Performance Measurement of Transportation in the Supply Chain
Supply chains and logistics networks are quickly growing in complexity, and only careful management and performance measurement of transportation and related activities will ensure continued efficiency.
The performance measurement of transportation of goods throughout the supply chain from the initial supplier to the end customer is very important to management and overall optimization. The trend in business has almost always been towards systems and networks of greater and greater complexity, and these supply chains and logistics networks are no exception. This supply chain encompasses a wide range of businesses, firms, and organizations, from manufacturers and gatherers of raw materials to logistics and transportation to sales and distribution. In many cases, it is of interest to everyone involved to work together and optimize the way they manage and utilize their own parts of the entire process.
This is because in such a network, the smooth functioning of one step depends to some extent on all the other steps. The flow of materials and goods is ultimately ensured by continuing demand from consumers and buyers, and the responding supply from the suppliers and manufacturers. So, some of the burden falls upon the sales and distribution stages of the chain, because they need to keep demand up through the judicious use of marketing and advertising techniques. At the same time, at the supplier end, they need to be able to produce as much as necessary, as well as to maintain a high standard of quality so that consumers continue patronizing their products.
The intermediate steps that take the product from the factories to consumers everywhere are of course just as important, although they are not commonly appreciated to be so. The proper system of storage in warehouses and other facilities as well as the transportation of material and products from one place to another deserves careful consideration. A haphazard logistics network will definitely cripple a company, no matter how excellent their product or their advertising is. Consumers care about consistency and the ability to deliver every time, and only a robust, well-managed supply chain can provide this.
Small scale operations may get by with just one manager or a small group of managers keeping track of all the details, but as the scale grows, so does the complexity. It soon would become quite impractical to continue trying to manage a growing supply chain operation without relying on consistent, accurate measurements and data gathering. The performance of a supply or logistics chain, while possible to grasp intuitively, should be measured quantitatively for the best, most consistent results.
Performance measurement of transportation, for example, should be done by implementing the collection of relevant metrics or performance indicators. These would include such measures as transit time, freight cost per unit shipped, freight bill accuracy, percent of truckload capacity utilized, and so on. It should be noted here that no single of these factors should be considered more important than all the others. Instead, as is true for the entire supply network, all of these factors should be considered in relation to each other. Optimizing one at the cost of others might lead to an overall increase in expenses and thus backfire. Careful supply chain management will payoff for everyone involved.
