Measuring the outbound Logistics Performance of St George Brewery in Addis Ababa Research Project submitted in partial fulfillment of the

Requirements of Master of Business Administration Advisors: Dr. Shimelis Zewdie Ato Mekonnen Bogale Submitted By: Tesfaye Belay Jimma University COLLEGE OF BUSINESS AND ECONOMICS MBA PROGRAM 14/05/2004

Introduction In each country, a huge amount of money is spent annually in logistical activities. For instance, in 2003 US logistical activity costs were 8.5% of the countrys GDP. Given that the US GDP in 2003 was approximately $12,400 billion, the logistical activity cost was approximately $1054 billion. ( Farahani et al, pp 4, 2011 ).

Fierce competition in todays global markets, the introduction of products with short life cycles and the heightened expectation of customers have forced manufacturing enterprises to invest in and focus attention on their logistics systems(Bramel and Levi pp 1, 1997). Logistics management is that part of supply chain management that plans, implements, and controls the efficient, effective forward and reverses flow and storage of goods, services and related information between the point of origin and the point of consumption in order to meet customers requirements. The objective of logistics process is to get the right quantity and quality of materials (or services) to the right place at the right time, for the right client, and at the right price. The entire process of logistics, which deals with the moving of materials into, through, and out of a firm, can be divided into three parts: (1) inbound logistics, which represents the movement and storage of materials received from suppliers; (2) materials management, which covers the storage and flows of materials within a firm; and (3) outbound logistics or physical distribution, which describes the movement and storage of products from the final production point to the customer( Farahani et al, pp 11, 2011 ) Performance measurement can be defined as the process of quantifying the efficiency and effectiveness of past action. Effectiveness refers to the extent to which stakeholder requirements are met, while efficiency is a measure of how economically the firms resources are utilized when providing a given level of stakeholder satisfaction. A performance measure can be defined as a parameter used to quantify the efficiency and/or effectiveness of past action (Neely et al, 2002 p. xiii) According to Professor D.J Bowersox logistics performance measures can generally be classified into these categories: (1) cost, (2) customer service, (3) Productivity, (4) asset management, and (5) quality. The student research will use Cost, Customer service, asset management and quality to measure the outbound logistics performance of BGI Ethiopia. In order to ensure sustained improvement of outbound logistics, it is crucial that a body of knowledge be developed to inform decision-making, and to inform the causes of system

inefficiencies and proposed improvements. According to second Annual State of Logistics Survey 2005; the demands of a developing economy require that the research agenda is wider than the traditional focus on logistics and supply chain management. Although logistics has been mentioned by many articles, the research in this area is not satisfactory in our country. Thus the intension of this research is to measure the outbound logistics Performance of St. George Brewery in Addis Ababa through the use of three key performance measures. Statement of the Problem To achieve business success in the demanding world market place, a company must use relevant performance measures (UK Government report) as cited by Neely et al 2000; 11191145. A performance measurement system enables informed decisions to be made and actions to be taken because it quantifies the efficiency and the effectiveness of past actions through the acquisition, collation, storing and analysis, interpretation, and dissemination of appropriate data (Neely 1998, pp 5-6). The combination of slow economic growth and increased competition has forced firms in every industry to concentrate on efficient and effective deployment of resources. Effective logistics performance measurement and controllship are necessary to allocate and monitor resources. Aramyan 2007 has reviewed different literatures and fined out that, many attempts have made to develop a measurement system for supply chains. The most commonly used performance indicators are efficient, flexibility and responsiveness. Since logistics is part of supply of supply chain management its performance is evaluated using the stated indicators as a benchmark. The state is no longer player in the beer business as Bedele and Harar Breweries have transferred to Heineken NV, Duch based company by 163.4 million dollars and Meta Abo to Diageo, UK based company by 225 million dollars in a bid opened on September 1, 2011. The attempt by Ethiopians dominant brewery, St. George for Harar and Bedele Brewery has failed (fortune 4, September 2011). St. George will face intense competition from Heineken, Diageo, Dashen Breweries currently and Habesha and Raya Brewery in the future to achieve sustainable competitive advantage. In todays fast-paced business world, the ability of effectively manage the marketing process-

