Explain the Characteristics of ideal performance evaluation system

Characteristics of ideal performance evaluation system

The ideal performance measurement system incorporates 3 characteristics that provide accurate & timely direction for management:

1. Cost/ service reconciliation: The difficulty that arise in collecting certain data & in in coordinating cause & effect relationships, a majority of reports show logistics expenditures only during a specific period of time. For example, freight bills may not be received until sometime after a shipment is made. This practice often causes a problem matching the freight bill with the invoice. Similarly, it is not easy to assign the extra costs related to customer service to those orders that require additional customer service effort. Typical reports fail to reflect cost/service trade-offs critical to generating revenue. It is important to identify and coordinate relevant costs and revenues in order for managers to make meaningful logistics deqisions. For example, in the toy industry, products are typically manufactured in the spring and sold with early order discounts to encourage purchase commitment by retailers for the holiday season unless costs are appropriately sequenced with revenues’ management may obtain a distorted view of the performance effectiveness of its logistics system, An important benefit provided by an operational plan is that activity levels are matched to projected cost levels. When planned activities generate costs that are related to futures sales, it is possible to reconcile the cost with the corresponding revenues.

2. Dynamic Knowledge-Based Reporting – The  biggest challenge in logistical reporting is to present, a dynamic, rather than static, picture of operational performance over an extended time period. In general, most logistical operation reports provide the status of important activities such as current inventory position, transportation cost, warehouse cost & other measures of expenditures or activity level a single reporting period. Such reports provide vital statistics that can be compared operational periods to determine if performance is tracking as planned. The deficiency of static status reports is a failure to provide a picture over extended past periods & an inability to project critical trends in the future. Logistics managers require a reporting system that can project adverse trends before they surge out of control. Ideally, the reporting system can also query available logistics data and extract relevant information that will guide corrective management action. Thus, reporting systems should ideally possess diagnostic capacity to project where operational trends are heading and to suggest appropriate’ corrective actions.

3. Exception-Based Reporting: Logistical measurement should be exception-based. The comprehensive and detailed nature of logistics requires that managerial attention be directed to exceptions from anticipated results. The existence of an exception to planned results is proof that unanticipated activity is occurring. Therefore, an ideal reporting system will assist managers in isolating activities-and processes requiring attention. Such attention may identify areas-requiring problem-solving efforts or facilitate taking a more in-depth assessment of a specific process or function.