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Five factors of supply chain influence the supply chain of any organisation.  They are sourcing, transportation, storage, inventory costs, and product differentiation as explained in the below graphic.

commodity

I will briefly introduce five elements of commodity-related factors that could influence your supply chain.  Integrated planning includes demand planning, material requirement planning and distribution requirement planning. The business success largely depends upon the integrated planning. Demand management is a structured process of tracking enterprise product demand enabling the procurement process to plan and source material for future.  According to a survey, the average forecasting error rates are Chemical, Consumer Goods and FMCG – 39%; Electronics – 29%; Manufacturing – Industrial 39%; Retail – 13%; Biotechnology – 34%; Aerospace – 28%; Transportation – 18% and            Construction – 28%.

In the age when competition between manufacturing companies has become global, making business operations as efficient as possible is the key to economic advantage. Unlike manufacturing companies few decade ago, nowadays manufacturers compete not only with other local businesses but also with other operations across the globe, both big and small. The core objective of MRP is to manage the seamless flow of material (components) into a manufacturing facility to meet the scheduled production orders and at the same time to ensure optimal inventory carrying.

How MRP works?

MRP

Source: MRPEasy

The next in the integrated planning is Distribution resources planning.  What is DRP? – “Distribution requirements planning (DRP) is a systematic process to make the delivery of goods more efficient by determining which goods, in what quantities, and at what location are required to meet anticipated demand. The goal is to minimise shortages and reduce the costs of ordering, transporting, and holding goods.”  The benefits of DRP include:

  1. Coordinated shipments to save costs.
  2. Optimise inventory level.
  3. Optimise Storage requirement.
  4. Last but not least is the satisfied customer.

Sourcing – Sourcing is a very big aspect of the commodity.  You can source it locally, one can source it from the low-cost country and some even source it from low-cost product manufacturing country.  There is a subtle difference between these two, the low-cost country many not be cost effective for some components or finished products, whereas some European countries are proving to be low-cost product manufacturing countries.  For example, steel is cheaper to purchase from Europe. The likes of ArcelorMittal, ThyssenKrupp and Tata Steel are expected to see those profits grow as with sources suggesting annual contracts for 2017 were set at levels 70% higher than for 2016. According to one estimate 15-30% production cost reduction Textile products, houseware and kitchenware 15-20%, injection moulded plastics 12-20% and in electronics 15-20% if the production is outsourced to a low-cost country.

The third element that could influence the supply chain as a commodity is Transportation.  It is needless to add that a fully functional and effective supply chain requires visibility between stakeholders but 82% believe that connectedness and visibility need to be improved and 12% believe there is no visibility according to BPI report. The same report also identified three major challenges the first one is poor coordination between partners (57%) and too little transparency and visibility (50%) and inefficiencies within the supply chain (37%). Transportation could be explained as a “blind spot”, we get no visibility of the product movement whether inbound or outbound, it is common for both components and finished goods.

Inventory – The majority of the working capital is deployed on inventory apart from capital assets.  Optimal inventory carrying is the need of the hour to balance service vs. cost.  Working capital signifies company’s operating liquidity. On an average depending upon interest charges, the inventory carrying cost is minimum at 24% per annum.  This is not visible in the P&L and hidden under finance costs, warehouse rental, insurance, obsolescence, workforce and many more overheads.

Product Differentiation – The objective is to create loyal brand equity such as Apple products and avoiding price comparison with the competitor’s products and value addition to the customer with a better feature of the product.  Further, customisation also could be considered as product differentiation.  It all looks good as far the customer is concerned.  Just step into a supply chain manager’s shoes and think how difficult to manage the supply chain with so much of variation and modular production systems.  The life cycle of the products is becoming shorter due to product proliferation and unrelenting competition.  In response, companies are restructuring the traditional manufacturing process and migrating towards concurrent engineering methods.

