UNIVERSITY OF ECONOMICS AND LAW

Course

WAREHOUSE MANAGEMENT AND DISTRIBUTION

Instructor: Dr. Nguyễn Duy Quang

Email: [email protected]
2024
 Chapter 13. Performance management
Introduction
“What you do not measure, you do not manage” (Tom Peters)
 Chapter 13. Performance management
1. Reasons to measure performance and productivity of
warehouse
. To ensure customer satisfaction;
. To ensure that there is a culture of continuous improvement
within the operation;
. To discover potential issues before they become major
problems;
. To train staff in the right areas;
. To reward staff where appropriate.
 Chapter 13. Performance management
1. Reasons to measure performance and productivity of
warehouse
Items were sent incorrectly, the company has to incur:
. Finance department is affected by delayed payments and
possible penalties.
. Inventory department has to provide extra stock cover.
. Sales department has to handle complaints and authorize
returns.
. Transport department has to effect extra deliveries and
collections.
. Warehouse has to re-pick, re-pack and duplicate activities.
 Chapter 13. Performance management
1. Reasons to measure performance and productivity of
warehouse
Items were sent incorrectly, the company has to incur:
. Returns procedure has to take place.
. Possible product disposal/write-off.
. Review of processes needs to take place.
. Potential additional training required.
. Loss of product if client keeps the over-delivered product.
. Potential loss of customer.
 Chapter 13. Performance management
2. What should we be measuring?
. reliability;
. flexibility;
. cost; and
. asset utilization
 Chapter 13. Performance management
2. What should we be measuring?
High-performance operations that most companies strive to
accomplish:
. High-quality operations don’t waste time or effort having to redo
things
. Fast operations ensure a quick turnaround of orders.
. Dependable operations can be relied on to deliver exactly as
planned.
. Flexible operations adapt to changing circumstances quickly and
without disrupting the rest of the operation.
. Low-cost operations lead to higher profits as well as allowing the
company to sell their products at a competitive price.
 Chapter 13. Performance management
3. Choose the right performance measures
Need to undertake the followings:
. Understand your business and its strategy.
. Decide on the objectives.
. Understand which KPIs are likely to assist in meeting the
objectives.
. Align the KPIs to others within the company.
. Ensure that everyone works towards achieving the targets –
nominate KPI owners.
. If targets aren’t achieved, analyse the reasons why and
introduce processes to enable achievement.
. If the target isn’t realistic, replace it.
 Chapter 13. Performance management
3. Choose the right performance measures
SMART principle:
. Specific
. Measurable.
. Achievable.
. Timely.
 Chapter 13. Performance management
4. Traditional productivity measures
. Labour hours utilization
(Labour hours used × 100) ÷ labour hours available
. Warehouse area utilization
(Space used × 100) ÷ space available
. MHE utilization
(MHE hours used × 100) ÷ MHE hours available
. Cost as a percentage of sales
(Total warehousing cost × 100) ÷ total sales revenue
 Chapter 13. Performance management
4. Traditional productivity measures
. Cost per order despatched
Total warehouse cost ÷ total number of orders shipped
. Units picked per hour
Units picked ÷ total hours available
. Dock-to-stock time
. Order accuracy
(Orders picked and despatched accurately × 100) ÷ total orders received
. On-time shipments
Orders delivered as per customers’ requests ÷ total orders received
 Chapter 13. Performance management
5. New performance metrics
* Common measures
- OTIF
. On-time delivery
. In-full delivery
- Inventory measure
- Stock cover in days
The current level of stock / the total annual sales * multiplying by 365
- Stock turn
The total number of units sold / the average number of units in stock.
 Chapter 13. Performance management
5. New performance metrics
* Common measures
- Stock/Inventory accuracy
. Location stock accuracy percentage = (number of correct locations ÷
number of locations counted) × 100 Stock
. Line accuracy = (number of correct lines counted ÷ total no. of lines
counted) × 100
. Stock unit accuracy = (actual quantity by SKU ÷ expected quantity by
SKU) × 10
- Damaged inventory
Damaged items percentage = items found damaged ÷ items despatched
per month
 Chapter 13. Performance management
6. Hard and soft measures
- Hard measures are relatively easy to measure, being
quantifiable and less ambiguous.
- Soft measurements are those that deal with intangible attributes
such as customer satisfaction with accuracy of delivery:
. providing services as promised;
. dependability in handling customers’ service problems;
. performing services right the first time;
. providing services at the promised time;
. maintaining error-free records
 Chapter 13. Performance management
7. Integrated performance model
Integrated performance models are a mix of actual performance
data and customer perception.
 Chapter 13. Performance management
8. Benchmarking
Reasons for benchmarking
. understand the performance;
. identify any shortcomings;
. discover what others are doing better;
. identify performance targets that can be demonstrated to be
achievable;
. accelerate and manage change;
. improve processes;
. understand what is best practice.
 Chapter 13. Performance management
8. Benchmarking
The principles of benchmarking are as follows:
. collaboration;
. confidentiality;
. value;
. flexibility;
. honesty;
. openness;
. reputation.
 Chapter 13. Performance management
8. Benchmarking
 Chapter 13. Performance management
8. Benchmarking
 Chapter 13. Performance management
9. Balanced scorecard
 Chapter 13. Performance management
9. Balanced scorecard