beginning to end-has become an extremely important competitive advantage. ( Kotler 2002, PP.39 ). It is only in the recent past that business organizations have come to recognize the vital impact that logistics management can have in the achievement of competitive advantage (Christopher 2005, PP 3). It is difficult to visualize accomplishing any marketing or manufacturing without logistical support. ( Bowersox and Closs 1996, PP.3). Although logistics has been mentioned by many articles, the research in this area is very rare in our country. Thus the intension of this research is to measure the outbound logistics Performance of St. George Brewery in Addis Ababa through the use of three key performance indicators (responsiveness, efficiency and flexibility). The basic research question that will be addressed in this student research project is described as follows; What are the major performance indicators to measure outbound logistics performance? Specifically the student research project will answer the following key question;
What parameters are going to be used to measure the effectiveness and efficiency of

outbound logistics system? What should be the framework for measuring outbound logistics system? Does the company minimize its cost at the outbound logistics system?
Does the company outbound logistics system satisfy its customers?

Is there proper utilization of capital investment in facilities and equipment?

Does the company product quality affect at distribution? What is the impact of different performance measures, on outbound logistics performance

of St George Brewery? Objective of the study

The general objective of the student research project is to measure the performance of outbound logistics system of St George Brewery at the downstream stage of the supply chain starting from the manufacturer distribution section to agents to retailers by using key performance measures to improve the performance of outbound logistics system of the company. Specifically the research will address the following objective;
To identify logistics performance indicators from literatures to measure the efficiency

and effectiveness of outbound logistics system of the company. To develop conceptual framework for measuring outbound logistics system of the company. To measure the cost effectiveness of the company outbound logistics system. To study weather customers are satisfied or not by the company distribution system.
To examine capital investment utilization on outbound logistics facilities and equipments.

To examine the product quality is affected or not at distribution.

To give possible recommendations based on the actual performance of St. George

distribution system that will improve the outbound logistics system. Significance of the study The student research project is believed to have the following importance:
The finding of the research will show the performance of the company outbound

logistics system and the finding of the research will facilitate informed decision in finished product distribution ultimately will improve the company distribution system. The finding of this research will be used as historical standards for the company when measuring its outbound logistics performance.
The research will initiate other like companies to measure their outbound logistics

performance.

The finding of this research will also be used as benchmark for

competitor companies in the country brewery industry.

 St. George customers will get wide range of service at short lead time with low price.
The research will benefit the student researcher to transform his theoretical know-

how on business research, marketing, operations management and other different courses in to practice.
The research also will be used as reference for other researcher.

Scope of the study Logistics is the function responsible for the flow of materials from suppliers into an organization, through operations within the organization, and then out to customers (Waters 2003, pp 3). The scope of this study is not going to focus on the whole logistics in the industry instead it is delaminated to measure part of the logistics which is outbound logistics ( flow of materials out to customers ) performance of St. George Brewery in Addis Ababa by using key performance measures. While conducting the study the downstream supply chain members starting from the St. George finished product distribution section---St. George Agents in Addis Ababa --- ending at Retailers. Retailers for this study are hotels, bars, bars and restaurants excluding retail shops and super markets.

RESEARCH METHODOLOGY Study area The dominant brewery in Ethiopia, St George Brewery is the company within which the proposed study will be conducted. The basic reason behind selecting St. George is that, it has a market share of around 50 percent nation-wide and even higher in Addis Ababa according to the research by access capital in May 2010.

As a student researcher it is not feasible to conduct nation-wide study as result Addis Ababa market is selected. The reason for selecting Addis is that, the company controls around 60 percent of the beer market in the capital Addis, the figure still being the highest in the country according to The Reporter published on 24 Dec 2011. Nature and Source of data In order to execute this research the study will employ both primary and secondary data. The primary data will be collected from the down-stream supply chain members starting from BGI Ethiopia distribution section, BGI agents in Addis Ababa and sample of each agent retailers. An extensive literature survey in relevant international and national studies, journals, text books, news papers, company periodic reports, beer industry report by government concerned bodies including the electronic sources (i.e. websites). Population All the items under consideration in this research include BGI finished product distribution section. BGI has divided the Addis Ababa market in to four, location wise and has given each location to one agent who works as intermediaries between BGI and retailers. their own list of customers: retailers. Each agent has and others published and unpublished sources will be conducted to collect the secondary data from the

Sampling frame It is not required to take sample to measure BGI performance as the data will be collected from it-self and the four agents. The consideration of time and cost invariably lead the researcher to select retailers as they are large in number and scattered geographically. The selected respondents constitute what is technically called a sample and the selection process is called sampling technique. Let the population size for each agent be Ni and selected respondents be ni.