“Concurrent engineering, also known as simultaneous engineering, is a method of designing and developing products, in which the different stages run simultaneously, rather than consecutively. It decreases product development time and also the time to market, leading to improved productivity and reduced costs.”

All these business requirements put stress on supply chain right from planning to sourcing and manufacturing.  This implies the complexities of today’s supply chain.

SUPPLY CHAIN COMPLEXITY


 

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The Corporation:

The Organisational Vision and goal determines the effectiveness of Organisational performance.  The core objective of any organisation is to customer retention and sales growth and ROI.  However, all these objectives can go wrong with wrong policies and strategies.  James MacGregor Burns coined the word “Transformational Leadership” in 1978.  The critical elements of this leadership style include positive approach with an optimistic outlook and trustful in nature and also emotionally intelligent and foster collaborative teamwork and set high expectations and nurture innovation.  These leaders transform their organisational culture by inspiring with a sense of mission and purpose.  The need of the hour is Transformational Leadership!

The strategy is one of the most over-used words in the business dictionary. But it is critical to any business success, the strategy is about making choices, trade-offs; it’s about deliberately choosing to be different.

The situation differs from Organisation to the organisation.  However, one thing is certain, Organisational Goals, Organisational Strategy and Organisational culture should be embedded into Operational Strategy.

The operational strategy could be at different levels in different organisations from lacking to Predictive.  As an organisation, it is very hard to judge the current state of Operational efficiency. Ideally, your operational strategy should include, Cost, quality, Velocity, Dependability, Flexibility (change volume, product mix, cycle time, NPI).

The core aim of the strategy should be to transform the supply chain into a profit generating growth engine through incremental value addition using predictive supply chain. It is the corporation’s responsibility to return healthy ROI to the shareholders and investors and at the same time, a safe and healthy work environment that encourages the employees to contribute to the incremental value addition and transforming the supply chain into the predictive supply chain. According to Howard Business school study, a mere 7% of employees today fully understand their company’s business strategies and what’s expected of them in order to help achieve company goals. This should change!

Some Statistical Data:

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Source: IDC.

  1. Visibility is the key within the organisation:
  2. By 2018, 75% of manufacturers will be coordinating enterprise-wide planning activities under the umbrella of rapidly integrated business planning (rIBP).
  3. By 2017, 50% of manufacturers will explore the viability of micro logistics networks to enable the promise of accelerated delivery for select products and customers.
  4. In 2015, half of all manufacturers will be actively employing supply chain design and modelling technologies to dynamically assess both the demand and supply across supply chains.

Supply chain managers believe that “Business Decision Makers Lack an Understanding of or Analytics for their Supply Chain System”.  This was reported by the above mentioned CAPGEMINI study.  Further, it was reported that only 34% participants believe that the business decision makers appreciate the impact of supply chain on organisational performance, only 21% of the supply chain managers rate their systems as excellent, and 79% of the supply chain managers believe that they do not use advanced modelling techniques to inform business challenges or issues in supply chain management very often.

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Cartoon Source: International Liberty – WordPress.com


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The Competition:

In today’s highly globalised and volatile environment companies no longer compete one-on-one, but their supply chains do, so the incremental value addition becomes critical to avoid supply chain extinction.

Today’s competition is moving from “among organisations” to “between supply chains”, more and more organisations are increasingly adopting lean and nimble SCM practice with a primary objective of reducing supply chain costs in order to gain competitive advantage. It has been established beyond any doubt that supply chain management practices will have a discernible impact on competitive advantage, product differentiation and finally organisational performance.

Ma Yun, known professionally as Jack Ma, is a Chinese business magnate who is the founder and executive chairman of Alibaba Group believes that the competition is a force to recon to strength your supply chain.

Comp

Word of Caution – “Companies that solely focus on competition will die. Those that focus on value creation will thrive”

Conclusion – Competition is a necessity, it enables us to deliver our best and eliminates complacency and avoids mediocrity.  Even in horse racing, you need competition to make the horse run fast to win the competition.

