Logistics Metric and Service Quality Improvement

Logistics metrics are used to measure the performance of various logistics functions (internal and external). They focus on time, quality, availability, cost, profit and reliability Logistics metrics may be financial (cost and revenue) or non-financial (service and productivity) They include the critical success factors for all levels of the business

Logistics metrics can be classified as:

Internal metrics: They measure the performance of the system or the internal components of the logistics system (production plant, warehouses, transportation equipment)
External metrics: They reflect the expectations of the organization by external entities (customers, stock markets, government, third-part agencies)

Metrics can be strategic and operational depending on the focus and level of detail

  • Strategic metrics focus on overall system-level performance
  • Operational metrics focus on unit-level or machine-level performance

How to design the metrics?
1. Define the system that has to be measured and its components
2. Determine the functional requirements or expectations of the system
3. Identify metrics that can quantitatively measure the functional requirements Service quality is a focused evaluation that reflects the customer’s perception of specific dimensions of service namely reliability, responsiveness, assurance, empathy, tangibles.

Since the quality of service relate to customer’s expectations as well as their perception of the service, service quality is difficult to assess. Usually there are three levels of assessment of quality services:

  • Good: when customers perceive the service beyond their expectations.
  • Satisfactory: when the service levels their expectations.
  • Poor: when the service is below customers‘ expectations.

The 5 gap model is considered to be quite specific and detailed with identification five gaps that may cause customers to experience poor service quality. Not only does it compare between customers‘ expectation and reality but it also takes into account the service that companies want to provide. In addition, it mentions that service quality is affected by the difference between customers‘ expectations and companies‘ perception

  • Gap 1: appears when there is difference between consumer expectation and management perception. The basic point of this gap is that companies do not fully understand the necessary characteristics of their own organization‘s service quality as well as service delivery to satisfy customers.
  • Gap 2: between management perception and service quality standards. It means that the organization finds it difficult to turn customers‘ expectations into appropriate performance standard. The reason is possibly not-well-trained staff or too-high demand of customers.
  • Gap 3: between service quality performance and service delivery. This happens when the staffs are unable to provide and meet the set service standard.
  • Gap 4: between service delivery and external communications. This happens when the promotional campaign and advertisements do not meet reality, which will easily lose customers‘ trust in the company image.
  • Gap 5: between expected service and perceived service. The service quality assessment depends mostly on the fifth gap while this gap five is also affected by the first four gaps above. If the customers do not feel any difference between their expectation and reality, that service would be rated excellent. So the ultimate goal is to reduce these gaps to increase customers‘ satisfaction.

The three main elements of customer service in logistics are pre-transaction, transaction and post transaction. The first one means that the factors of customer service occur before the actual order takes place. These elements must be provided by supplier, for example supplier should make sure whether stock is still available and order cycle time is appropriate and consistent. Secondly, transaction elements are directly linked to the transaction and most commonly concerned with logistics. Customers usually evaluate customer service quality based on these factors such as accurate invoices and orders, on-time delivery, consistent product quality, etc. Last but not least, post-transaction elements relate to the factors occurring after the delivery takes place. This element has two sub-categories: relationship service and relationship quality. The former one includes after-sales support, actual delivery time, helpful customer service representatives and offered customised services. The latter one relates to trust, commitment and integrity between
supplier and client.

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