employs evidence in order to determine the progress in regard to specific defined objectives of an organisation. This include qualitative evidence for instance, measurement of the travel times of the customer and qualitative which includes measurement of the satisfaction and perception of the customer. Thus, measurement of operational performance involves measurement of progress towards achievement of the objectives in the management and operations of a system (Lambert, cooper, & Pagh 1998). There are various approaches for measuring performance such as use of balanced scorecard, logistics scoreboard, supply chain council and activity based costing among others (Kaplan 1992). According to De Toni, & Tonchia (2001), measurement of operational performance is important as it provides ways in which an organisation can assess if there is improvement or degradation of its supply chain. Thus, use of these measures helps in ensuring a better performance of the supply chain. It keeps the company on track towards the achievement of the objectives for improvement of supply chain. Customer accommodation In order to understand the customer accommodation is it is important to have an idea of who the customer is. Based on the total supply chain perspective, the customer is the end user of production in regard to consumer market. From the firm’s perspective within a supply chain, intermediate customer organisations usually exist between the end users and the firm. In a logistics manager’s perspective, the customer involves any delivery location such as receiving docks for a manufacturing warehouses or plants (Holmberg 2000). Customer accommodation measurement requires additional metrics such as perfect order, absolute performance and customer satisfaction. Perfect order is used to measure the entire integrated logistical performance. That is, the ratio of perfect orders to the total number of completed orders during the same period of time (Lambert & Pagh 1998). Absolute performance provides a clear and better indication of how the performance of the firm impacts customers. For instance, in a certain firm, a 99.4% on-time delivery would indicate that on a typical day, over 4,000 consumers received late orders. A perfect order means deliverance of completed orders to the customer’s requested time and date and in perfect condition with inclusion of all documentation. The measurement of customer satisfaction requires monitoring, measurement as well as collection of information from the consumer (Holmberg 2000). Supply chain metrics The management of supply chain requires managing complex dependencies between partner companies, departments and teams. Supply chain metrics involves measurements for production, procurement, warehousing, transportation, inventory, packaging, material handling and customer services. There are various metrics that are used to score the performance of supply chain management. Some of them include cash to cash cycle, customer order cycle time, supply chain cycle time, on shelf in-stock percentage, inventory days of supply, fill rate, and on-time shipping rate among others (De Toni, & Tonchia 2001). Cash to cash cycle time gives the number of days between the payment for materials and getting paid for the product. It measures the amount of time that the operating capital is tied up. Cash at this time is not available for other purposes. If the cash to cash is fast, then this shows a profitable and lean supply chain. Supply chain cycle time provides the time that would be taken to fill a customer order given that the levels of inventory are zero. It shows the supply chain’s overall efficiency. Shorter cycles are reflected by more efficient the supply chain. This analysis assists in recognizing competitive advantage (Van Hoek, Harrison, & Christopher 2001). Customer order cycle time gives the measurement on the time it takes to deliver a customer order after receiving the purchase order. That is, the difference between the actual date of delivery and the creation date of purchase order. The inventory days of supply gives the measurement of the number of days required for the supply to run out, if it was not replenished. Holmberg (2000) states that fill rate supply chain management aims to minimise these days of supply for the reduction of risks of obsolete and excess inventory. Other financial benefit associated with minimisation is tied up operational cash flow. On-shelf in-stock percentage gives the percentage of time in which the product is available on the store shelf. Dwell time is the ration of days that the inventory sits idle to the days that the inventory is productively uses (Lee & Billington 1992). Benchmarking Performance is benchmarked for various reasons. Firstly, it is benchmarked in order to identify best practices as well as opportunities for improvement of efficiency. Secondly, benchmarking provides accountability in regard to the stakeholders. Thirdly, it is benchmarked to promote political will to innovate. Finally, benchmarking performance enhances deliverance of objective data in order to drive change as well as supporting of decision making. Benchmarking has various benefits; increase in the awareness of changing needs of the customer, development of realistic goals, creating a good understanding of the current business position, and establishment of an action plan that is realistic (Stewart 1995). Different types of benchmarking include internal, competitive, non-resistant and world class benchmarking. Internal benchmarking involves a condition where different locations in the organisation that produce similar products compare how they are creating similar outputs. The aim is learning from others and adapting the best practices. Competitive benchmarking involves discovering the performance of our company in comparison with an immediate competitor. World class benchmarking involves making comparisons other organisations in different industries with an aim of being the best for various crucial activities that influence costs, market share and employee motivation among others (Cavinato 1992). Conclusion Operational performance is aimed at the improvement of the outcomes of the core business such as safety, financial, people and environmental outcomes. Monitoring, controlling, directing, and improvement of the value of shareholder are some objectives of measuring the operational performance. Management of supply chain is a major component of the strategies for competition which enhance productivity as well as profitability. The metrics for the measurement of customer accommodation include perfect order, absolute performance, and customer satisfaction. Supply chain metrics involves measurements for production, procurement, warehousing, transportation, inventory, packaging, material handling and customer services. There are various metrics that are used to score the performance of supply chain management include; cash to cash cycle, customer order cycle time, on shelf in-stock percentage, and inventory days of supply among others. Performance is benchmarked for various reasons such as identification of best practices as well as opportunities for improvement of efficiency; benchmarking provides accountability in regard to the stakeholders; to promote political will to innovate; and to enhance deliverance of objective data in order to drive change and also support decision making. Various types of benchmarking include internal, competitive, non-resistant and world class benchmarking. (Word count 1254)   References De Toni, A, & Tonchia, S 2001, Performance measurement systems, characteristics and measures, International Journal of operations & management, vol. 21, no. 1/2., p. 46-70 Holmberg, S 2000, A system perspective on supply chain measurements, International Journal of physical distribution & Logistics management, vol. 30, no. 10, pp 847-868. Kaplan, RS, Norton, PD 1992, The balanced score-board measures that drives performance, Harvard Business review, vol. 70, no.1, 71-79. 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