The easiest thing is becoming number one and the most difficult task is retaining it. You can only achieve maintain your leadership over your competition by converting enemies’ weakness into your strength. Thought leadership, Predictive Supply Chain Model, Supply Chain Agility are the last legal unfair competitive advantages one can make use to run over the competition.

Finally, advice from well-known businessmen Jack Welch – “Cash is the King, Communicate, buy or bury the competition.“

 


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This is a long story summarised into four parts, I will publish part 1, 2, 3, and four in separately in order to give the readers time read in leisure and digest the information delivered in this long article.

According to the Oxford Dictionary, the supply chain is defined as “the sequence of processes involved in the production and distribution of a commodity.” In simple terms, it is a chain of events that results in producing and delivering the goods and services from the point of production to the point of consumption.

The importance and impact of the supply chain on Organisational performance are phenomenal.  In my opinion, the four dimensions impact any supply chain.  I call them “the four Cs”.  The first C is Customer, the second one is Competition, the third one is Corporation and the final one is the Commodity.

The Customer:

In the past customers have previously had very little influence on the efficiency of the supply chain as they were not fully aware how they can influence corporations supply chain effectiveness.  In today’s globalised economy, the customer preferences and needs are changing very fast due to product proliferation and choices made available by the competition. The customer is fully informed about where the product is manufactured, how long it takes to reach the shelf and what to expect as a price of the product and what features to look for. The customer now has access to information on all these areas and have therefore gained unprecedented influence over supply chain management efficiency. The customer is the key figure in the supply chain and their needs and opinions will affect the supplier’s decisions. According to a report published by the consulting firm CAPGEMINI, 90% of the supply chain managers confirmed participating in a survey confirmed that “Consumer demand is fluctuating more rapidly”.  The same report confirmed that “73% Consumers would purchase the item from a different store than originally intended” if the product is not on the shelf.  Further, the survey outcome reported that the main pain points of the customers with regard to supply chain include, delivering wrong product (95%), Late Delivery (93%), stock on available when required (82%), doest not offer options such as order online and pick-up in store (63%).

Today’s consumer expectations are unpredictive and making predictive supply chains shiver with the thought of fear of failure. The above-mentioned report also reported that 89% of the customers are likely to choose different store if the product is delayed by one day.

The power of the customer – “There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”

The best customer service“The best customer service is if the customer doesn’t need to call you, doesn’t need to talk to you. It just works.”

How to manage the customer“The golden rule for every business man is this: ‘Put yourself in your customer’s place.”

How a customer can destroy your Organisation – According to one estimate, if the customers are not satisfied, 13% of them will tell to 15 or even more people that they are unhappy. On the other hand, 72% of customers will share a positive experience with 6 or more people. The biggest problem is that 67% of customers mention bad experiences as a reason for churn, but only 1 out of 26 unhappy customers complain.

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Cartoon Source: Randy Glasbergen

 

 

 

 

 


Blue Tick Shows Quality And Excellence

Qualitative Supply Chains

 

“Quality is never by accident; it is always the result of intelligent effort. There must be a will to produce superior things”
John Ruskin

Before we discuss the process of implementing quality, it is necessary to understand what lies for us in Future as far as Quality Management is concerned.  It would help us in fine tuning our process of implementation.

Seven key forces have been identified that are most likely to shape the foreseeable future:

  1. Quality must deliver bottom-line results;
  2. Management systems increasingly will absorb the quality function;
  3. Quality will be everyone’s job;
  4. The economic case for broader application of quality will needed to be proven;
  5. Global demand for products and services will create a global work-force environment;
  6. Declining trust and confidence in business leaders and organizations;
  7. Rising customer expectations.

These are the areas identified as things in store come our way when we progress into future as far as quality management is concerned.  Having understood the future requirements, we may have to carefully plan a process for implementing quality management.