Sample size The sample size of retailers under the list of each agent for the study will be determined based on interval estimate of a population proportion (infinite population) developed by Anderson. n = (z/2 )2 p* (1 - p*) E2 Where: z/2 confidence level E margin of error p* population proportion n = (1.96)2 * 0.5 * (0.5) 0.05 2 n = 385 The researcher will use the most frequently chosen confidence value 95% (z.025 -1.96 from normal distribution table). A larger value for the quantity p*(1 - p*) will result in a larger sample size. Note that the largest value of p*(1 - p*) occurs when p* =0.50, that the sample size will be sufficient to obtain the desired margin of error. It is also recommended to use planning value of p*0.5 when there is no previous work done on similar topic, pilot study was not conducted, and judgment is not used to select preliminary sample (Anderson 2009, PP. 313- 316). Sampling Technique Stratified random sampling will be used to select the required number of respondents from the population as the population doesnt constitute homogeneous group. The total number of retailers will be divided in to three sub-populations (stratums) as Hotel, Bars and Restaurant and Bars. How many respondents will be selected from each stratum? The researcher will follow the method of proportional allocation under which the sizes of the samples from the different strata are kept proportional to the sizes of the strata. That is, if Pi represents the proportion of population (P i = n i /Ni) included in stratum i, and n represents the total sample size, Ni represents population in i stratum, N represent total population, the number of elements selected from stratum i is ni.

n i= n i * pi p i = Ni/N Then Simple random sampling method will be used to select the required number of respondents from the population. Under this sampling design, every item of the population has an equal chance of inclusion in the sample. Individual units will be picked up from the population under lottery method (Kothari 2004, PP. 62 & 63). Method of data analysis As the necessary data are collected from the identified sources, the data will be processed and analyzed. Technically speaking, processing implies editing, coding, classification and tabulation of collected data so that they are amenable to analysis. The term analysis refers to the computation of certain measures along with searching for patterns of relationship that exist among data-groups (Kothari 2004, pp 122). The data processing for this research includes; editing to assure the data are accurate, coding; assigning numbers to questionnaires, classification; arranging data in groups on the basis of common characteristics, tabulation summarizing raw data and displaying in the form of table for future analysis. Analysis comprises both descriptive and inferential analysis. Statistical computation of certain measures, testing the hypothesis and regression analysis will be used to study how efficiency, responsiveness and flexibility affect change on the dependent variable (outbound logistics performance) of the company. At the end the analysis will be summarized and organizing in such a manner that they answer the research question(s) and takes conclusion. 4.2. Cost Budget As far as it constrains the study, cost budget has to be considered appropriately for the smooth operation though outs the project time. So the following table describes the cost of required resources. S.No Description Quantity No. of days Unit cost (in Total cost (in Birr)

Birr) 1 Supplies 2 paper (A4) pen pencil Binder 10 10 10 5 3 5 10 80 1.5 .50 20 25 80 800 15 5 100 75 4000 4995.00

CD -RW Data collector Cost Enumerator

3 Total Cost Note: On item 2: 5 is number of enumerators, 10 is number of days to collect data.

Conceptual framework for measuring outbound logistics performance Outline : 2.1. Supply Chain Management This chapter introduces supply chains as groups of companies which work together to source, produce and deliver goods and services to end customers. To survive, and to be competitive, it is

