Logistics Management

Transportation channels and systems form vital parts of most supply chains and logistics networks. Accurately measuring transportation performance should be done via the use of the appropriate metrics.

Measuring transportation of goods and products is always a concern, from the smallest scale to the biggest scale networks. Although the amount of organizational detail and level of complexity of the infrastructure involved may be vastly different, the basic fact remains that these systems require good management to be efficient. Moving materials, intermediate goods, and finished products from suppliers to consumers may sound simple on paper, but is rarely ever simple in practice. In fact, the supply chain is composed of many different firms and agencies that of course operate only within a particular sphere of interest. For instance, the original organization that gathers raw materials will, in most cases, be far removed from the eventual organization that distributes the products made from those materials. However, in recent decades the so-called extended enterprise composed of all of these different players self-organizing to optimize the supply chain has been recognized.

Transportation plays a key role in both supply chains consisting of many different organizations down to so-called logistics networks, which refer to the movement of materials and products within an organization. Measuring the performance of transportation systems should be done keeping in mind many different factors and aspects that should be considered equally. For example, although utilizing full truck loads as much as possible would undoubtedly increase efficiency at one level; it may affect inventory management and reduce overall cost efficiency. Even just within the sphere of transportation itself, many factors interact, such as fuel or load efficiency versus timeliness, the management of supply and demand, the flexibility required to respond to changing circumstances, and so on.

Thus, many different measures or metrics should be employed in order to be better able to grasp overall transportation performance. Typically, metrics from different categories such as quality assurance, asset management, finance, storage and resource utilization, and process management should be selected. That is, management should be aware of the metrics in each category that are most relevant to the organization, and do their best to keep track of at least these most important metrics.

One of the most important metrics in keeping track of transportation would obviously be transit time. Simply put, this is the time that a shipment takes to travel from one source to a particular destination. For manufacturers, this would be the time necessary for a shipment from a factory to be delivered to the client’s location. The acceptable and expected values of transit time varies widely since there are many different modes and channels of transport, and local geographical and other conditions play crucial roles. Another metric that is often important to keep track of is the percent utilization of truckload or in general cargo capacity. Ideally, of course, this percentage should be 100%, meaning that all available capacity is being filled and hence is being used fully efficiently. Percentages less than 100% would indicate that the organization is using and maintaining greater cargo capacity (more trucks, for instance) than strictly necessary. These are just examples of the many ways of measuring transportation performance.

Supply chains and logistics have become increasingly complex, and it has become important to measure transportation efficiency. This should be done without ignoring any of the important metrics.

With the increasingly complex supply chains that organizations must deal with and often manage, it has also become increasingly important to be able to measure transportation efficiency accurately. Supply chains, of course, refer to the path from initial supplier to the final consumer, and are often quite involved, being composed of many different firms and agencies. Raw materials are gathered and processed; products are manufactured at factories, transported to warehouses and retail outlets, and delivered to end consumers. Each part of the chain depends to an extent not only on those parts immediately before and after them, but on all the other parts of the chain. In many cases, a catastrophic failure at any part of the chain would have repercussions on all levels, which might eventually lead to a larger failure of the supply network itself.

Since transportation plays such a huge role in these systems, it would only make sense to be interested in maximizing the efficiency in transportation processes. But, again, even restricting attention to transportation alone, there are still a large number of factors that should be considered. And often, it is not even possible to narrow the field down to just a couple of factors because of how many of these factors are interrelated, much like the steps in the bigger supply chain. Optimizing according to just one of these metrics might seem to be a good idea, but without the proper analysis and synthesis with other factors, it could very well just lead to lesser efficiency overall.

For example, one factor that is obviously quite important is transit time. This refers to how long a shipment is in transit, or, that is, how long it takes to arrive at its destination from the time it leaves its source. Transit time would depend on many things, such as the transportation channel or channels to be used, local geographic conditions, along with specific considerations, such as fragile cargo and other circumstances. In general, average times are provided by the shippers themselves, and transit times are measured against these estimates obtained through experience. Optimizing transit time while ignoring all other factors is obviously a bad idea. Because although it might lead to greater efficiency in terms of turnover through time, it would also most probably lead to greater costs and greater risk of damage and loss.

Managing transportation should always start by ensuring that there exists a system to measure transportation efficiency. This may seem like common sense but it bears repeating. Management aims to improve the performance of a process or organization and this improvement will only be tangible if accurate comparisons can be made. These comparisons should be based on the relevant metrics or measurements, of which transit time is just one among many. By keeping a broad base of transportation metrics and maintaining an up to date, accurate tracking system for measuring and recording these, management will be much better able to make optimal decisions. And a smoothly working, efficient transportation system will go a long way towards making supply chains and networks that much more cost-effective.

There is some different between the transportation scorecards represented on this web-site.

• The Transportation Scorecard focuses specifically on transportation problems from the view point of transportation unit of the company or small transportation company. This scorecard provides more metrics to evaluate quality aspects of some specific transportation process. It is a low-level scorecard. Check the names of some metrics: “Frequency of damage”, “Dollar value per order”, “Orders picked per hour”.
• The Supply Chain Scorecard is a middle-level performance tool. It helps to evaluate the performance of transportation unit and how it is integrated in other business processes. As well as business processes of other companies. There are more general indicators, such as “Manufacturing Cycle Time”, “On time pickups”, “Material Value Add”.
• The Global Logistics Scorecard is a high-level performance evaluation tool. It helps to estimate logistics performance from the view point of CEO or manager of the large (meaning international) logistics unit. Indicators that are used for this scorecard are helpful for global view on performance problems – “Avg. vessel turnaround time”, “Inland freight cost”, “Damage or pilferage”.

So, the scorecards are related to each other as:

Global Logistics Scorecard (high level)
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Supply Chain Scorecard (middle level)
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Transportation Scorecard (low level scorecard)

Check scorecard details.