Quality Management Principles:

International Organization for Standardization has identified eight quality management principles and they are:

  1. Principle 1 Customer focus
  2. Principle 2 Leadership
  3. Principle 3 Involvement of people
  4. Principle 4 Process approach
  5. Principle 5 System approach to management
  6. Principle 6 Continual improvement
  7. Principle 7 Factual approach to decision making
  8. Principle 8 Mutually beneficial supplier relationships

I would highly recommend that the Quality Management can be introduced using the above 8 principles.  The detailed process is discussed hereunder:

  1. Customer Focus:

 “Don’t try to tell the customer what he wants. If you want to be smart, be smart in the shower. Then get out, go to work and serve the customer!”  Gene Buckley, President, Sikorsky Aircraft

Customer is the objective and meaning of the business.  Every organization depends on their customers and therefore should understand current and future customer needs, should meet customer requirements and strive to exceed customer expectations.  Any business will be successful, if they are able to think one step ahead of their customers.  I would call it as proactive approach towards customer.  Most of the businesses fail because of the reactive approach. As the competition is introducing e-commerce offerings, the management is taking a critical look at their operations.  This should change and the change would bring the following benefits:

  • Increased Revenue and growth in market share;
  • Increased customer satisfaction which results in repeat sales;
  • Increased customer loyalty which will ensure market leader status.

This means one has to do his homework well.  Applying the principle of customer focus typically leads to:

  • Understanding of Customer’s expectations.
  • Aligning Organizational goals with customer needs.
  • Making the organization aware about the customer needs well.
  • Measuring customer satisfaction and acting on the results.
  • Systematically managing customer relationships.
  • Ensuring a balanced approach between satisfying customers and other interested parties (such as owners, employees, suppliers, financiers, local communities and society as a whole).
  1. Leadership:

 The best way to gain and hold the loyalty of your personnel is to show interest in them and care for them, by your words and actions, in everything you do.

Secrets of Effective Leadership

Ordinary people believe only in the possible. Extraordinary people visualize not what is possible or probable, but rather what is impossible. And by visualizing the impossible, they begin to see it as possible. The leaders have to be extraordinary.

Leaders establish unity of purpose and direction of the organization. They should create and maintain the internal environment in which people can become fully involved in achieving the organization’s objectives.

Key benefits:

  • Employees will understand the goal and be motivated;
  • Activities are evaluated, aligned and implemented in a unified way.
  • Miscommunication between levels of an organization will be minimized.

Applying the principle of leadership typically leads to:

  • Considering the needs of all interested parties including customers, owners, employees, suppliers, financiers, local communities and society as a whole.
  • Establishing a clear vision of the organization’s future.
  • Setting challenging goals and targets.
  • Creating and sustaining shared values, fairness and ethical role models at all levels of the organization.
  • Establishing trust and eliminating fear.
  • Providing people with the required resources, training and freedom to act with responsibility and accountability.
  • Inspiring, encouraging and recognizing people’s contributions.

 

  1. Involvement of People:

“Managing at any time, but more than ever today is a symbolic activity. It involves energizing people, often large numbers of people, to do new things they previously had not thought important. Building a compelling case -to really deliver a quality product, to double investment in research and development, to step out and take risks each day (e.g. make suggestions about cost-cutting when you are already afraid of losing your job) -is an emotional process at least as much as it is rational one”. – Tom Peters.

The three tools (Human Resources, Processes and Technology) that make things happen include human beings.  A good system may bring some discipline in work place and a technology may make things easier to execute.  However, we ultimately need people to translate objectives into results. “Artificial intelligence is no match for natural stupidity.”

People at all levels are the essence of an organization and their involvement enables their abilities to be used for the organization’s benefits.  Human resources are identified as one of the Supply Chain enabler.  Any organization which fails to involve all levels of their employees may progress towards their objective due to indifferent thinking process in the organization.

