2.4 Measurement and evaluation
Like all other processes, materials management must have proper systems of control and measurement. To be able to control the process, it must be properly measured. The firm must be able to collect data, identify each stage of the process and make improvements. Typically, the stages to identify and measure include:
- supplier performance, including the number of items accepted/rejected, types of defects, efficiency of delivery
- inventory levels and inventory turn over, use of different types of transportation
- material costs over time, comparing actual expenditure with forecast spending, price effectiveness, cost savings and cost avoidance, new work generated, work completed
- quality of supplier and finished product.
In the process of measurement, three critical variables exist. These are:
- the source and reliability of data
- the use of the data to generate useful information
- the purpose to which the data and information is being put.
The source and reliability of data is an important issue. Broadly, data can be divided into two kinds - soft (personal service and customer satisfaction ratings, for example) or hard (for example, product availability). Firms can develop links and control variables that can impact on performance. These can include differentiating between customer types, products, markets and so forth.
The measurement can also be used to compare activities against targets or against different activities. Firms use measurement information to compare their activities with other companies.