Midterm Exam II Flashcards
5 business performance attributes
- delivery reliability
- responsiveness
- flexibility
- cost
- asset management
what is a metric?
metrics are a measure a company’s activities and performance
why do we have metrics?
- give a company a way to monitor, analyze, and manage key areas of the business
- assist in setting measurable goals
- allow for improvement accountability
why are some metrics more or less effective?
-a metric that measures the wrong thing may encourage behavior within different business units that is counter productive to the organization’s overall goal
characteristics of a good metric
- quantitative
- easy to understand
- encourages appropriate behavior
- visible
- encompasses both outputs and inputs
- measures only what is important
- multi-dimensional
- process uses economies of effort
- facilitates trust
challenges in developing a good metric
- must decide what is important to measure
- metric should represent all aspects of a process so that it gives an accurate view of business performance in that area
- must consider how it will affect behaviors
- complexity and scope
how to develop performance metrics and multi-dimensionality
- team effort
- involve customer and suppliers when appropriate
- develop a tiered structure for the metrics
- identify metric owners and tie goal achievement to individual or division performance
- top management support
- established procedure to mitigate arising conflicts
perfect order metric
-measures what percent of orders meet all of the criteria to be considered a perfect order
elements of the SCOR model
plan
source make deliver
return return
income statement elements
- revenue
- COGS
- interest
- other operating costs
revenue levers
- order fill rate
- order cycle time
- on time delivery
COGS levers
- inbound transportation
- inventory obsolescence
- inventory damage
- SMI/consignment costs of suppliers
interest levers
- inventory financing
- vehicle financing
- facility financing
- technology financing
other operating cost levers
- warehousing cost
- transportation cost
- logistics administration
- technology cost
balance sheet elements
- inventory
- accounts receivable
- fixed assets
- accounts payable
inventory levers
- raw material
- work in process
- finished goods
- days on hand
accounts receivable levers
- aging from disputed deliveries
- aging from time lag: goods delivered- invoice sent
fixed asset levers
- transportation equipment
- warehouses
- crossdocks
- storage & handling equipment
- logistics systems hardware & software
- communications equipment
accounts payable levers
- payment/discount terms
- inbound transport component
- outsourcing
return on assets ratio
net income/total assets
equivalent sales concept
-the amount of sales increase that would be needed to have the same profit impact as a specific dollar amount of logistics costs savings
financial impacts of an increase in customer service through higher levels of inventory
- increase net sales
- increase COGS
- increase inventory cost
- reduce other operating costs (assumption)
profit margin ratio
net income/sales
sales equivalent formula
sales equivalent= cost saving (profit)/% profit margin
profit leverage affect
-a lower % profit margin means a higher sales equivalent for a given supply chain cost because it takes a higher volume to produce given profit
SC impact on ROA
- profit=revenue-costs
- total assets=inventory+accounts receivable + cash + fixed assets
3PL relationship types
- transactional
- collaborative
- strategic
drivers and facilitators in choosing 3PL
- drivers: asset/cost efficiency, customer service, marketing advantage, profit stability/growth
- facilitators: corporate compatibility, mgt. philosophy & techniques, mutuality of commitment, fit on factors such as size, financial strength, etc.
what is a 4PL?
manage and direct the activities of multiple 3PLs, serving as an integrator, delivering a comprehensive supply chain solution
