What is meant by the term “Logistics Performance Management”? As created by John J. Coyle, the Seven R’s of Logistics is beautifully explained.
“Logistics is all about receiving the right merchandise, to the right consumer, in the right quantity, in the right condition, at the right place, at the right time, and at the right costs.”
Logistics performance management is the consistent tracking of every feature and aspect of the logistics system.
Logistics performance management is the consistent tracking of every feature and aspect of a logistics system. This process takes account of the data related to all logistical activities. This includes outbound and inbound transmissions, warehousing, fleet management, materials handling, inventory management, 3PL management, order fulfillment, supply and demand planning, logistics network strategy, and many other support facilities.
Logistics performance management experts use this process to identify and rectify problems, as well as to update and refine business performance.
Below are three factors that affect Logistics Performance Management.
Factor# 1: Unproductive Strategy
The majority of businesses strive to achieve high-performance goals but may end up falling short of some standards. It always becomes clear when a component is lacking. The objective of logistics performance is to identify these components.
In order to devise a strategy for your logistics performance management, a logistics chief must lay out the process. It is the job of this chief officer to develop a game plan to get the company back on track. In general, logistics performance management depends on a steady flow of proceedings, measures, decisions, and actions. As soon as a business recognizes an area of development, they must put down their current process and aim to fulfill that specific goal.
When utilizing effective logistics performance management, it is possible for a chief to:
- Utilize information and data to discover the reason behind delivery postponements (truck breakdowns)
- Reorganize team members to decrease the number of transporters across all roads
- Utilize current and past information to combine shipments, therefore creating fewer trips
Track and measure cost-savings subsequent to these actions
It becomes clear that a successful logistics performance management proposal requires a skilled decision-maker to decode the data so that a company can reply with real-time measures to develop better business performance.
Factor# 2: The Performance Metrics Are Not Legibly Well-Defined
Unfortunately, all the information gathered will be worthless if the correct performance metrics are not implemented. Those logistics specialists should be aware of what to assess when tracking performance. They also must rely heavily on their bookkeeping skills in this regard.
There are innumerable metrics that logistics specialists may use to calculate the performance. These measurements will mostly be based on the size, as well as goals, of a business. Some of these performance measurements are highlighted below:
- Total travel time
- Over-all orders achieved
- Number of orders in a specific period
- Amount of shipments in certain hours of transport time
- Average inventory investment
- Service dependability
- Fixed costs (building, payroll, equipment)
- Accessorial charges
- Variable costs (utilities, fuel)
- Total lane costs
- Overhead costs (lighting, heating, taxes, insurance)
- Cost per pound
- Customer service grievances
Factor# 3: Falling Behind in Logistics Technology
Technological variations on an almost daily basis can become quite difficult to keep track of. This is one of the bigger challenges facing performance management. Developments in the IT infrastructure must be made in order to back the logistics software. The logistics supervision team must ensure that their software is able to adapt to the business’s performance metrics.
These three factors all affect business logistics performance management. It is the business owner’s responsibility to do everything possible to manage these factors and provide their customers with their product at the right cost, the right time, right place, in the right condition.
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