The measurement of service performances

The measurement of service performances

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

Service performance measurement General framework 32

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

The structure of an order ROSSO BIANCHI S.p.A Milan, 25-11-2004 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

Service measurements Accuracy (or Precision) 35

Service measurements Completeness 36

Service measurements MTS - Availability 37

Service measurements MTS Stock out persistency ( product unavailability) 38

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

Service measurements The concept of lead time setup manufacturing wait for lot control 40

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

The measure of timeliness 42

The measure of punctuality 43

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

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 * 100 45

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

Exercise (1/2) Cause Jan-Mar Apr-Jun Jul-Sep Oct- Dec Idle time due to lack of materials 5 10 50 110 Idle time due to lack of orders 10 5 0 10 Idle time due to strikes and organizational 20 0 5 5 causes Idle time due to breakdown 80 40 10 2 Idle time due to maintenance 15 15 15 15 Time for tests 0 0 0 0 Time of setup 35 40 16 22 Standard time of setup 24 36 20 24

Exercise (2/2)

Warehouse performance measurements ABC-ABC analysis

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

Materials management productivity measures 51

Warehouse efficiency Σ Consumption period Stock turnover index = Average Stock Days in the period Days of inventory = Stock turnover index 52

Materials management productivity measures 53

Materials management productivity measures Classification ABC: Stock Value 7.000.000 6.000.000 5.000.000 25.000.000 95 % 20.000.000 80 % 4.000.000 3.000.000 2.000.000 1.000.000 A B C 15.000.000 10.000.000 5.000.000 0 0 54

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

Example of distribution GIACENZA STOCK CONSUMPTION CONSUMI A B C Totale Total A 2 2 1 5 B 2 4 3 9 C 1 4 11 16 Totale 5 10 15 30 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

Example of distribution GIACENZA STOCK GIACENZA STOCK A B C Totale % A 11.546.098,55 4.972.092,65 1.538.899,50 18.057.090,70 78,09% B 1.096.599,80 1.140.101,10 1.472.099,60 3.708.800,50 16,04% C 219.299,40 452.903,75 684.598,25 1.356.801,40 5,87% Totale 12.861.997,75 6.565.097,50 3.695.597,35 23.122.692,60 % 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

Exercise Product Cunsamption Stock P1 7777777777 850,00 777777 350,00 P10 777716.000,00 77777777 50,00 P11 7777777777 700,00 777777 400,00 P2 777777 1.550,00 77777777 30,00 P3 777777 1.500,00 77777777 20,00 P4 7777777777 800,00 77777777 50,00 P5 777777 1.500,00 777777 350,00 P6 7777777777 300,00 77777777 90,00 P7 7777777777 300,00 772.500,00 P8 777777 1.500,00 777777 200,00 P9 777720.000,00 772.000,00 58

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

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

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

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