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Sri Sharada Institute of Indian Management-Research 7, Institutional Area,Phase-II,Vasant Kunj, New Delhi 70

Website: www.srisiim.org

Project on

PERFORMANCE MEASUREMENT FRAMEWORK OF DHL

Submitted to:

Prof Sanjeev Sareen

Submitted by:

Sandeep Dubey

Roll No- 20100144

Shitij ChandhokRoll No-20100151

Rajiv Kumar

Roll No- 20100118

PGDM (2010-12)

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Declaration

We, Sandeep Dubey, Shitij Chandhok and Rajiv Kumar students of PGDM (2010-12) hereby declare that we have completed this project

on performance measurement framework of DHL.

The information submitted is true to the best of our knowledge.

Sandeep DubeyShitij Chandhok

Rajiv Kumar

(PGDM 2010-12)








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ACKNOWLEDGEMENT

By doing this project, we feel greatly honoured to be a management

student of SRI SIIM. We have got a great theoretical & practical

experience of the corporate world.

This report is the result of labour spanning over 2days. We have got lots

of encouragement and co-operation from our fellow friends, respected

teachers, our parents, good wishers.

We would like to thank Rev. Swamiji, CMD of SRI SIIM & we would

like to thank Prof Sanjeev Sareen for his sincere co-operation.

Finally, we would like to thank all my friends, parents, faculties, all

group members, who shared their views with each other’s & helped to

be easy with the project.

Sandeep DubeyShitij Chandhok

Rajiv Kumar

(PGDM 2010-12)








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CONTENTS

Introduction………………………………………………………………………6

History and background of DHL…………………………………………………..6

The world's largest express and logistics Network……………………………..7Integrated Logistics………………………………………………………………....8

Supply Chain Management……………………………………………………….12International Logistics………………………………………………………………………13

Service logistics………………………………………………………………….14Inbound to Manufacturing……………………………………………………….15Extended supply chain management………………………………………….16

Order Management ……………………………………………………………..16Call Centre Management ………………………………………………………16

Implementation services………………………………………………………….17Quality Management …………………………………………………………….17

Performance Management………………………………………………………..18Performance Measures…………………………………………………………..19

Performance Measurement Systems ………………………………………....21Performance Measurement at DHL Solutions……………………………………22

Transportation…………………………………………………………………………….27

Inventory Management and Warehousing............................................................29

Warehouse Infrastructure Networks……………………………………………………..29Warehouse Management Solutions……………………………………………………..30Inventory Optimisation………………………………………………………………….....31Special Warehouse Solutions…………………………………………………………....32Outsourcing Projects………………………………………………………………………33

Technological Electronics/Telecom solutions……………………………………..34

Electronics/Telecom……………………………………………………………………...34Core and Value-added Technology Solutions…………………………………………35Inbound to Manufacturing………………………………………………………………..35

Service Parts Logistics…………………………………………………………………...35


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Technical Distribution…………………………………………………………………….35Technical Services………………………………………………………………………..35

Conclusion………………………………………………………………………………..37

BIBLIOGRAPHY……………………………………………………………...................38












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Introduction

Logistics is concerned with getting the products and services where they are needed whenthey are desired. It is difficult to accomplish any marketing or manufacturing without

logistical support. It involves the integration of information, transportation, inventory,warehousing, material handling, and packaging.

The operating responsibility of logistics is the geographical repositioning of raw materials,work in process, and finished inventories where required at the lowest cost possible

The formal definition of the word ‘logistics’ is: - it is the process of planning,implementing and controlling the efficient, effective flow and storage of goods,services and related information from the point of origin to the point of consumption

for the purpose of conforming to customer requirements.

In order to understand the concepts of logistics in terms of practical usage and to glimpseinto the how a real company or organization uses logistics as a formidable tool to gaincustomer satisfaction, reduce overall cost and increase efficiency we selected “DHL” theworlds leading courier service company. But DHL is multi faceted and offers myriad typesof services.

History and background of DHL

DHL are the first letters of the last names of the three company founders, Adrian Dalsey,Larry Hillblom and Robert Lynn.

In 1969, just months after the world had marveled at Neil Armstrong's first steps on themoon, the three partners took another small step that would have a profound impact on theway the world does business.

The founders began to personally ship papers by airplane from San Francisco to Honolulu,

beginning customs clearance of the ship's cargo before the actual arrival of the ship anddramatically reducing waiting time in the harbour. Customers stood to save a fortune.

With this concept, a new industry was born: international air express, the rapid delivery of documents and shipments by airplane.

The DHL Network continued to grow at an incredible pace. The company expandedwestward from Hawaii into the Far East and Pacific Rim, then the Middle East, Africa andEurope. By 1988, DHL was already present in 170 countries and had 16,000 employees.








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At the beginning of 2002, Deutsche Post World Net became the major shareholder in DHL.By the end of 2002, DHL was 100% owned by Deutsche Post World Net.In 2003, DeutschePost World Net consolidated all of its express and logistics activities into one single brand,DHL

The world's largest express and logistics Network

DHL is the global market leader in international express, overland transport and air freight.It is also the world's number 1 in ocean freight and contract logistics. DHL offers a fullrange of customised solutions - from express document shipping to supply chainmanagement.

Below are the global facts and figures that show you the scale of the world's largest

express and logistics network.

