Quantitative measurements

In this section of the course, we examine ways of measuring logistics performance – starting with defining quantitative measurements.

For the measurement of any system/subsystem, there are usually three steps to consider.

First, strategic aims are defined, followed by Critical Success Factors (CSF) or Key Performance Indicators (KPI). Finally, department and sub-section performance measures are determined.

For measuring logistics, there are a range of quantitative measures to assess – and improve – the performance of each element of a supply chain. These include:

• On-time delivery percentage
• Logistics costs as a percentage of sales
• Inventory turnover ratio
• Complete order fill rate
• Average order cycle time and variability
• Items picked per person per hour
• Average back-order fill rate
• Sales lost due to stock-out
• Percentage error pick rate
• Logistics cost per unit

The Supply Chain Operations Reference (SCOR) model, which is based on six business processes, can be used to improve the performance of a supply chain. The six processes are: plan, source, make, deliver, return and enable.

The purpose of the SCOR model is to help organisations benchmark their supply chain performance against other organisations or supply chains. Companies are asked to complete a detailed questionnaire, which is submitted anonymously, and the results are compared with other companies in their sector.

Your task

Can you think of any other quantitative measures that could be used to assess logistics performance? Share your ideas in the comments area.