Measuring logistics performance

A planned strategy of measurement is a prerequisite of successful planning, realization and control regarding the different activities which together form the business logistics function. It is of special importance to coordinate the processes of planning and realization in order to supply the right information to the right decision-maker. The main objective in logistics should be the overall coordination. Previous research within the field of measuring logistics performance shows a great deal of interesting results, but also some gaps, especially when it comes to methods applicable on illustrating the entire logistics performance. In the present paper the authors deal with logistics performance measurement mainly from such an overall perspective. The contents are founded on the preliminary results achieved at Linköping Institute of Technology within the scope of a research programme initiated by an association of Swedish companies, the Swedish Programme for Logistics Research. The first part of the project has contained a search for and structuring of quantitative methods applicable to the field of logistics performance. The methods were grouped in two main groups according to how they have evolved in the company: (1) financial measurement methods such as: budgeting techniques, cost estimating methods, mission costing etc, and (2) engineered physical measures such as: productivity, leadtimes, quality, customer service, turnover rates, etc. The following aspects of measures are discussed in the paper: the purpose of measuring, the historical development of measures attached to logistics performance and how measures can be structured along different vectors. The authors conclude that the weaknesses of today’s measuring systems often stems from a ‘measurement gap’ between the economist’s approach, focusing on measures for financial control, and engineer’s approach, focusing on measuring physical quantities. The second part of the paper includes a brief discussion on how the measurement system should be incorporated in a strategic review process in the company. As a result, a measuring model for evaluating a company’s overall logistics performance is presented, focusing on balancing the conflicting purposes of financial and physical measurement.