MODULE

#6 •                 Distribution Management 
MODULE G ALS FLEX Course Material

Cost and performance monitoring;

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What is cost and performance monitoring?

This is the process of monitoring

the status of the project to update
the project budget and managing
changes to the cost baseline. It
involves taking the cost baseline
and performance data about what
has actually been done in order to
determine the work accomplished
against the amount spent.
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 Why monitor?

For many
companies transportation of
goods is the highest
operational supply chain
expense.
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 Different approaches to
cost and performance
monitoring
 The aspect of cost
monitoring includes
all costs occurring within
logistics. In contrast to
those two approaches
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 While cost management overall is a very complicated
process and a critical project management knowledge
area, we can break it down into four processes:
•Resource planning
•Cost estimation
•Cost budget
•Cost control
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 Good practice for
transportation
6 Best Practices for
Transportation Solutions
1. Focus on Improving the Customer
Experience.
2. The biggest benefit comes from
making it convenient to access the
service.
3. Improve Your Scheduling System.
4. Leverage Mobile Technology. ...
5. Take Complaint Handling Seriously.
6. Use the Data for Improved Reporting
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 Influencing factors in
Transportation Decision

Let's look at some of

the factors that
affect transportation costs.
Fuel costs.
The labor market for
commercial drivers
Demand for freight
Customer loyalty
Vehicle capacity
Government regulation
Geopolitical events
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 Detailed metrics and
KPIs.
Here is the complete list of the
most important
logistics KPIs and metric
Shipping Time.
Order Accuracy.
Delivery Time.
Transportation Costs.
Warehousing Costs.
Number of Shipments.
Inventory Accuracy.
Inventory Turnover.
( key performsnce indicator )
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 To evaluate the different distribution metrics or KPI’s

KPIs are measurable values that show

you how effective you are at achieving
business objectives. Metrics are
different in that they simply track the
status of a specific business process.
In short, KPIs track whether you hit
business objectives/targets, and
metrics track processes
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 • Shipping time Transit time is the • Order Accuracy It measures the
interval needed for amount of orders that are
a shipment to be delivered once it processed, shipped and delivered
has been picked up from the point without any incidents on its way.
of departure. Basically, it is the The shipping time as well as the
amount of time spent when moving delivery time are both respected,
goods from one point to another.  the order is not a wrong one and
the goods are not damaged.
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 • Delivery Time-
• Freight shipping transit time is
impacted by factors including distance,
shipping mode, route, and season. In
very rough estimates: express can take
as little as 1-3 days, air freight is
typically 5-10 days, and sea shipping
can range anywhere from 20-45 days.
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• Transportation Cost
• Travel Expenses.
Travel expenses usually must be
classed as variable costs.
These expenses will rise and fall with
the efforts you make to increase sales
and build business relationships.
Travel costs can vary widely each
month.
 • Inventory carrying costs - are the costs related
to storing and maintaining its inventory over
a certain period of time. Typically, inventory
costs are described as a percentage of the
inventory value (annual average inventory, i.e.
for a retailer the average of the goods bought to
its suppliers during a year) on an annualized
basis. They vary strongly depending on the
business field, but they are always quite high. It
is commonly accepted that the carrying costs
alone represent generally 25% of inventory
value on hand
• Warehousing Costs.
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 • Types Inventory Cost
• Ordering costs (also called Setup costs)-
• Carrying costs (also called Holding costs)
• Stock-out costs (also called Shortage costs
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• Ordering costs are the
expenses incurred to create and
process an order to a supplier.
These costs are included in the
determination of the economic
order quantity for an inventory
item. Examples of ordering
costs are: Cost to prepare a
purchase requisition. Cost to
prepare a purchase order.
 • Carrying costs are the various costs
a business pays for
holding inventory in stock.
Examples of carrying costs include
warehouse storage fees, taxes,
insurance, employee costs, and
opportunity costs
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• Stock-out costs (also called Shortage costs
•  Is the lost income and expense associated with
a shortage of inventory. This cost can arise in
two ways, which are: Sales-related. ... When a
company needs inventory for a production run
and the inventory is not available, it must
incur costs to acquire the needed inventory on
short notice