not sufficient for firms to restrict their vision to their own processes. Instead they must consider the whole flow of materials and goods and the information which communicates the specific needs of consumers to the various levels of suppliers. Firms should also consider the management of those flows and the part which they play within the coordination of the entire supply network. The challenge is for companies in partnership* to collaborate in design and delivery of products and services so that a more effective service is given to consumers and each company prospers. A basic supply chain comprises: A focal company, which forms goods or services for a set of consumers, A range of suppliers of raw materials and components, Distributors, which deliver the goods to consumers, and Modes of transport which move products between each location in the chain. ( Sadler 2007, pp 1) 2.1.1 THE SUPPLY CHAIN CONCEPT The biggest challenge facing companies today is not the Internet, by itself, or globalization or stakeholder needs. Rather, the greatest challenge is the integration of supply chains* from vendors through manufacturers and distributors to satisfy end customers* and obtain value for those companies. Supply chain management is the planning and flow* of materials and products between a number of companies to deliver goods and services to end consumers. Business supply chains are more likely to survive, grow and profit if they integrate the development of new products with a balanced supply chain in which each link* combines to provide the goods that consumers want. We suggest that managers* in all the links in the supply chain need to plan and achieve a seamless stream of products in order to fully satisfy chosen customers while making a good return for each link. However there are some potential problems. Directors of different companies do not trust each other sufficiently. Managers of some chain links have more power than others and therefore push their own needs rather than working with their partner links to optimise the entire chain. A link is a company which performs some function within a supply chain, joining other parts into a complete chain. (Sadler 2007, pp 1)

 A supply chain consists of the series of activities and organizations that materials move through on their journey from initial suppliers to final customers ( Warter 2007, pp 37). According to Mendile and Chpra 2006, Supply chain encompasses all activities associated with the flow and transformation of goods from the raw materials stage, through to the end user, as well as the associated information and financial flow both up and down the supply chain. As per Handfield and Nichols; Supply chain encompasses all activities associated with the flow and transformation of goods from raw material stage (extraction), through to the end users, as well as the associated information flow. Material and information flows both up and down the supply chain. If we consider an individual firm within the context of this definition, we must include both its upstream supplier network and its downstream distribution channel. In this definition, the supply chain includes the management of information systems, sourcing and procurement, production scheduling, order processing, inventory management, warehousing, customer service, and after market disposition of packaging and materials. The supplier network consists of all organizations that provide inputs, either directly or indirectly, to the focal firm. Supply chains are essentially a series of kinked suppliers and customers; every customer is in turn a supplier to the next downstream organization until finished products reaches the ultimate end user. It is important to note that from the focal firms perspective, the supply chain includes internal functions, upstream suppliers, and downstream customers. A firms internal functions include the different processes used in transforming the inputs provided by the supplier network. The second major part of supply chain management involves the management of upstream external supply chain members. In order to manage the flow of materials between all of the upstream organizations in a supply chain, firms employ an array of managers who ensure that the right materials arrive at the right locations, at the right time. Purchasing managers are responsible for ensuring that the right suppliers are selected, they meet performance expectations, appropriate contractual mechanisms are employed, and a good relationship is maintained with

these suppliers. Materials managers are responsible for planning, forecasting, and scheduling material flows between suppliers in the chain. Materials managers work closely with production schedulers to ensure that suppliers are able to deliver the materials on time to the required locations, and that they have some advance warning regarding upcoming requirements so that they can plan ahead of actual production and delivery dates. Finally, a firms external downstream supply chain encompasses all of the downstream distribution channels, processes, and functions that the product passes through on its way to the end customer. Within the downstream portion of the supply chain, logistics managers are responsible for the actual movement of materials between locations. One major part of logistics is transportation management, involving the selection and management of external carriers or internal private fleets of carriers. Distribution management involves the management of packaging, storing, and handling of materials at receiving docks, warehouses, and retail outlets (Handfield and Nichols 1999, p 2) As per Chopera and Meindel; A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. The supply chain includes the manufacturer, suppliers, transporters, warehouses, retailers, and customers themselves. The supply chain is dynamic and involves the constant flows of information, product and funds between different stages. Each stage of the supply chain performs different processes and interacts with other stages of the supply chain. The primary purpose for the existence of any supply chain is to satisfy customer needs, in the process of generating profits for it. Supply chain activities begin with a customer order and end when a satisfied customer has paid for his or her purchase. The term supply chain conjures up images of product, or supply, moving from suppliers to manufacturers to distributors to retailers to customers along a chain. It is important to visualize information, funds, and product flows along both directions of this chain. The term may imply that only one player is involved at each stage. In reality, a manufacturer may receive material from several suppliers and then supply to several distributors. Therefore, most supply chains are actually networks. It may be more accurate to use the terms supply network or supply web to describe the structure of most supply chains (Chopera and