Global Facts and Figures

Number of Employees: around 285,000Number of Offices: around 6,500Number of Hubs, Warehouses & Terminals: more than 450Number of Gateways: 240Number of Aircraft*: 420Number of Vehicles: 76,200

Number of Countries & Territories: more than 220Shipments per Year: more than 1.5 billionDestinations Covered: 120,000

The reason for the success of DHL is due to its very effective and efficient way of carryingout the process of project management. The basic steps in it are as follows:

Project Management

DHL manages projects according to a six-step process:

Initiation: The formal start of the project

Design: The formal agreement on how to approach the project and its deliverables

Planning: Following agreement, a detailed plan is created

Execution: After detailed planning and preparation, the project goes 'live'

Closing: Gradually phase out and prepare for handover of the deliverables

Handover: The formal end of the project








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INTEGRATED LOGISTICS

Logistics is viewed as the competency that links an enterprise with its customers and

suppliers. Information from and about customers flows through the enterprise in the form of sales activity, forecasts and orders. As products and materials are procured, a value addedinventory flow is initiated that ultimately results in ownership transfer of finished products tocustomers. Thus the process is viewed in terms of two inter-related efforts, inventory flowand information flow.

Inventory Flow

Information Flow

Inventory Flow

The management of logistics is concerned with the movement and storage of materialsand finished products. From the initial purchase of a material or component, the logisticalprocess adds value. By moving inventory when and where needed. Thus the materialgains value at each step.

For a large manufacturer, logistical operations may consist of thousands of movements,which ultimately culminate in the delivery of the product to an industrial user, wholesaler,

dealer or customer.In order to understand logistics it is useful to divide it into three areas:

Physical distribution

Manufacturing support

Procurement

For DHL:

Manufacturing

support

Physical

distribution

ProcurementSuppliers

Customers








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DHL is completely service oriented therefore it does not have its own material movementbut that of the customers both the sender, the receiver and also the intermediateries.That means it only involves physical distribution and procurement. Procurement alsoincludes the material needed for packaging such as paper, moulded trays and boxes,

wooden crates, standard containers wraps, plastic inlays etc. The materials or the goodscollected from the senders (including papers, documents, physical goods like clothing,household good, chemicals, exotic animals etc) are weighed, checked for condition, anddepending upon its various characteristics it is packed. The goods are then dispatched totheir destinations. There is no value addition to the material itself but it is done to theservice which is provided ( eg if there has to be a certain package delivered from India toUK the normal services would take about 2 days whereas as a super fast delivery would bedone in about 9 hours)

Information flow

Information flow identifies specific locations within a logistical system that haverequirements. Information also integrates the three operating areas. The primary objectiveof developing and specifying requirements is to plan and execute integrated logisticaloperations.

Logistical information involves two major types of flows:

1. Coordination flows2. Operation flows

1. Planning and coordination flows

Coordination is the backbone of the overall information system.

Strategic objectives:

Strategic objectives detail the nature and location of customers, which are matched tothe required products and services to be performed.

For DHL








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It implies estimating the time requires for collecting the goods from the door step of thesender and then estimating the time for the goods to reach the final customer.

Forecasting

Forecasting utilizes historical data, current activity levels, and planning assumptions topredict future activity levels. Logistical forecasting is generally concerned with relativelyshort –term predictions.

The overall purpose of information planning/coordination flow is to integrate specificactivities within a firm and to facilitate overall integrated performance.

For DHL

DHL’s whole business is dependent on the vital point of timely delivery. Based onthe distance to the final receiver, the accessibility, the documentations and proceduresthat need to be handled etc they have fine tuned the process of delivery. They canaccurately gauge how much time it will take for the goods to reach its end destination.

2. Operational flows

The second aspect of information requirements is concerned with directing operationsto receive, process, and ship inventory as required supporting customer and

purchasing orders. Operational requirements deal with Order management Order processing Distribution operations Inventory management Transportation and shipping Procurement

For DHL:

DHL owns its success for the efficiency with which the operations are carried out. Here notonly the company but the sender and sometimes the receiver can track the goods throughtheir information center. They are given a certain password which they can use to trace viaonline or their customer service helpline.








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DHL WEB SHIPPING is the on-line express shipping tool that helps customers preparedocuments, book pick-ups, store contact details and track their deliveries. Ideal for busyoffice managers, business travelers or receptionists, DHL WEB SHIPPING needs nospecial software or training.

Purpose of DHL Web Shipping:

DHL WEB SHIPPING 's new, simplified navigation guides customers, quickly and easily,through the entire process. So they can respond to any shipping request within minutes.

With a click of a mouse customers can:

Select the right shipping and value-added services for each shipment

Prepare air waybills and customs documentation on-line

Get the latest service bulletins and customs information

Book collections and track shipments on-line

Save up to 300 customer addresses

Access shipment records for 99 days

Alert recipients and other interested parties

DHL WEB SHIPPING is also perfect for telecommuters. You can order a pick-up, checkservice availability or track your shipments from any location, in real time, direct from your

wireless laptop.








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Supply Chain Management

Definition for supply chain management

“Supply chain management is the management of upstream and downstream relationshipswith suppliers and customers to deliver superior customer value at less cost to the supplychain as a whole.”

Explanation:

The supply chain is the network of organizations that are involved through upstream anddownstream linkages, in the different processes and activities that produce value in the

form of products and services in the hands of ultimate consumer.

For DHL:

Supply Chain Optimisation

Good design is at the heart of an effective supply chain solution. DHL has developed areputation for consistently developing innovative solutions that streamline operations andimprove control. Their in-house teams have contributed to the solutions design of some of the world's leading brands and enabled to win key contacts.

DHL solutions design team offers a wide portfolio of expertise and services, from logisticsnetwork strategy, transport design, warehouse design and simulation, through tooperational improvement and inventory analysis.

