Internal performance measures focus on the activities required to serve customers. Measurement of these activities, as well as comparison with goals and standards, is necessary to improve performance and motivate and reward employees. Cost measurement is the minimum component of any performance measurement system. More sophisticated firms incorporate customer service, asset management and productivity measurement. While such measures generally monitor internal process efficiency, they do not examine external process effectiveness very well, particularly from the customer’s viewpoint. The quality measures applied today by the most sophisticated logistics organizations offer such an external perspective. While the individual internal measures discussed above offer a broad performance evaluation, they do not provide an integrated point of view. For example many customers desire high performance regarding both service and quality.
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