The measurement of service performances
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1 The measurement of service performances
2 Service performance measurement General framework Systems working to Stock (MTS) Availability Stock-out persistency Service Delivey Accuracy and Completeness Systems working to order (MTO, ATO.) Quickness Punctuality 31
3 Service performance measurement General framework 32
4 General considerations Order xy Client aa Delay in week 38 Order yy Client aa Article 123, 500 pieces Article 321, 100 pieces Article 123, 500 pieces Week 37 Article 321, 100 pieces Week 38 33
5 The structure of an order ROSSO BIANCHI S.p.A Milan, Dear GIALLO VERDI s.r.l. Order n. 548/zz Article aaaa.n 3 pieces Article bbbb...n 7 pieces Article cccc..n 9 pieces Terms for delivery: Place of delivery:.. Payments terms: ORDER ROWS or ORDER LINES 34
6 Service measurements Accuracy (or Precision) 35
7 Service measurements Completeness 36
8 Service measurements MTS - Availability 37
9 Service measurements MTS Stock out persistency ( product unavailability) 38
10 Service measurements The concept of lead time Credit Confirmation, Release of Production Order & Acquisition Order Production time Inspection and final control External wait: Queue at the machine Wait for materials Storage lead-time 39
11 Service measurements The concept of lead time setup manufacturing wait for lot control 40
12 Service measures Performances related to LT: punctuality and timeliness Date of the order Date of production start Requested date Planned date Actual delivery date (DD - DO) Total Lead Time TIME (DD - DP) Production Lead Time (DR - DO) Requested Delivery L.T. (DD - DR) Delay TIMELINESS PUNCTUALITY (DD - DP) Non planned delay (DP - DR) Planned delay 41
13 The measure of timeliness 42
14 The measure of punctuality 43
15 Delivery punctuality ORDERS TO BE DELIVERED in ΔT: 100 ORDERS DELIVERED (and NOT) in ΔT: Delivered in advance Delivered late Not delivered Delivered on time 44
16 Delivery punctuality % orders delivered on time = # orders delivered on time Tot orders to deliver in the period * 100 % orders delivered late = # orders delivered late Tot orders to deliver in the period * 100 % orders delivered in advance = # orders delivered in advance Tot orders to deliver in the period * 100 % orders not delivered = # orders not delivered Tot orders to deliver in the period *
17 Delivery punctuality Average delay of the orders delivered late = Σ i (# orders delivered late of i units of time ) * i # orders delivered late Average advance of the orders delivered in advance = Σ i (# orders delivered in advance of i units of time ) * i # orders delivered in advance 46
18 Exercise (1/2) Cause Jan-Mar Apr-Jun Jul-Sep Oct- Dec Idle time due to lack of materials Idle time due to lack of orders Idle time due to strikes and organizational causes Idle time due to breakdown Idle time due to maintenance Time for tests Time of setup Standard time of setup
19 Exercise (2/2)
20 Warehouse performance measurements ABC-ABC analysis
21 Efficiency (or productivity) performance Productivity Productivity of production resources Availability and potentiality Workforce Plants Materials Warehouses productivity Stock turnover and covering ABC-ABC analysis 50
22 Materials management productivity measures 51
23 Warehouse efficiency Σ Consumption period Stock turnover index = Average Stock Days in the period Days of inventory = Stock turnover index 52
24 Materials management productivity measures 53
25 Materials management productivity measures Classification ABC: Stock Value % % A B C
26 Materials management productivity measure A CONSUMPTION B C A HIGHLY REGULAR DEMAND NOT VERY REGULAR DEMAND OBSOLESCENCE STOCK B HIGHLY REGULAR DEMAND REGULAR DEMAND IRREGULAR DEMAND STOCK OUT C NOT VERY REGULAR DEMAND IRREGULAR DEMAND 55
27 Example of distribution GIACENZA STOCK CONSUMPTION CONSUMI A B C Totale Total A B C Totale GIACENZA STOCK CONSUMPTION CONSUMI A B C Totale A 6,7% 6,7% 3,3% 16,7% B 6,7% 13,3% 10,0% 30,0% C 3,3% 13,3% 36,7% 53,3% Totale 16,7% 33,3% 50,0% 100,0% 56
28 Example of distribution GIACENZA STOCK GIACENZA STOCK A B C Totale % A , , , ,70 78,09% B , , , ,50 16,04% C , , , ,40 5,87% Totale , , , ,60 % 55,62% 28,39% 15,98% 100,00% % Incidenza of stock percentuale giacenza CONSUMI CONSUMI CONSUMPTION CONSUMPTION Total A B C Totale Total A 49,93% 21,50% 6,66% 78,09% B 4,74% 4,93% 6,37% 16,04% C 0,95% 1,96% 2,96% 5,87% Totale 55,62% 28,39% 15,98% 100,00% 57
29 Exercise Product Cunsamption Stock P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 P , ,00 58
30 Materials management productivity measure High opportunity and high risk Usually low N of items: possibility to be more analytical in doing deeper analysis Specific situations: constant stock, frequent fulfillments and in small quantities: reduce safety stock constant stock, rare fulfillments and in big quantities: remove the constraints to fulfillment policies cyclical stock, frequent fulfillments and in small quantities: eliminate seasonality of fulfillment cyclical stock, rare fulfillments and in big quantities: eliminate seasonality of fulfillment and remove the constraints to fulfillment policies 59
31 Materials management productivity measure Hopefully low N of items; if it is not, objective zero Specific situations: obsolete items : do not produce/buy any more and get rid of them by promotions, discounts in different markets/canals; even destroy new products and spare parts: control 60
32 Materials management productivity measure Usually low N of items; objective increase Low level of stock or we do not sell enough? Observe and control carefully stock out occurrence Specific situations: items produced/bought to order items managed with a Just In Time logic 61
33 Materials management productivity measure Usually really high N of items Items of no interest for both stock managers and sales managers Items heavy for warehouses management: warehouse data updating, space, etc Specific situations: if the items are of no interests: check the opportunity to cancel them if sales are low because the item is not available: improve stock management and control stock out occurrence 62
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