Key benefits:

  • Motivated, committed and involved people within the organization.
  • Innovation and creativity in furthering the organization’s objectives.
  • People being accountable for their own performance.
  • People eager to participate in and contribute to continual improvement.

This would ultimately lead to people understanding the importance of their coordinated contributions to the organization.  People get to know their constraints in their performance and they will try to improvise their performance which leads to quality product development and delivery.  Information sharing will help the employees to extend their knowledge base and leads to innovative thinking.

  1. Process Approach:

ISO 9001:2015 definition of a process approach is working the following way:
A process is using resources to transform inputs into outputs. An organization can function more effectively if it identifies its processes and manages them accordingly.  One can achieve desired results if one manages the activities and related resources as a process.

Key benefits:

  • Lower costs and shorter cycle times through effective use of resources.
  • Improved, consistent and predictable results.
  • Focused and prioritized improvement opportunities.
  • Progress monitoring against the bench mark.

When we put processes in place we have defined the key responsibilities and key persons responsible for achieving the same.  The process will enable identification of interfaces of key activities within and between the functions of the organization.   And also will help the organization in evaluating risks, consequences and impacts of activities on customers, suppliers and other interested parties.

  1. System Approach to Management:

Identifying, understanding and managing interrelated processes as a system contributes to the organization’s effectiveness and efficiency in achieving its objectives.

Key benefits:

  • Integration and alignment of the processes that will best achieve the desired results.
  • Ability to focus effort on the key processes.
  • Providing confidence to interested parties as to the consistency, effectiveness and efficiency of the organization.
  • Structuring a system to achieve the organization’s objectives in the most effective and efficient way.
  • Understanding the interdependencies between the processes of the system.
  • Structured approaches that harmonize and integrate processes.
  • Providing a better understanding of the roles and responsibilities necessary for achieving common objectives and thereby reducing cross-functional barriers.
  • Understanding organizational capabilities and establishing resource constraints prior to action.
  • Targeting and defining how specific activities within a system should operate.
  • Continually improving the system through measurement and evaluation.

The objective of this approach is to structure the management system to achieve the corporate goals in the process defined and accepted by the management.

  1. Continual Improvement:

NASA has defined continual improvement as: Continual Improvement is a recurring activity to increase the ability to fulfil requirements or to increase the effectiveness of the management system and its processes.

One can never rest thinking that everything is in place and all is well.  One should not forget what Thomas Edison has commented about finding new things:

“There is a better way. Find it”
Thomas Edison

The re-engineering process or continual improvement methodology will enable the organization to take a re-look into their systems and processes to check whether there is any better way doing things which would lead to cost reduction, quality improvement and increase in customer satisfaction.

Key benefits:

  • Performance improvements;
  • Flexibility to react to a situation;
  • Increased customer satisfaction;
  • New opportunities.
  1. Factual approach to decision making:

Effective and efficient decisions are always made based on conclusions supported by logical data analysis and interpretations.

Key benefits:

  • Informed decisions.
  • An increased ability to demonstrate the effectiveness of past decisions through reference to factual records.
  • Increased ability to review, challenge and change opinions and decisions.
  • Making the data to those who need to take decisions;
  • Making decisions and taking actions based on factual analysis balanced with Business knowledge and experience.
  1. Mutually beneficial supplier relationships:

The author has suggested in earlier assignments that the relationship between the supplier and buyer should be as that of strategic partners and not vendor and the buyer.  An organisation and its suppliers interdependent and a mutually beneficial relationship will enhance both parties chances in improving their business opportunities and growing and healthy bottom-line.

Key benefits:

  • Increased ability to create value for both parties;
  • Flexibility and speed of joint responses to changing market or customer needs and expectations;
  • Optimization of costs and resources;
  • Sharing information resulting in better business processes;
  • Pooling expertise and resources with partners;

Think Zero Defects

Cartoon Source: Cartoonstock.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 


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The objective of performance drivers is to create an environment within which companies can plan, communicate and measure strategies and tactics in their unique business environment.