The supply chain extends from the ultimate customer back to mother Earth. The chain is viewed as a whole, a single entity rather than fragmented groups, each performing its own function. Money enters the supply chain only when the ultimate customer buys a product or service. Transactions within the supply chain simply allocate the ultimate customers money among the members of the chain. A firms supply system includes all internal functions plus external suppliers involved in the identification and fulfillment of needs for materials, equipment, and services in an optimized fashion. This supply system plays a key role in helping the firm satisfy its role in its supply chain. In the future an organizations success will be driven by its ability to compete effectively as a contributing member of dynamically connected supply chain communities, not as an isolated enterprise. The ability to interact quickly with customers, suppliers, and other partners is already critical to survival. Tomorrow, a tightly connected chain will become a necessity. 2.1.2 Supply Chain Integration An efficient, integrated supply chain plays a major part in the success of the business strategies of its constituent companies. It is now recognized that, in many cases, competition is between supply chains rather than individual companies. Getting the product and service to the end consumer when they want it is critical. Consequently, the partner companies should work closely together to define and execute a supply chain strategy which will both satisfy customer needs and allow them to make an adequate return. To get full benefit from a supply chain it is necessary to link all the partners involved so that goods and services flow effectively to consumers. This is achieved by working collaboratively with customers, suppliers, trading partners and service providers. The overall aim is to create a flow of products exactly as required by customers, responding dynamically to changes in their orders. First, it is necessary to establish the boundary of the supply chain, how many tiers of suppliers must be included, which service providers are important in chain flow outcomes? Secondly, where will the decoupling point be placed, that is the point at which planned production of materials and components changes to exact assembly and delivery of products and

services pulled by customer orders? Treatment of planned, or pushed, components is very different from the processing of known customer orders. Thirdly, what physical and human resources need to be built up to provide a capability which will confer distinctive competencies compared to competing supply chains? Within this integrated chain, managers now need to know the order winners. Which parameters are critical in the eyes of customers? Are they quality, speed of delivery or low price? Given the order winners, managers can design the supply chain to achieve them by choice of configurations and policies in each link. This includes strategic decisions on policies such as capabilities, quality assurance, response times and degree of customization of product or service. ( Sadler 2007, pp 18-20) Supply chain integration, for a chain of manufacturing and service companies, requires the major stages in the location, transformation and movement of raw materials and finished goods to be bounded, designed and operated very competitively. Using the current limited understanding of the concept of supply chain management how does a manager in one company work with upand downstream counterparts to position and tunes their businesses for success? There is now strong evidence of the importance of integrated supply chain strategy and management to achieve sustained competitive advantage. 2.1.3 Supply chain management It will be apparent that supply chain management involves a significant change from the traditional arms-length, even adversarial, relationships that so often typified buyer/supplier relationships in the past. The focus of supply chain management is on co-operation and trust and the recognition that, properly managed, the whole can be greater than the sum of its parts. Supply chain management definitions; Supply chain encompasses all activities associated with the flow and transformation of goods from raw material stage (extraction), through to the end users, as well as the associated information flow. Material and information flows both up and down the supply chain. Supply Chain Management( SCM) is the integration of these activities through improved supply chain relationships, to achieve a substantial competitive advantage ( Handfield and Nichols 1999, p.2)

As per Christopher SCM is the management of upstream and downstream relationships with suppliers and customers to deliver superior customer value at less cost to the supply chain as a whole.