International Supply Chain Extended Supply Chain ServicesImplementation ServicesOutsourcing Projects


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International Supply Chain

DHL’s international supply chain management solutions are focused on helping customerstake increased control of international inbound supply chain to maximise the value of

international and global sourcing.

DHL helps customers :

Give visibility of the upstream supply chain, and enable earlier decision making

Create a more agile supply chain, better able to respond to changes in consumer demand

Reduce lead times, inventories, and associated storage costs

Customer-focused solutions are built up from the following core services:

Origin management, including: vendor management; supplier collections; customsbrokerage; consolidation services and value-added services

Global forwarding, including: air/ocean/road/rail freight forwarding and management;European managed transport

Destination management, including: port and demurrage management; customsbrokerage; de-consolidation and pre-retail services; port to distribution centretransportation; direct store delivery (US only)

Supply chain visibility and management, including: purchase order management; RFIDproduct tracking; exception management; planning and forecasting; inventorymanagement.

Global forwarding services are provided across all major routes.

Logistical services that are offered.

Reverse Logistics

Service Logistics Inbound to ManufacturingMedical Device Distribution Distribution to Stores ManagementEngineering Response



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Reverse Logistics

DHL’s reverse logistics solutions help customers plan, implement and control flow of

materials and manage related information, back up the supply chain to recapture valuesand ensure the safe disposal of goods. Items include the recovery of obsolete or non-operational white goods such as refrigerators, plus the removal of old furniture on deliveryof new or replacement products.

Services include:

Roll in Management: de-installation of finished goods at the customer's site

Returns Management: receiving, sorting, verifying and managing returned products

Express Delivery: Exchange of Dead On Arrival products

Service logistics

Service and replacement parts

DHL’s service and replacement parts service involves the management of manufacturers'replacement parts delivered to and from customers according to pre-defined service levels

or warranty agreements on a one-, two-, four- or eight-hour and next-day basis, 24 hours aday, seven days a week.

DHL works closely with customers to overcome common issues such as:

Poor parts availability

High inventory investment

Long lead times, accentuated by global sourcing

High levels of customer returns

Poor visibility, reporting and control Cost control of the demand chain

Key services include:

International freight forwarding

Domestic and regional inbound deliveries

Inventory planning, forecasting, procurement and analysis

Distribution centre operations

Outbound delivery










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The entire process is underpinned by a web-enabled electronic order processing and order monitoring tool.

Inbound to Manufacturing

Inbound to manufacturing is the complete end-to-end logistics management of inventories,facilities and labour associated with the inbound flow of materials from vendors andsupplier origins to consumption points in manufacturers production lines.

The service encompasses:

Network, transportation and facility design

Inventory optimisation Supplier management

Transportation management

In-plant services

Key to the service is integrating manufacturers' forecasting, order management and supplychain execution processes with their component suppliers. DHL implements warehousemanagement and supply chain event management systems to manage just-in-timedeliveries and allow supply chain participants to exchange forecast requirements in realtime.

Value is created for manufacturers and component suppliers throughout the world by:

Enabling a robust and cost-effective supply chain

Providing the necessary visibility so that the location of all components within thesupply chain is known to all supply chain participants

Reduce inventory and investment costs

Improve delivery times

Co-ordinate multiple components more efficiently








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Medical Device Distribution

DHL country-based warehouses for a number of manufacturers to service a local customer base. This includes the receipt of product from local or global manufacturing sites and

downstream distribution to hospitals.

Distribution to stores management

DHL distribution to store services are focused on helping retailers create efficient andflexible supply chains to deliver product to retail outlets at high levels of service.

These solutions are built from several core services: reverse logistics collections; sortation;processing; repair/refurbishment; value recovery; disposal and compliance.

Engineering Response

Through our Engineering Response services, we manage the materials supply chain fromworks planning and inbound goods through to on-site works, delivering stock out toengineers, builders and construction workers in the field.

Extended Supply Chain Services

DHL not only provides physical logistics services but also manages other enhanced supplychain services, improving efficiencies and reducing costs.

Order Management

Receipt, management, execution, sequencing and dispatch of orders in a timelymanner.

Call Centre Management

A Call Centre manages orders, monitors sales activities, provides customer servicesand functions as a Help-desk.

Global Inventory Management

DHL gives the customer a global view of inventory, thus enabling informed decisionsregarding the disposition of stock.










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Consolidated Billing ServicesThe creation of a consolidated and categorized invoice, based on all servicesperformed in a specific time-period by more than one service provider, made availablein an agreed format.

Freight & Customs Solutions

DHL's many years of experience with international trade requirements and formalities,combined with the European Competence Centre and country expertise, givescustomers the leading edge in service, quality and management in cross border transactions.

Implementation Services

Implementation and Project Management

Implementation starts by defining project aims, setting the targets and describing thedeliverables in detail. The major topics in implementation include business processes,engineering, real estate, IT systems, migration, HR, finance and legal considerations.

Quality Management

Total Quality Management is a management strategy that integrates quality orientationinto the whole structure and workflow of a company by using methods and techniquesof quality management

Corporate Policy for Quality, Environment, Health and Safety (QEHS) is based onfive corporate values:

Customer satisfaction: Providing our customers and their customers withexcellent, high value logistics solutions

Employee motivation: Building on the know-how and stimulation of individualpotential in multi-cultural teams

Operational excellence: Continuous improvement of processes and services tofulfil or exceed expectations










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Corporate citizenship: Acting as a responsible corporate citizen in all countries Shareholder reward: Developing a sustainable business to provide increasing

shareholder value

Globally, DHL management systems are certified according to the international standard for quality management systems ISO 9000 in almost every operating unit.

