From the customer's point of view, the delivery of a product is perceived as the last stage of the purchase and many times it does not have the dimension of the complexity that this process has. In case of any delay or difficulty, the customer ends up blaming transport for the problem, when in fact the bottleneck could be in any one of the many activities that make up the delivery or distribution process.
From the supplier's point of view, the delivery of a product is a complex process made up of a series of activities that need to be very well linked so that the level of service is met at the lowest cost. Some of the sub-processes that make up the delivery and distribution of products are: (1) receipt and validation (credit checking) of the purchase order; (2) billing; (3) stock reservation and delivery date forecast; (4) order consolidation; (5) cargo composition; (6) scripting; (7) carrier selection; (8) picking; (9) packaging; (10) document generation; (11) vehicle loading; (12) transportation; (13) receipt and verification of the product by the customer.
Figure 1 - Stages of the delivery/distribution process
Source: ILOS
To ensure the performance of this process, it is necessary to measure and monitor performance indicators, in addition to correcting problems that may occur in any of these activities. The SCOR model presents a good reference of performance indicators for the product delivery and distribution process. According to the model, these indicators can be divided into 5 attributes of logistics performance: reliability, speed, flexibility, costs and efficiency. These attributes are described in more detail. in my post from February/2017.
From the point of view of delivery reliability, the most complete indicator is perfect order fulfillment or OTIF (on time in full), which aims to measure the percentage of perfect deliveries, that is, a complete order, in perfect condition, with complete documentation. and within the agreed time frame.
Regarding speed, we can follow two indicators. The first, more comprehensive, is the order fulfillment cycle time, which considers the total time required from the supply time, through production to the product delivery time. The second indicator is restricted to delivery time, which is the sum of the times of all stages of the delivery process described above. To identify the bottleneck in the delivery process, it is necessary to monitor the times of each step individually and then act on the sub-processes with the worst performance.
Considering flexibility, we can measure the company's ability to accept changes in orders, with the addition of products or changes in the ordered quantity. Just like the reliability and speed indicators, flexibility is also an attribute that focuses on the level of service offered to the customer.
From an internal point of view, the company must monitor cost and efficiency indicators. The total delivery cost is the sum of all costs involved in fulfilling the order, such as the cost of people, systems, assets, inventory, transportation, and taxes. As well as time indicators, it is important that cost indicators are monitored individually to enable the identification of opportunities.
Finally, the delivery efficiency attribute includes productivity and asset utilization indicators such as return on assets, return on working capital, days of inventory, vehicle occupancy, etc. Seeking to improve efficiency indicators also contributes to cost reduction.
The delivery process involves a series of activities of different natures. Therefore, monitoring delivery performance means monitoring a large number of indicators so that no stage of the process is neglected. Furthermore, it is important that all performance attributes (reliability, speed, flexibility, costs and efficiency) are considered so that both the interests of customers and the company are met, maintaining the level of service at the lowest possible cost.
References:
The 5 Supply Chain Performance Attributes
Beatris Huber
https://ilos.com.brManaging Partner of ILOS, Master in Business Administration from COPPEAD/UFRJ with extension at the European Business School – EBS, Germany and Business Administration from UFRJ. More than 10 years of experience in training and consulting projects, focusing on Logistics and Supply Chain. In the training area, he developed company games and online courses and today teaches classes in Data Analysis, Inventory Management, Warehousing Management, in addition to applying business games such as Beer Game in open and in-company programs in companies from different segments, such as Coca -Cola, Nestlé, ThyssenKrupp, Votorantim, Carrefour, Mallinkrodt, Souza Cruz, Via Varejo, Monsanto, Itaú, Renner, Ipiranga, among others. In consultancy, he carried out projects such as Redefinition of the Logistics Network, Inventory Management, S&OP Process Structuring and Diagnosis of Storage and Transport Operations in companies such as Coca-Cola, Souza Cruz, Editora Moderna, Petrobras, Ducoco, Ultragaz, Silimed, Eudora among others.