Thus the focus of supply chain management is upon the management of relationships in order to achieve a more profitable outcome for all parties in the chain. This brings with it some significant challenges since there may be occasions when the narrow self interest of one party has to be subsumed for the benefit of the chain as a whole. Extending this idea it has been suggested that a supply chain could more accurately be defined as: A network of connected and interdependent organizations mutually and co-operatively working together to control, manage and improve the flow of materials and information from suppliers to end users. (Christopher, 2005 p. 5 & 6). 2.2 Logistics Management
But many who are first will be last, and many who are last will be first. Matthew 19:30

Logistics is the flow of material, information, and money between consumers and suppliers. Frazelle Modern logistics is a paradox. Logistics has been performed since the beginning of civilization: its hardly new. However, implementing best practice of logistics has become one of the most exciting and challenging operational areas of business and public sector management. Logistics involve the integration of information, transportation, inventory, warehousing, material handling, and packaging. All of these areas of work provide a variety of stimulating jobs. These jobs combine to make overall logistics management a challenging and rewarding career. Because of the strategic importance of logistics performance, an increasing number of successful logistics executives are being promoted to senior manager. The operating responsibility of logistics is the geographically positioning of raw materials, workin-process, and finished inventories where required at the lowest cost possible. It is through the logistics process that material flow into the vast manufacturing capacity of an industrial nation and products are distributed through market channel to customers ( Bowesox 2000, p 4) .

In 1991 the council of logistics management modified its 1976 definition of physical distribution management by changing the term to logistics and then changing the definition as follows: Logistics is the process of planning, implementing, and controlling the efficient, effective flow and storage of goods, services and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements. Logistics add value when inventory is correctly positioned to facilitate sales. For individual firm logistics expenditures typically range from 5 to 35 percent of sales depending on the type of business, geographical area of operation, and weight/value ratio of products and materials. Logistics typically account for one of the highest cost of doing business, second only to materials in manufacturing or cost of goods sold in warehousing or retailing. It is clear that logistics is expensive. Despite the impressive cost comparisons, the true excitement of logistics is not cost containment or reduction. The excitement comes from understanding how select firms position their logistical competency to gain competitive advantage. Firms that enjoy world class logistical competency to gain competitive advantage by providing customers with superior service. While perfect orders are difficult to achieve, logistically sophisticated firms seek such lofty performance and are committed to continuous improvement. Leading firms typically have information systems capable of mounting logistical performance on real time basis, giving them the capability to identify potential operational breakdowns and take corrective action prior to customer service failure. In situations where timely corrective action is not possible, customers can be notified in advance and offered alternatives, there by taking the surprise out of forthcoming service failures. By performing above industry average in terms of inventory availability as well as speed and consistency of delivery, logistically sophisticated firms are attractive suppliers and ideal business partners. Logistics management includes the design and administration of systems to control the flow of material, work-in-process, and finished inventory to support business unit strategy. The overall goal of logistics is to achieve a targeted level of customer service at the lowest possible cost. Logistics involves detailed and complex work. Logistics managers are responsible for planning and administrating this work.

The logistical mission At a strategic level, logistics managers seek to achieve a previously agreed upon quality of customers service through state-of-the art operating competency. The challenge is to balance service expectations and cost expenditures in a manner that achieves business objectives. Service Almost any of logistical service can be achieved if a firm is willing to commit the necessary resources. Logistical service is a balance of service priority and cost. If a specific material is not available when required for manufacturing, it may force a plant shut down, causing significant cost penalty and potential loss of sales and even the loss of a good customer. The profit impact of such failure could be minimal or even insignificant. In contrast, the profit impact of an unexpected two day delay in delivering products to replenish a warehouse could be minimal or even insignificant in terms of impacts on overall operational performance. Total cost Total logistical cost includes all expenditures necessary to perform logistical requirements. The appropriate level of logistics cost expenditure must be related to desired service performance. The simultaneous attainment of high availability, operational performance, and reliability is expensive. A significant managerial challenge stems from the fact that logistical cost and increased and increased performance have a non proportional relationship. A firm that support customer commitments of high inventory availability delivered on reliable overnight basis may experience double the logistical cost in comparison to less ambitious commitment.