Performance Management :

Performance management is a key part of the supply chain. Measured elements arereviewed as a system, as each component interacts with all the other parts around it.Performance measuring not only records historical performance but also provides earlyindication of any service slippage. In this second role, the measures provide a valuablecontribution to DHL's Continuous Improvement Programmed

In a sense, all organizations measure performance. They may do it systematically

and thoroughly, or on an ad hoc-basis and superficially, but they do it. The bottom line is thatorganizations have to track and monitor events to be able to know what they are doing. Or asLord Kelvin (1824-1907) once put it:

performance that are important to the core competencies or critical to thecompetitiveness of an organization. The use of KPIs stems from the concept of critical success factors (CSFs), which were developed in the late 70’s. CSFscan be defined as: Those few critical areas where things must go right for thebusiness to flourish.1 In other words, KPIs are the set of performance measuresthat a manager need to track to be able to know how the organization under hisor her responsibility is functioning. “When you can measure what you are speaking about,

and express it in numbers, you will know something about it.”

Organizations measure performance for many different reasons. Some of the reasons maybe to:

• Identify success

• Identify if they are meeting customer requirements• Help them understand their processes: to confirm what they know or reveal what theydo not know• Identify where problems, bottlenecks or waste exist and where improvements are

necessary• Ensure decisions are based on fact, not on supposition, emotion, faith or intuition








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• Show if improvements planned, actually happened

According to Neely et al. (1995) the level of performance a business attains is a function of theefficiency and effectiveness of the actions it undertakes. In this statement, efficiency is a

question of doing the things right, whereas effectiveness is a question of doing theright things.12 With this in mind we can make the following definitions: 13

• Performance measurement: The process of quantifying the efficiency and effectivenessof actions.• A performance measure: A metric used to quantify the efficiency and/or effectiveness of an action.• A performance measurement system: The set of metrics used to quantify both theefficiency and effectiveness of actions.

One specific type of performance measures is the so called key performanceindicator (KPI). A KPI is, as the name reveals, a performance measure that is a“key” to success for the organization. The KPIs are aggregated measures of performance that are important to the core competencies or critical to thecompetitiveness of an organization. The use of KPIs stems from the concept of critical success factors (CSFs), which were developed in the late 70’s. CSFscan be defined as: Those few critical areas where things must go right for thebusiness to flourish.1 In other words, KPIs are the set of performance measuresthat a manager need to track to be able to know how the organization under hisor her responsibility is functioning.

The academic literature on performance measurement is diverse, and differentauthors emphasize different perspectives of the topic. Although, one commonrecommendation among authors is that performance measures and performancemeasurement systems should be derived from corporate and business strategy.That is, there should be a closed management loop with the deployment of strategic objectives and the feedback through measures.8, 14, 15, 16, 17 and 18

Judson (1996) also promotes this idea by stating that performance measuresand reporting systems established to track organizational performance are notstrategically neutral. By this he means that every measure of performance, onceinstituted, focuses the attention of every manager and employee concerned onthe issue that is being measured. Hence, what is being measured and tracked issignaled as important; to be given a higher priority than other matters. This is infact one of the purposes of performance measures. Conflicts arise when there islittle relationship between the aspects of organizational performance that arebeing measured, and the aspects that are critical to the successful execution of the strategy.

Performance Measures

The concept of performance measurement has historically been focused onfinancial measures, such as sales turnover, profit and return on investment.








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However, traditional financial measures do not match entirely with thecompetencies and skills companies require to face today’s businessenvironment.19 In fact, there has been a lot of criticism on the role of financialmeasures during the past two decades. This is primarily due to the fact that they

reflect the results of management actions and organizational performance, notthe cause of it.8 In other words, financial measures have a backward-lookingfocus. Furthermore, traditional measures have a tendency to focus onindividuals or functions, rather than on the processes that are at the core or theorganization as a whole. Additionally, traditional performance measuresencourage a short-term vision due to their lack of strategic focus. Another dangerous shortcoming of financial measures is that they have a strongemphasis on control. This makes individuals more concerned with conforming

to standards than with continuously improving. As a consequence, they encourage

local optimization.19

In order to meet this criticism on financial measures, a new way of looking atperformance measurement was developed. Important works by R. S. Kaplan,among others, in the late 80’s and the early 90’s seriously changed theknowledge and practice of accounting and performance management.20 The emphasisnow is to complement the financial measures with measures built around other perspectives as well. Or as Sinclair and Zairi (2000) puts it:

“Performance should no longer be measured by financial measures alone. A wider, more

balanced range of measures is required. […] Measures should be used as a part of themanagement process to improve performance, rather than standards to be met.”

Managers must also have in mind that developed measures are not “cast in stone” andthat areas which need to be measured will change over time, as strategies change.

There are a wide range of recommendations on how to develop and use performancemeasures and KPIs. Neely et al. (1997) presents a summary of these recommendationsin their ambitious review of the literature on the subject.

Neely et al. used this knowledge to develop a framework for the design of

performance measures. Table 3.2 shows this framework, the performancemeasure record sheet, which seeks to specify what a “good” performance measureconstitutes. The framework ensures that a developed measure follow the recommendationspresented above if the measure is clearly specified on each element of the record sheet.

An explanation of the ten elements in the record sheet and their relationship to therecommendations summarized in Table 3.1 are presented in appendix 4.

