DEVELOPING A PERFORMANCE-MEASUREMENT SYSTEM TOR WORLD-CLASS DISTRIBUTION LOGISTICS BY USING ACTIVITY-BASED COSTING AND MANAGEMENT - CASE - BASIC METAL INDUSTRIES

The performance of distribution logistics has developed into a signifi cant element in the competitiveness of an industrial company. The basi s for the development has been the globalization of the markets in the 20th century, the customer's increased demand for service and the cap ital intensiveness of distribution logistics. In order to have control over the performance and capability to direct the development efforts effectively, the formulation of performance needs to be measured. The previous research within the field of measuring logistics performance has presented various dimensions of performance from a certain viewpo int, e.g. physical, economic, internal and external measures. However, the use of performance measures in practise for strategic and operati ve business management requires a limited set of measures to ensure th e top corporate performance. This paper discusses the formulation and measurement of performance in distribution logistics by using a descri ptive and constructive research approach. Distribution logistics is co nsidered as an interactive part of a company's total business process and supply chain. The following aspects of performance measurement are discussed: the development of measures, today's needs for measurement and different roles of performance measurement. Performance is approa ched from aspects vital to successful business management in today's e nvironment, including both internal and external viewpoints. Discussio n also reflects distribution logistics role in a company's business pr ocess on strategic and operational levels. Activity Based Costing and Management (ABC/ABM) is introduced as a tool for producing relevant in formation for performance measurement and an overall measurement syste m is developed in a participative case study in a huge and globally co mpetitive company in basic metal industries. The system is designed to measure the operational performance of the distribution logistics whi ch provides information also for strategic decision making. It was fou nd that a conventional cost accounting system built mainly for the reg istration of costs does not provide the managers with the information needed to manage performance and to identify areas for potential impro vement. With ABC/ABM the performance could be measured and analysed st arting from the activity level and proceeding to larger totalities. Th e inefficiencies were located and the structuring of profits and costs became more visible. The system consists six of different measurement s. The viewpoints represented include internal and external, physical and economic, soft and hard as well as the suppliers' performance back wards in the supply chain and the customers' performance forward. As a result, the following findings were achieved in the performance measu rement system: importance of internal customerships to performance, fo rmulation of performance in own activities, effect of distribution log istics performance on the overall profitability, level of service real ised in own operation and development of the highly emphasized innovat iveness in the distribution logistics. The results of the development of the distribution logistics (with its development tools) may be gene rally utilized, e.g. in basic metal and forest industries having bulk production.