Financial issues and Logistics performance

UNIT - 5
Logistics performance
• Logistics performance is the extent to which a country or
organization meets its logistics goals.
• Performance management Is the continuous monitoring of every
aspect of the logistics chain and continuous search for possible
improvements in order to better meet the wishes and
requirements of internal and external stakeholders

• The World Bank's Logistics Performance Index (LPI) is a

benchmarking tool that helps countries identify areas for
improvement in their logistics performance.
• The LPI is based on six components:
• Customs
• Infrastructure
• Logistics quality and competence
• Tracking and tracing
• Timeliness
• International shipments

Some things that can be measured to improve logistics

performance include: Picking rates, Cost per order dispatched,
Lead time to export, and Lead time to import.
10 logistics metrics to measure supply chain efficiency in your
warehouse
• On-Time Shipping. ...
• Warehouse Capacity. ...
• Accurate Order Fulfillment. ...
• Properly Storing Incoming Product. ...
• Peaks in Warehouse Capacity. ...
• Total and Individual Cycle Times. ...
• Damaged Products. ...
• Employee Turnover Rate.
How to improve organizational performance
• Plan: Have a detailed plan that considers all aspects of
logistics, including obtaining goods, delivery, storage, and
budgeting. Also have a plan B for emergencies.
• Invest in technology: New technology can help streamline
logistics and speed up processes.
• Train staff: Ensure employees are confident using new
technology by providing them with the necessary training.
• Communicate: Encourage communication between
departments to ensure efficient logistics.
• Monitor KPIs: Set key performance indicators (KPIs) to
measure success, and monitor them regularly.
• Maintain inventory accuracy: Update inventory counts in real
time so customers can't order products that are out of stock.
• Access the right information: Provide decision-makers with
real-time data so they can make the right decisions.
• Consider outsourcing: If managing logistics is difficult,
consider outsourcing to a third-party logistics (3PL)
business.
• Hire a reliable logistics manager: A logistics manager with
good interpersonal skills and industry contacts can help
resolve issues and identify business opportunities.
centralized organization
• Centralized and decentralized logistics structures differ in
how they organize decision-making, supply chain
operations, and distribution:

Centralized
• In a centralized structure, decision-making is
concentrated in one location, and supply chain operations
are unified in a database. This model is predictable and
systematic, and can lead to cost savings and streamlined
processes.
Decentralized

• In a decentralized structure, decision-making is

distributed across multiple locations or departments. This
model is more flexible and adaptable, and can enable
organizations to quickly adjust to market demands.
Factors to be considered before choosing ....
• Goals: What are your business's goals?
• Customer base: Who are your customers?
• Capabilities: What are your business's capabilities?
• Industry: What industry are you in?
• Market distribution: How is your product distributed across
the market?
• Supply chain complexity: How complex is your supply
chain?
What is centralized structure and decentralized structure?

• In centralized organizations, strategic planning, goal

setting, budgeting, and talent deployment are typically
conducted by a single, senior leader or leadership team.

• In contrast, in decentralized organizations, formal

decision-making power is distributed across multiple
individuals or teams.
• Decentralized Supply Chain

• When a business moves into a decentralized distribution

model, the product moves further away from the key
stakeholders at the “central” corporate office and closer to
the end customer.
What is a centralized logistics organization?
• In a centralized supply chain, there's a single HQ that
serves as a central hub for all operations. Traditionally,
that also meant there was a single warehouse that
controlled the flow of all goods.
STAGES OF FUNCTIONAL AGGREGATION IN AN
ORGANIZATION
• STAGE - 1

• In 1950 initial attempt of grouping logistics activities had

started..... without changing the oover all organizational
structure logistics function were grouped into smaller
units.
• Organization unit was rarely engaged in purchasing and
physical distribution.
• STAGE - 2

• Then the organization started to evolue with over all

enterprise ganing operational experience with logistics
and cost benefits
• STAGE - 3

• In 1980’s Logistics was established as a important

organizational function.
• Every area of Logistics were grouped together as a
seperate line structure.
• STAGE - 4

• A shift in the focus from function to process.....

• Measuring the outputs of any business can be done only
if these can be in terms of customer satisfaction...... this
became the core process of the business.......
• STAGE - 5

• Organization beyound Structure

• Virutality and organizational transparency - Extended

Enterprise.....
THIRD PARTY LOGISTICS
• Third-party logistics (3PL) is when a business outsources
its logistics functions to a specialized service provider.
3PLs can handle a variety of tasks, including:
• Warehousing
• Transportation
• Fulfilment
• Inventory management
• Reverse logistics
• Picking, packing, and shipping
• Coordinating shipments
• Providing software for order tracking and inventory management
FUNCTION OF 3 PL
• Transport function
• Warehouse Management
• Packing
Advantages of 3 pl
• Focus on core competencies
• Lower investment
• Enhanced Technology
Characteristics of 3 pl
• Solution Oriented
• IT Capability
• Management and organizational skill
• Innovativeness
• Independednt best approach
4 Party Logistics
• Fourth-party logistics (4PL) is a model where a business
outsources its supply chain management and logistics to
a single external service provider
Function of 4 pl
• Responsibilities: A 4PL provider is responsible for managing all
aspects of a customer's supply chain, including transportation,
warehousing, order fulfillment, and more. They also act as a
single point of contact for the customer, managing relationships
with other logistics service providers and carriers.
• Technologies: 4PLs use the latest technologies, such as
advanced analytics, artificial intelligence, and cloud-based
platforms, to streamline supply chain operations.
• Suitability: 4PL is a good fit for medium-to-large businesses.
• Examples: Amazon, DHL, and UPS are all well-known examples
of 4PL companies.
Some disadvantages of using 4PL include:
• Less control
Businesses may have less control over certain aspects of their supply chain.
• Higher costs
Premium, all-inclusive services might be more expensive than selecting
individual third-party logistics services.
• Dependency
Businesses may become overly reliant on the 4PL provider, which can be risky
if the provider faces challenges.
• Not cost-effective for small and medium-sized companies
4PL may not be a cost-effective option for small and medium-sized companies.
ABC Technique
• Activity Based Costing Techinique

• This approach was developed to overcome some

shortcomings of traditional accounting method.
• This method involves breaking down activities into
individual tasks or cost.
• This approach allows one to better assess the true
productivity ande cost of Supply chain process.
Categories of ABC approach
• Diagnostic
• Re-engineering
• Intergrated Cost Management system
steps in ABC costing
• ABC assigs cost to products br tracing expenses to
activities. Each product is charged based on the extent to
which it is used ......

• It recognise that many organizational resources are

required not for physical production of units but to provide
a broad arrary of support activities.
• Step 1 - Identify Resources
Resources represents to the expenditure of an organization.
1. production Labour
2. Sales
3. Marketing Labour
4. Utilities
5. Customer services etc
• Step - 2 Identify Activity
Activities represents the work performed in an Organization.
By determinig the actual activities that occur in various
departments, like accounts, Customer services, and
Sales.....
To evaluate the actual cost
• Step - 3 Identify Cost Objects
• ABC provides Profitability by one or more Cost object it is
usually represented by Product, Customer and services.

Step - 4 Determine Resource Drivers

Resource Drivers provide the link between the expenditure
of an organization and the activitiesperformed within the
organization
• Step - 5 Determine Cost Drivers
• Cost of performing certain activities to cost objects......
Financial Gap Analysis