Table 3.1 Recommendations with regard to the design of performance measures

Recommendations

1. Performance measures should be derived from strategy








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2. Performance measures should be simple to understand3. Performance measures should provide timely and accurate feedback4. Performance measures should be based on quantities that can be influenced, or controlled, by the user alone or in cooperation with others5. Performance measures should relate to specific goals (targets)

6. Performance measures should be relevant7. Performance measures should be part of a closed management loop8. Performance measures should be clearly defined9. Performance measures should focus on improvement10. Performance measures should have an explicit purpose11. Performance measures should be based on an explicitly defined formula and source of data12. Performance measures should employ ratios rather than absolute numbers13. Performance measures should use data which are automatically collected as part of aprocess whenever possible14. Performance measures should be based on trends rather than snapshots

15. Performance measures should be precise - be exact about what is being measured16. Performance measures should be objective - not based on opinion (Source: Neely et al.,1997)

Table 3.2 The performance measure record sheet

Elements Details

Title

Purpose

RelatesTarget

Formula

Frequency

Who measures?

Source of Data

Who acts on the data?

What they do?

Notes and comment

Performance Measurement Systems

The need to integrate the performance measures obtained in a system is two-fold. First, as Sinclair and Zairi (2000) points out, it is imperative to conveyinformation through as few and as simple a set of measures as possible. Thesemeasures must be analyzed as an entity in order to avoid redundancies and tofind a balanced set of measures. Second, measures need to be part of a

comprehensive system which integrates the goals of everyone in theorganization, in a way that enables them to work together for the benefit of the








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organization as a whole.

In response to the dissatisfaction of traditional performance measures, a number of frameworks and models were developed in the early 90’s to support companies in their

process of measuring performance. Among the most widely cited are the balancedscorecard and the performance pyramid.8 These performance measurement models areexplained briefly below.

The Balanced Scorecard

Kaplan and Norton made a significant contribution in overcoming some of thelimitations of traditional performance measurement systems by linking them tostrategy. They developed a balanced scorecard, which was first presented in1992. It is a comprehensive performance summary that complements financialmeasures with operational measures, which are the drivers of future financial

performance. The word “balanced” calls attention to the fact that the systemmust combine financial and non-financial measures.19 The set of measures canbe grouped into four main perspectives (i.e. dimensions of performance), whichrespectively enable managers to answer four important questions about their organization. These are: 15

• How do we look to our shareholders (the financial perspective)?• What must we excel at (the internal business perspective)?• How do our customers see us (the customer perspective)?• How can we continue to improve and create value (the innovation and learning

perspective)?

Performance Measurement at DHL Solutions

Traditionally, the culture of performance tracking at DHL Solutions hasprimarily been governed by control of the financial dimension. This dimensionhas a rather long history in the organization’s accounting culture. Still,headquarters follow-up their operating units on financial performance tightlyand they monitor the units’ overall conformance to budgets on a monthlybasis.24 and 25

DHL Solutions in Sweden has not formulated and distributed any support toolsor guidelines for how and when performance measures are to be developed.24

Consequently, measures are established on an ad hoc-basis and no manager inthe organization have full insight into the entity of measures used at a particular time. The only overall policies for measurement are those indirectly formulatedas a result of corporate projects, such as the MORE-project (an internationalproject that addresses multiple improvement initiatives).26 Although, such

projects are often instituted for a particular reason and therefore, there is a risk that their

conclusions are based on a parochial view of the organization. All too often operating unitmanagers experience that directives for performance measurement resulting from








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such projects lacks clear purposes and are irrelevant for and incongruent with their day-to-day operations.27

Although frequently used in the organization, the term KPI has no unified definition

throughout the company. Moreover, there are no documents or lists stating whichmeasures that are KPIs and which are not. However, on a request to define it the operatingunit managers explained that:

• A KPI is a key ratio with which the performance of the business can be explained onsome dimension. A portfolio with a number of KPIs monitored simultaneously should beable to describe if the company or unit is healthy and well managed.

• KPIs are the most important control parameters in the company. Managersshould try to identify a handful of KPIs among a wide spectrum of measures, and

give them the attention they deserve. A suitable KPI portfolio should consist of aboutthree or four distinctive measures which explain the business in a holistic way.

• KPIs are measures which contain information that makes it possible to manage a businessproperly. The most important characteristics of a KPI are that it should be measurable, easyto understand and reflect one of the core processes of the business.

• A KPI is a measure with which one can review the performance of the operations in arelevant way.

The reasons why managers want to measure the performance of the parts theyare responsible for are somewhat different between the respondents. Table 6.1presents the reasons for measurement stated by heads of divisions and units.








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Table 6.1 The reasons why managers at DHL Solutions measure performance

HEADS

Performance Measures at DHL Solutions

When looking at the portfolio of measures used at DHL Solutions in Sweden

and investigating each measure on why it was instituted and by whom, there are

basically four groups of performance measures in the organization

Reason for measurement Customer Industrial Unit A Unit B Unit C Unit D

Identify success X X X

Identify if they are meeting

clients’ requirements X X X X

Help them understand their

processes X X

Identify where problems,

bottlenecks or waste exist X X X

Ensure decisions are based on

fact

X X

Show if improvements

planned, actually happened

X X X X X X








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1

2

4

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The first group of measures (1) includes those developed by higher organizational levels than the Swedish headquarters. Examples of such are themeasures that each unit is compelled to report to managers at the globalheadquarters in Basel. These measures are reported into the shared company.server on a monthly basis and the methods of measurement are clearly defined. However,

managers in Sweden lack purposes for the measures and they are rarely forced to explain poor performance on them