Before we get into the discussion of performance drivers, we should be clear in thoughts whether we are looking at short-term business performance drivers or long-term strategic performance drivers.  I feel for both of them the process is the same.  We should know where we are and also know where we are heading to.  I would explain the process first before we discuss the performance drivers.

Process

The inspiration for the above process mapping is the story from famous Alice’s Adventure in Wonderland, which goes like this:

“Would you tell me please, which way I ought to go from here?”

“That depends a good deal on where you want to get to,” said the Cat.

“I don’t much care where –” said Alice.

“Then it doesn’t matter which way you go,” said the Cat.

 In my opinion, the following Business Drivers are appropriate for any predictive supply chain operations if we follow the above-mentioned process.

Strategic Instruction:

To be the Market Leader and retain the leadership with better product offering and service support to the customer.

 From scenario to strategy

 In our earlier assignments, we have identified qualitative critical variables which are strategic in nature.  We have recommended internal analysis in the Logistics Audit assignment; we have the Market Analysis about the present status Vs. Competition position in some of the measures. We also know where we are strong and where we have to improve.

From Strategy to Action

 It is time now to set the Business performance drives or objectives or strategic guidelines or any name that me suitable for the action of guiding the company to achieve the corporate goal of maintaining the Market Leader position and continue to enjoy the customer’s support.

The best Business performance drivers in my opinion:

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If anyone looks at the above-given business performance drivers will recognise that these performance drivers are aimed at reducing the lead time, reducing the cost and improving the product offerings to the customers.  As and when one achieves these objectives will become the market leader.

However, one should not forget to develop Industry foresight.  With the advanced technology and availability of the same to everyone, the network expansion and the reach has put everyone on the same platform.  In order to win the customer’s support and business, one has to integrate three basic resources (i.e. Process, People and Technology) and try to add value to the system through innovation and re-engineering.  Any company which will not have this as the primary business performance objective will fail in the long run.  Organisations who keep their eyes and ears open and keep a close watch on the customers and the competitors will be the winners.

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Cartoon source: http://www.torbenrick.eu/blog/

 

 

 

 

 

 

 

 


Audit Puzzle Shows Auditing And Reports

 

The primary objective of Logistics Audit is to match the logistic requirements and customer service expectations, taking the market dynamics into consideration, and to identify  areas for improvement to achieve customer service excellence.

Key Steps in conducting Logistics Audit:

Logistics Audit

An effective logistics control system requires accurate, relevant, and timely information about activities and performance. A major source of this information is a logistics assessment, otherwise known as a logistics audit. The periodic assessment of logistics should be an integral part of the process of logistics strategy development. The logistics audit serves three main functions for any organization:

  • Identification of key data required to manage costs, service, cycle times, response and quality.
  • It allows for a better understanding of the current environment.
  • It determines how well the system is meeting current business needs in a cost-effective, flexible and responsive manner, and how it is adapting to the changing marketplace.

The logistics audit can be framed by asking below given basic questions to any organization.

  1. Are current logistics objectives consistent with current corporate, marketing and production strategies?
  2. How is the company performing with respect to customer requirements and preferences?
  3. What is the true total cost of the Logistics function? And how do those costs compare with others in the same industry or market segments?
  4. Is the company using its Logistics resources and capacity effectively?
  5. Is the company managing its material flow effectively through the supply chain?
  6. Are the information systems and technologies meeting the needs of the users, the business, and the consumers?
  7. How should the company plan proactive measures in reducing the cost by optimizing the supply chains and by reducing the inventories?
  8. How the present order cycle time is addressing the customer satisfaction as far as lead time is concerned?
  9. How to optimize the manufacturing operations?
  10. How can we switch over to pull process from the present push process?
  11. How to develop component vendors to avoid long distance buying?
  12. How to react to the competition as far as innovative distribution strategies?
  13. How can one optimize the resources and reduce the administrative costs?
  14. What are the areas one can look into outsourcing to reduce the cost and increase the efficiency levels?

