Logistics Management

Evaluation of performance is important for any business, especially taking into account post crisis realities of the recession hit economy.  Competition is getting tougher and that is why every company needs to make sure it efficiently spends every dollar.  Most large production and sales companies have own logistics departments or use services of logistics companies.  At a first glance, the work of the logistic department seems very simple.  One should take a unit or a product and take it to another place.  But in fact, shipment expenses may exceed the prize of the delivered product itself which makes it two times expensive.  A logistic department spending too much money on delivery of products and cargoes makes the whole companies suffer losses and increase prices for products.  As known, prices fall many products include transportation costs.

Use BSC to measure efficientcy of logisitics

For this reason, in order to increase competitive advantage of a company and its products in the market it would be a reasonable to decrease transportation and logistics costs.  That’s why it is imperative to set strategic goals for logistics department or make such a department work in concord with the company strategic goals.

Balanced scorecard system is known as the most effective tool that successfully communicates strategic goals of the company with its operational management.  It often happens that lower management levels are not aware of company strategy and their own role in it.   Balanced scorecard visualizes company strategy and links it to operational level.  In other words, employees and managers of logistics department will actually see what needs to be done to improve performance of their department.

Efficient logistics is about fast and cheap delivery.  Of balanced scorecard uses a number of key performance indicators that represent performance of the company or logistics department in our case.  So, what are most important KPIs in logistics?

Select the most important logistics KPIs

Without any doubt, freight cost per unit is one of the most important indicators.  This is the amount of money the company spends to deliver product to an end customer.  The less one spends the cheaper the product is or the greater the savings are.

Load capacity is known as another indicator showing efficiency of the logistics department.  If airplanes, ships, trucks for other means of transportation can take for example 100,000 tons of cargoes a month, but in fact they take only half of this amount, logistics managers should think of the ways of a more efficient use of transportation means.

Logistics is the integration of the different aspects of a business to ensure smoother flow. Thus, it is important for businesses to implement logistics training.

No doubt about it, there are businesses that are pretty adamant that logistics training is a necessity in any industry today. In fact, many companies are now employing a logistics expert in their payroll. This is indeed something that is not common across businesses nowadays. However, there are still some companies that contend this, saying that there really is no need to train employees on the importance of logistics. There are even some companies that insist that logistics is not really an important aspect in the success of the enterprise as a whole. In reality, nothing could be further from the truth.

The absence of logistics can only lead to poor company planning. Beyond that, its absences also leads to disorganized processes in the supply chain flow. To further understand the relationship between logistics and the success of an enterprise, let us first define logistics in its most basic form.

Logistics is actually the science or art – whichever you prefer – of integrating virtually all aspects existing in an enterprise. The factors or aspects included here are the gathering of resources, production, marketing, advertising, transportation or delivery, and the very consumption or utilization of the products or services at hand. A standard reference can even be quoted that logistics is the actual action of integrating all business sections, putting them together in sync, from even the inception of the product or service, right down to the consumers receiving the product or service. While these definitions do talk about logistics to some extent, these are not really the clear-cut be-all definition of logistics itself. To date, there really is no official definition for the term yet. All we know is that it does play a vital role to the overall success of the enterprise.

From the mentioned definitions, it is clear that the use of logistics aims to make all existing processes more efficient so that financial revenue could then be maximized. This is the reason behind the need train employees on the basics of logistics. Evidently, it helps employees realize how critical and important the very roles they play are in the overall success of the enterprise. Furthermore, logistics help determine current processes that are already outdated, thereby eliminating them effectively. It also helps point out processes that are in dire need of improvement, as well as the courses of action that the company should take on, just to initiate improvement where it is needed.

Through intensive training on logistics, employees become adequately knowledgeable in terms of the actual practices that can lead to more satisfied customers. One of the main issues that can hamper customer satisfaction is when products go out of stock. Imagine yourself in the customer’s shoes – wouldn’t this somehow disappoint you? You might even regret considering buying a product from that particular company in the first place. This is, sadly, a direct result of poor logistics. Somewhere down the supply chain or flow, an error must have been made in calculating how many products should be produced or delivered to particular branches. Thus, the product is rendered out of stock. In this scenario, it becomes evident how important logistics training is to any business or enterprise in the corporate world today.