Manageable employee turnover (that is, total leaving staff less non manageableleaving staff such as retirements) Absenteeism (sickness hours in percentage of total hours) Rent per square meter Sellable capacity (that is, total space in the warehouse) Complaints (claims per outgoing order) On time deliveries (measured on orders) Inventory accuracy (damaged, stolen or incorrectly picked items in percentage of the total number of handled items) Customer net change (gained or lost clients)

Managers at central levels

Managers at Swedish head quater

Manager at Operating Unit

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The second group of measures (2) contains those demanded by managers atheadquarters in Sweden. These are primarily total operating unit measures onfinancial performance incorporated in the accounting system. Primary measuresmonitored are:

The third group (3) consists of the measures developed at the units to support

the management of their own operations. Heads of units develop templates for

measurement on their own and they are responsible for the relevance of eachmeasure developed. Examples of measures monitored at the four operating

units examined in this project are:

• Profit

• ROS at OR1

• SWOT/Net Sales (HA & VAS)

• On time delivery (percent of total orders that was delivered befor due date)• Claims per order line• Failures found in control per order line• Order lines without failure in picking (percent of complete and correct

order lines in outbound control)• Scrap articles in percentage of total handled articles (smashed bottles at

the unit C)• Pallets without faults (inbound and outbound)

• Occasional labor flexibility analyses based on the business system (SAP)• Absenteeism (total sickness hours in percentage of total paid hours)• Number of accidents in work• “Productivity” (explained in more detail below)

The fourth group of measures (4) includes those instituted at operating units to meet their clients’ requirements on operational information. Examples of such measures are some of the measures calculated at unit D and reported to their client. For example

• Inbound pipe (the number of order lines that were not stored in the warehouse ontime)• Outbound pipe (the number of order lines that were created as pick orders in Prologs’,but were not picked on time)• Warehouse denials (the number of times that the system have said that there should bearticles at a storage position, but there were not)•Customer fill (number of delivered order lines in percentage of total ordered order lines)








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TRANSPORTATION

Transport Functionality

Transportation is one of the most visible elements of logistics operations. Transportationprovides 2 major functions: product movement & product storage.

Product Movement

Whether the product is in the form of materials, components, assemblies, work-in-process,or finished goods, transportation is necessary to move it to the next stage of themanufacturing process or physically closer to the ultimate consumer. A primarytransportation function of product movement is moving up and down the value chain. Sincetransportation utilizes temporal, financial, and environmental resources, it is importantthat items be moved only when it truly enhances the product value.

Transportation involves the use of temporal resources because product is inaccessibleduring the transportation process. Such product, commonly referred to as in-transitinventory, is becoming a significant consideration as a variety of supply chain strategiessuch as just – in – time and quick response practices reduce manufacturing anddistribution center inventories.

Transportation uses financial resources because internal expenditures are necessary for private fleets or external expenditures are required for commercial or public transportation.

Transportation uses environment resources both directly and indirectly.

In direct terms, it is one of the largest consumers of energy (fuel and oil) in thedomestic United States economy. In fact, it accounts for close to 67% of all domestic oiluse.

Indirectly, transportation creates environmental expense through congestion, air pollution and noise pollution.

The major objective is to move product from an origin location to a prescribed destination

while minimizing temporal, financial and environmental resource costs. Loss and damageexpenses must also be minimized. At the same time the movement must take place in








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such a manner that meets customer demands regarding delivery performance andshipment information availability.

Principles

There are two fundamental principles guiding transportation management andoperations. They are economy of scale and economy of distance.

Economy of scale refers to the characteristic that transportation cost per unit of weightdecreases when the size of the shipment increases.E.g. truckload shipments cost less per pound than less-than-truckload shipments. It is alsogenerally true that larger capacity transportation vehicles such as rail or water are less

expensive per unit of weight than smaller capacity vehicles like motor or air. Transportationeconomies of scale exist because fixed expenses associated with moving a load can bespread over the load’s weight. The fixed expenses include administrative costs of takingthe order; time to position the vehicle for loading or unloading, invoicing and equipmentcost. These costs are fixed because they do not vary with shipment volume.E.g. suppose the cost to administer a shipment is $ 10.00. Then the 1-pound shipment hasa per unit of weight cost of $10.00, while the 1,000 pound shipment has a per unit of weightcost of $0.01. Thus, it can be said that an economy of scale exists for the 1000-poundshipment.

Economy of distance refers to the characteristic that transportation cost per unit of distance decreases as distance increases.e.g. a shipment of 800 miles will cost less than two shipments (of the same combinedweight) of 400 miles. Transportation economy of distance is also referred to a se taperingprinciple since rates or charges taper with distance. The rationale of distance economies issimilar to that for economies of scale.Longer distances allow the fixed expenses to be spread over more miles, resulting in lower overall per mile charge.

These principles are important considerations when evaluating alternative transportationstrategies or operating practices. The objective is to maximize the size of the load and thedistance that is shipped while still meeting customer service expectations.

Transport Infrastructure

FOR DHL:

DHL uses all the modes of transportations that is

airways








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roadways

waterways

rail freight

DHL has its own fleet of airplanes and motor vans. Depending upon the final destinationwhere the goods have to finally reach and the type of package the customer has paid for,DHL uses the individual modes of transport or a combination of either of these or all. Onceagain the geographical location and how fast the goods have to be delivered are thefactors for the final selection of modes of transportation .

The concept of economies of scale and economies of distance are both taken intoconsideration in case of larger consignments where DHL provides an appropriate logisticalsolution which helps in reducing the overall cost for the customers.

