Question

The International Logistics Conference is coming up in a few months. Elephant L&SC Consultants has always participated and presented a paper which increase our stature in the eyes of the industry and potential clients. You are being assigned the task to write a paper and then be prepared to present it. First, let’s focus on the paper and the topic to be presented: Balanced Scorecard versus Logistics Key Performance Indicators.

Quite often, we are asked by some of our clients to develop a BSC for them so they can utilize a regular dashboard for measuring performance. As is often the case, there are other key performance indicators (KPI’s) that should be utilized beyond the traditional BSC. And we often have to go into a complicated discussion with clients to move them towards adapting the BSC to include other logistics KPI’s to provide a well-balanced Balanced Scorecard. We think that a well-written paper that covers this topic can be very useful. And that is your assignment. We hope to use this to develop a white paper that we can provide to clients and prospects.

Your Deliverable: a report that provides a review of the traditional Balanced Scorecard and also identifies logistics/SC Key Performance Indicators. Discuss why and how to include these other KPI’s to adapt the scorecard to specific logistic companies to make it more effective. Be sure to cover transportation, warehousing, and inventory as well as the five types of performance. Also to be included is discussion of how to design and implement these measures.

Answer 1

Balanced Scorecard-It is the performance metrics which was introduced and published by Dr. Robert Kaplan and Dr.David Norton at Harvard Business Article in 1992.

Objective of Balanced Scorecard-

• Balanced scorecard is the strategic tools that can help any organization strive towards their mission and vision.
• The objective of Balanced scorecard is to recognize and enhance the internal function of any company so as to improve the external outcomes.
• With the help of this tools companies can identify what factors are obstructing company to performance better in the market.After identifying those factors company can improve upon by making better strategic decisons.

PILLARS OF BALANCED SCORECARD-

1. Learning and Growing-In this case, training and development department of the organization conducts regular training for its employees so that they can learn new technologies and apply them in there day to day work.After imparting training, employees are analysed on how they are utilizing information in their business.Analysis can be done in form of test,presentations etc.. and employees are graded accordingly.
2. Evaluation-New Business technologies learned by employees are evaluated .Management checks for any shortage,bottlenecks.
3. Customer view-Regular feedback from customers are collected like its pricing, how the new product is performing,what else can be done to improve its quality.
4. Finances- New product acceptance among the customer is done by measuring its sales number, how much sales has improved as compared to last quater or last year.It helps to identify those geographic region where product is more accepted and also where product needs further promotion.

KEY LOGISTIC SUPPLYCHAIN PERFORMANCE INDICATOR-the key performance indicators are discussed below :-

(1). Warehouse-

• Location of the warehouses
• Centralized or Decentralized monitoring.
• Availabilityvof infrastructure,proximity to customers.
• Whether it will go for efficent supply chain or responsive supply chain.
• Production costs/unit.
• Processing/setup/idle/down time.

(2). Inventory-

• whether to go for cycle inventory,seasonal inventory or safety inventory.
• cash to cash cycle time.
• Average replenishment batch size of the inventory.
• Fill rate.
• Understocking and overstocking of inventory.

(3). Transportation-

• Design of the transportation network-whether to go for direct or more than one consolidated points.whether to have single or multiple supply and demand locations.
• Mode of Transportaion-Whether to go for road,rail,air or ocean transportation.
• Avergae inbound and outbound transportation costs.
• Average outbound and inbound shipment size.
• Cost of transporting a product and the delivery time of the product.

(4). Pricing-

• Everyday low pricing /high-low pricing.
• Fixed pricing versus menu pricing.
• Profit margins.
• Days sales outstanding.
• Average order and sale price.
• Average order and sales size.

(5).Sourcing

• supplier selection-number of suppliers,evaluation and selection criteria of suppliers,negotiation or direct auction.
• Effect of sourcing on inventory costs,production costs, maintenance costs,service etc.
• Average purchase quantity.
• whether to perform a given task inhouse or to go for outsourcing.
• Procurement-the suppliers send products in response to the customers order.

Network design performance can be evaluated along two parameters.

• Needs of the customers
• costs associated.

profitability is evaluated by measuring customer needs and associated costs.