Data is power in an organization, and a lack of relevant data is a key impediment to the achievement of an information-integrated company. Often companies collect the data but store it in a diverse range of locations from mainframe to notebook computers. Accessibility of data is essential throughout the firm in order to leverage its usefulness effectively. The first thing a logistics audit will discover is how accessible data is, for without data, the audit process will be significantly handicapped.

The process itself comprises eight major steps:

  1. Determine consistency of strategic objectives
  2. Determine customer requirements and preferences and obtain performance targets
  3. Detail current logistics operations and practices
  4. Analyze logistics data
  5. Identify programs and initiatives
  6. Prioritize projects
  7. Develop and implementation plan
  8. Implement and measure performance and improvement

Once we have identified key questions for the Logistics Audit, it is time now to establish Critical variables.  We can classify the variables into two categories and they are:

  1. Quantitative Variables
  2. Qualitative Variables 
  1. Quantitative Variables:

The objective of quantitative variables is to establish bench marks or norms to conduct the audit for the existing operations and also simulate situations to understand the capabilities to meet the future demands of the market place.  As the name suggests, these variables can be measured in terms of numbers and compared with the present or future operations to understand the progress.  Further, these quantitative variables can be classified into four broad categories and they are:

  1. Demand Throughput
  2. Service
  3. Cost
  4. Utilization.
  • Demand Throughput:

This analysis is conducted to analyze the capability of the system (i.e. Production plants and Distribution centers) keeping in view of the strategic objectives of the business.  To conduct this analysis, we need the future forecasts and data related to customer geographic locations of the future periods.

  • Service:

The primary value of logistics is to accommodate customer requirements in a cost effective manner.  Philosophically, customer service presents logistics’ role in fulfilling the marketing concept.  A Customer service program must identify and prioritize all activities required to accommodate customers’ logistical requirements as well as, or better than, competitors.  In establishing a customer service program, it is imperative to identify clear standards of performance for each of the activities and measurements relative to those standards.  In basic customer service programs, the focus is typically on the operational aspects of logistics and ensuring that the organization is capable of providing the seven rights to its customer: the right amount of the right product at the right time at the right place in the right condition at the right price with the right information.

As discussed earlier the customer satisfaction is measurable through the below given measures:

  1. Order Fill Rate;
  2. Line Item Fill Rate;
  3. Quality Fill Rate;
  4. Back orders / Stock-outs;
  5. Customer satisfaction;
  6. % of Resolution on first Customer Call;
  7. Customer returns;
  8. Order track and trace performance;
  9. Customer Disputes;
  10. Order entry accuracy;
  11. Order entry times.

 

  • Cost Analysis:

In order to establish or identify costs involved in servicing the customer. By Analysing the foremost challenge is to interpret and understand the variation in the margins.  The gap between the lowest and the highest cost analysis is very critical and it is necessary to understand elements of cost escalation and low cost elements.

  • Utilization Analysis:

This analysis would give us the Resources utilization indication.  However, to work out the utilization %, we need Installed capacity of the production plants, Human resources employed; Equipment employed details; Product stacking norms etc.  The basic principle to arrive the Utilization rate is:

Capacity Utilisation/Installed Capacity

  1. Qualitative Variables:

Qualitative variables are undertaken to give a shape to the strategic thinking of the organization.  These interviews basically should be done with the heads of the departments and also few strategic personnel in the department to understand the scope for improvement of productivity and reduction of costs.  The following Qualitative Variables should be subjected to the Logistics Audit.

    1. Distribution Strategy;
    2. Warehousing Strategy;
    3. Outsourcing Strategy;
    4. Vendor Development from local areas;
    5. Marketing Strategy;
    6. Production Strategy;
    7. Product mix strategy.

Audit-planning-meeting

Cartoon Source: http://independentaudit.com

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