Inventory Management and Warehousing.

Warehouse Infrastructure Networks Warehouse Management Solutions Inventory Optimisation Special Warehouse Solutions Outsourcing Projects

Warehouse Infrastructure Networks

DHL warehouse service supports inbound logistics, distribution and aftermarket services ina way that improves inventory management, reduces total operating costs and improvescycle times.

DHL facilities offer our customers warehousing that is fully integrated into the wider supplychain and meets demanding service levels. This encompasses the design implementationand operation for both dedicated and multi user sites.

Benefits include improvements in:

Customer service levels

Stock accuracy

Lead times

Redundant stock costs

Productivity responsiveness to a company's strategic needs

Multi User Centres


























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We provide a network of multi-user warehouses, enabling manufacturers to hold inventoryat local level, whilst avoiding expensive, dedicated storage solutions. These facilities canreceive products from both local and global manufacturing sites, providing downstreamdistribution.

Strategic Part Centres (SPC)

Our Strategic Part Centers (SPCs) are in-country facilities offering:

1, 2 and 4 hour order fulfillment

stock optimisation across the complete network of SPCs

guaranteed performance against agreed business rules

Express Logistics Centres (ELC)

Our Express Logistics Centres (ELCs) are regional centralised facilities offering:

order processing

outsourced repair facilities

custom final assembly

kitting services

Warehouse Management Solutions

Warehouse Management Systems

The Warehouse Management System (WMS) records all events and actions in thereceipt, handling and storage of products and orders in a warehouse environment. TheWMS also accurately records the location of inventory whilst stored in the warehouse.

Our Prologs WMS manages all critical processes in the warehouse, and is also animportant support for varied transport and distribution concepts (planning, timecontrolling, booking of transport capacity, communication with customs and other authorities).

Strategic Inventory Management










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Strategic Inventory Management (SIM) has been created to deliver urgent shipments tomain business areas within a 2 to 4 hour time frame, usually time critical spare partswith a high value and high impact on business.

Direct Express Inventory Management

Direct Express Inventory (DEI) allows customers to centralise stock in one warehouseand use express distribution to deliver components the next day. Entire management isdone by DHL.

Repair Return Inventory Management

Return & Repair Inventory (RRI) manages the physical flows for Return materialauthorisation. In this case, DHL will be responsible for picking up the broken part,

sending a new one, bringing the broken part to a repair centre and moving repairedparts back into stock.

Cross Docking

Cross-dock operations are facilities where shipments are received from one mode of transport and transferred to another mode, or where shipments complete one leg of a journey prior to commencement of another journey. Shipments are consolidated or deconsolidated. Product received into the facility is not taken into inventory.

Inventory Optimisation Through effective inventory management, inefficiencies can be driven out of the supplychain, overall costs reduced and high service levels achieved. We optimize inventory at aline-item level at every stage of the supply chain.

DHL focuses on driving results in:

Supplier management

Expediting Order replenishment

Demand forecasting

Safety stock setting

Order pipeline monitoring

Excess stock management

Inventory optimisation is supported by inventory management software that calculates 'line

item risk profiles' that measure the variability of demand and supply for each line itemwithin a customers inventory.










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DHL offers:

Average of 20% inventory reduction and 8% improvement in product availability

Reduced inventory and overhead costs

Improved sales, profitability and return on investment High service standards

Better matching of supply with demand

More streamlined and responsive supply chain

Shared-user Warehousing

Our shared-user facilities are designed to meet the needs of organisations of any size.Currently, we provide shared-user services to leading manufacturers and retailers of medical supplies, consumer products, industrial equipment, chemicals and technology.

Through sharing of DHL's resources, such as space, labour, equipment andtransportation, customers benefit from synergies that considerably reduce supply chaincosts.

This environment returns significant value to a small business requiring distributionoperations without long term lease or capital commitments, or a large enterprisehandling a new acquisition, product launches or seasonal overflow.

Campus Solutions

We pioneered the campus model to provide regional customers with a flexible solutiondesigned to capitalise on similar distribution channels, minimise labour costs, andincrease specialized equipment utilization.

Campuses are strategically located at key distribution points in North and South America, Europe and select locations in Asia, allowing for expedited transit times tolarge concentrations of consumers.

Special Warehouse Solutions

Vendor Hubs

Warehousing and delivery of service parts, based on demand pull. Vendor hubs areusually located in close proximity to the manufacturing facility.










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Reverse Centres

Specially designated facilities for the receipt and handling of returned parts for repair,recycling or disposal.

Bonded Warehousing

Bonded warehouses provide secure environments in which customers' products can beheld without immediate payment of local duties and taxes.

Shared-user Warehousing

Our shared-user facilities are designed to meet the needs of organisations of any size.Currently, we provide shared-user services to leading manufacturers and retailers of medical supplies, consumer products, industrial equipment, chemicals and technology.

Through sharing of DHL's resources, such as space, labour, equipment andtransportation, customers benefit from synergies that considerably reduce supply chaincosts. Consequently, the customer can increase efficiencies throughout their distribution network and maintain a higher level of service to their customers.

Outsourcing Projects

Outsourcing involves DHL taking over and managing previous in-house logisticsoperations, including:

Distribution centres

Transport operations

Back-office functions

Supply chain management functions After sales services










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Technological Electronics/Telecom solutions

Electronics/Telecom Core and Value-added Technology SolutionsInbound to ManufacturingService Parts Logistics Technical Distribution Technical Services

Electronics/Telecom Technology

Manufacturers have some of the most complicated supply chain requirements of anyindustry because of the nature of the products: complex, high value and rapidobsolescence.