2.3 Business performance measurement

 Supply Chain Performance measurement

Definitions of supply chain management Supply chain integration

Performance measurement in supply chain management context

Historical approach for supply chain performance measurement

Definition of logistics management

Inbound logistics, materials management and outbound logistics

Logistics performance measurement system Historical approach for logistics performance measurement

Purpose of supply chain performance measurement

Designing logistics performance measure system

Develop conceptual framework for measuring outbound logistics performance

According to Professor D.J Bowersoxty logistics performance measures can generally be classified into these categories: (1) cost, (2) customer service, (3) Productivity, (4) asset management, and (5) quality. Each is discussed as follows; Cost The most direct reflection of logistics performance is the actual cost incurred to accomplish specific operating objectives. Logistics cost performance is typically measured in terms of total dollars, as a percentage of sales, or as a cost per unit of volume. Table1 lists typical logistics cost

performance measures and reports the percentage of manufacturers, wholesalers, and retailers that use each for all systems. Table 1; LOGISTICS COST PERFORMANCE MEASURES Performance measure Total cost analysis Cost per unit Cost as a percentage of sales Inbound freight Outbound freight Warehouse costs Administrative cost Order processing Direct labor Comparison of actual vs. budget Cost trade analysis Direct product profitability Percentage by business type Manufacturer Wholesaler 87.6 74.8 79.7 63.8 83.3 81.2 86 80 94.4 88.3 89 85.7 80 79.1 52 45.8 78.6 71.4 96.6 76.9 59.2 86.6 59.1 46.8 Retailer 82.1 78.6 79.5 87.5 90.6 89.9 76.7 45.7 86.2 86.5 61.4 27.8

Customer service; the second common set of logistics performance measures focus on customer service. These measures, examine a firms relative ability to satisfy customers. Common service measures are the following; Table 2; LOGISSSTICS CUSTOMER SERVICE PERFORMANCE MEASURES Performance measure Fill rate Stockouts Shipping Percentage by business type Manufacturer Wholesaler 78.2 71 80.6 72.9 On-time 83 82.7 77.1 69.9 90.3 87.9 68.8 78.9 70.5 69.2 34.7 85.6 85 51.6 81.9 76.9 58.7 56.4 84.1 51.5 58.9 Retailer 66.2 71.6

errors

delivery On-time delivery Back orders Cycle time Customer feedback Sales force feedback Customer survey

Productivity Measures; productivity is another measure of organizational performance. Productivity is a relationship (usually a ratio or an index) between output (goods and /or services) produced and quantities of input (resource) utilized by the system to produce that output. Table 3 Lists the typical logistics productivity measures and reports the percentage of manufacturers, wholesalers, and retailers that use each measure. Table 3; LOGISTICS PRODUCTIVITY PERFORMANCE MEASURES Performance measure Percentage by business type Wholesaler 53.1 43.7 51.7 74.6 69.2 44.9 Retailer 61.4 63.9 15.5 86.4 82.1 56.3

Manufacturer Units shipped per employee 54.8 Units per labor dollar 51.9 Orders per sales representative 38.7 Comparison to historical standards Goal programs Productivity index 76.3 76.2 55.8

Asset management; asset management focuses on the utilization of capital investments in facilities and equipment as well as working capital application to inventory to achieve logistics goals. Logistics facilities, equipment, and inventory can represent substantial segment of a firms assets. In the case of wholesalers, the amount exceeds 90 percent. Asset management measures focuses on how fast liquid asset such as inventory turnover will as well as how well fixed assets generate return on investment. Table 4 Lists typical logistics asset management measures and reports the percentage of manufacturers, wholesalers, and retailers that use each measure. Table 4; LOGISTICS ASSET MANAGEMENT PERFORMANCE MEASURES Performance measure Inventory turns Inventory carying cost Inventory levels, number of days' supply Obsolete inventory Return on net assets Percentage by business type Manufacturer Wholesaler 81.9 85.2 68.6 68.3 86.9 85.7 66.9 80.7 79.7 65.9 Retailer 82.6 55.6 74.1 73.1 55

Return on investment

74.6

74.8

67.9

Quality; quality measures, which are the most processes oriented evaluations, are designed to determined the effectiveness of a series of activities rather than an individual activity. Table 5 lists typical logistics quality measures and reports the percentage of manufacturer, wholesalers, and retailers that use each measure. Table 5 LOGISTICS QUALITY PERFORMANCE MEASURES Performance measure Frequency of damage dollar amount of damage Number of credit claim Number of customer returns Cost of returned goods Percentage by business type Manufacturer Wholesaler 67.4 44.7 74.6 55.6 75.7 68.9 77.1 69 68 57.7 Retailer 60.8 67.1 67.5 63.9 54.2

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