Our logistics solutions help technology companies reduce inventory and cycle time, whileproviding control and visibility through to final delivery. This is achieved by focusing onproduct availability and optimisation of product flows and supply chain costs. For optimumflexibility and speed, you can outsource your entire logistics operation, includingdistribution centers, transport, back-office, supply chain management and after sales, to

DHL.

Electronics/Telecom

DHL provides the know-how to optimize flows and drive down supply chain costs. Youreduce stock but not quality, and maintain flexibility to meet market needs. Servicesinclude:

Modular networks consisting of warehouses and hubs, downstream links enablingmerge-in-transit, and delivery capabilities for any size, speed and dimension

Inbound logistics (VMI or JIT) Electronics Distribution Network (EDN)

Reverse logistics

After sales logistics - spare parts

Lead Logistics Provider (SCM) - integrated supply chain services from DHL, whether end-to-end solutions or management of partial supply chain solutions

Complete outsourcing, including transfer of staff, infrastructure financing, businessoptimisation and supply chain integration






















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Core and Value-added Technology Solutions

Responding to customer needs, we provide a range of core and value-added services thatreduce cycle times and improve performance. These include:

inbound logistics to production facilities, including vendor managed inventory hubskitting, assembly and light manufacturing operations

order fulfillment and finished goods distribution

integrated freight management and contract logistics services

product delivery and installation, including reverse logistics

aftermarket and critical service parts logistics

Inbound to Manufacturing

Our Inbound to Manufacturing service enables our customers to more effectively managethe inbound flow of materials from collection points at their component suppliers' facilitiesto consumption points in their production lines. We help address the constant challenge for both finished goods manufacturers and component and sub-assembly suppliers who mustadapt to shorter product lifecycles and the migration of production facilities to developingcountries.

Service Parts Logistics

Our Service Parts Logistics service involves the management of technology manufacturers'replacement parts delivered to and from customers according to pre-defined service levelsor warranty agreements on a one-, two-, four- or eight-hour and next-day basis, 24 hours aday, seven days a week.

Technical Distribution

Supporting companies in a wide range of industries including computer equipment and

peripherals, medical equipment, vending equipment, office equipment andtelecommunications, our technical distribution service meets the challenges associatedwith the effective and safe movement of high-value goods.

Technical Services

Technology manufacturers expect every link in the supply chain to have capabilities to addvalue to their product or process. Our tailor-made solutions can be integrated into existingcustomer operations at our warehouses. The strength is the integrated approach with other

segments of the business which improves time-to-market and reduces the cost for the








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customer.

QA Control

Quality control ensures that product is received into and dispatched from the warehouse ina suitable condition, free from faults and defects.

Labelling/Merchandising

The application of labels either to the product or to the packaging. Merchandising caninclude the addition of price stickers or promotional items ready for retail display.

External Performance Measurement

While internal measures are important for detailed organizational monitoring, externalperformance measures are also necessary to monitor, understand and maintain a focusedcustomer perspective and to gain innovative insights from other industries. The topics of customer perception measurement and best practice benchmarking, which address theserequirements, are discussed and illustrated below.

Customer Perception Measurement

To succeed in any activities of business one has to always cater to and satisfy the needs of the customer. To do so, it is essential for one to know how the customer thinks in order tomeet his needs in a more satisfying manner. Therefore, an important component of leadingedge logistical performance is the regular measurement of customer perceptions. Suchmeasures can be obtained through surveys or by systematic order follow up. These surveyscan be company - or industry – sponsored.

Such surveys ask questions regarding the firm’s and the competitor’s performance in generalor for a specific order in particular. Most of the surveys incorporates measurement of customer perceptions regarding availability, performance-cycle time, information availability, problemresolution and product support. The survey may be developed and administered by the firmitself or by consultants, delivery agents or industry organizations.








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Conclusion

Logistics is one the most important and integral part of any organisations strategyand function. When the logistical process is carried out accurately then not only thecompany reduces the production cost but also improves the efficiency and customer satisfaction. Overall logistics management is very important for today’s highly competitiveand cut- throat corporate world.

DHL has the worlds largest express and logistics Network. Over the past decades ithad turned delivering goods into a finely oiled process. Be it a book, pen, WIP material,

drugs, hazardous chemicals, clothes, documents, wild animals and any other thing under the sun DHL delivers it . With a network spanning 200 countries and with its private fleet of airplanes, mobile vans, cargo ship carriers & even rail way automotives in some countriesDHL can handle any type of goods. Not only that with international network there comesthe hassle of documentation and paperwork, standard packaging and other formalities toadhere to. But DHL has its own department which looks into the international laws andother formalities. In the end what maters is delivering good in good condition at the door step of the customer. A happy and satisfied customer makes the business grow.Competitors have come and gone but DHL has been able to keep its No 1 position intact.

This is because of its dynamic nature and attitude of maintaining good customer relations.Logistics management is important for every organisation but more so DHL.

We have tried to incorporate all the facets of logistics which propel DHL to be thebest delievery and carriage-service around the world. No wonder that DHL is head andshoulders above all of its competitors!








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Bibliography

www.google.com www.dhl.com www.wikipedia.com www.yahoo.com www.answer.com

http://www.google.com/

http://www.dhl.com/

http://www.wikipedia.com/

http://www.yahoo.com/

http://www.answer.com/

http://www.answer.com/

http://www.yahoo.com/

http://www.wikipedia.com/

http://www.dhl.com/

http://www.google.com/

dhl project common elective

Documents