Cost of damaged product as a percentage of sales

This measure calculates the cost of damaged product as a percentage of sales by dividing total damaged value by total sales value. Appropriate values are in the range of 0 to 100. This measure is part of a set of Process Efficiency measures that help companies optimize the performance of their "manage logistics and warehousing" process by minimizing waste and refining resource consumption.

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Measure Category:
Process Efficiency
Measure Id:
100422
Total Sample Size:
1,889 All Companies
Performers:
25th
– Median
– 75th
–

Compute this Measure

Units for this measure are percent. Lower values are better.

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Cost of damaged product as a percentage of sales

Key Terms

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Process efficiency

Process efficiency represents how well a process converts its inputs into outputs. A process that converts 100% of the inputs into outputs without waste is more efficient than one that converts a similar amount of inputs into fewer outputs.

Measure Scope

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Cross Industry (7.2.1)

  • 4.4.1 - Provide logistics governance (10338) - Outlining the strategy for managing logistics. Translate customer requirements logistic requirements. Create an efficient logistic network and outsourcing portions of logistics activities. Design a logistics strategy that optimizes transportation costs and schedule. Define key performance indicators.
    • 4.4.1.1 - Translate customer service requirements into logistics requirements (10343) - Determining the requirements for managing the flow of things between the point of origin and the point of consumption by assessing the service requirements of the customers.
    • 4.4.1.2 - Design logistics network (10344) - Developing a network for logistical activities. Create a network of entities through which materials and information flow, encompassing all related activities associated with the flow of transformation of products.
    • 4.4.1.3 - Communicate outsourcing needs (10345) - Conveying outsourcing needs within the organization, with the objective of sourcing the assistance required. Define the portion of logistical activities that can be transferred to outside suppliers. Assess third-party agencies to carefully select the most appropriate agencies for outsourcing. Convey these needs to management or the appropriate authority.
    • 4.4.1.4 - Develop and maintain delivery service policy (10346) - Establishing rules and regulations, as well as the terms and conditions regarding the delivery of service by the company. Develop a delivery plan that specifies what, how, when, and in which way to deliver services to the customer.
    • 4.4.1.5 - Optimize transportation schedules and costs (10347) - Optimizing the schedule and costs of transportation services. Design a logistics strategy by strategically creating delivery routes and systems, which optimizes the overall transportation schedules and costs. Evaluate different transportation sources in order to select the most appropriate and cost-effective sources.
    • 4.4.1.6 - Define key performance measures (10348) - Establishing measures for evaluating the performance of the logistics strategy of the organization. Establish key performance indicators, including the logistics performance index, delivery in full, and delivery on time.
    • 4.4.1.7 - Define reverse logistics strategy (16905) - Establish a strategy that includes rules and regulations for the physical handling, information processing, and disposition of product and packaging returned by the buyer to the seller or an intermediary. Include return approval, transportation coordination, advance communication, product tracking, receipt, disposition of the return, and processing warranty claims in the strategy.
  • 4.4.2 - Plan and manage inbound material flow (20936) - Creating and executing a strategy for all the internal activities related to the flow/transfer of inbound materials. This process includes planning inbound material receipts, managing inbound material flow, monitoring inbound delivery performance, managing the flow of returned products, controlling the quality of returned parts, and salvaging or repairing returned products.
    • 4.4.2.1 - Plan inbound material receipts (10349) - Managing the receipts of inbound materials. Create a plan accounting for the materials procured from the source of supply and the materials delivered to the distribution center or the warehouse.
    • 4.4.2.2 - Manage inbound material flow (10350) - Managing all the internal activities related to the flow/transfer of materials. Manage materials being delivered to distribution center or warehouse. Gauge the time taken for delivery and if the delivery process is on time.
    • 4.4.2.3 - Monitor inbound delivery performance (10351) - Overseeing the performance of an inbound delivery system. Check the present delivery system's efficiency, cost effectiveness, and adherence to a delivery schedule.
    • 4.4.2.4 - Manage flow of returned products (10352) - Tracking and taking care of the products that have been internally returned either because of their deficiency or in cases of incorrect delivery.
    • 4.4.2.5 - Control quality of returned parts (12708) - Implement a checks and balances system to verify that returned parts meet acceptable quality standards to determine appropriate disposition activity.
    • 4.4.2.6 - Salvage or repair returned products (20109) - Determining if a returned product can be salvaged or repaired. Salvage or repair is dependent upon the product, the condition of the product, or the availability of a like item.
      • 4.4.2.6.1 - Perform salvage activities (10366) - Executing activities for reinstating the returned products. Present the customer with additional incentives of compensation in case of any defective products delivery or any discrepancy in the product specifications in order to save the order from being permanently returned.
      • 4.4.2.6.2 - Manage repair/refurbishment and return to customer/stock (14195) - Administering the reinstatement of the returned product in order to return them back to customers. Repair or remanufacture the defective or ineffective products returned by the customer. Process the delivery of the repaired or remanufactured products back to the customer.
  • 4.4.3 - Operate warehousing (10340) - Tracking the inventory deployment. Accept and store products. Ship the products. Measure the accuracy of the inventory. Assess the performance of the outsourced logistics activities.
    • 4.4.3.1 - Track inventory deployment (10353) - Tracking the logistical act of delivering or releasing an inventory item or entity to targeted end users. Track how much inventory has been deployed at all the distribution centers, individually.
    • 4.4.3.2 - Receive, inspect, and store inbound deliveries (10354) - Coordinating the incoming inbound materials/products. Accept the delivery of these materials and the subsequent storage. Track them at the warehouse/distribution center.
    • 4.4.3.3 - Track product availability (10355) - Keeping track of the availability of different materials/products at the warehouse and distribution centers.
    • 4.4.3.4 - Pick, pack, and ship product for delivery (10356) - Packing and shipping the product to deliver to the customer. Take care of the internal and external packaging of the products in order to ensure safe transportation of the products from the warehouse to delivery locations. Notify the ERP system and/or Accounts Receivable Dept.
    • 4.4.3.5 - Track inventory accuracy (10357) - Monitoring any discrepancies between electronic records that represent the inventory and the physical state of the inventory. Look for discrepancies such as phantom inventory, which includes products that an inventory accounting system considers to be available at the storage location but are not actually available.
    • 4.4.3.6 - Track third-party logistics storage and shipping performance (10358) - Keeping a track on the storage and shipping performance of third-party agencies. Monitor logistics storage and shipping performance for third-party agencies. Use measures such as a logistics scoreboard, activity-based costing, economic value analysis, and balanced scorecards.
    • 4.4.3.7 - Manage physical finished goods inventory (10359) - Administering the movement of the finished products that are processed by the organization through its warehouses. Track goods through the use of systems such as barcodes in order to monitor the volumes available, quantity of out-flowing goods, remaining shelf life of the product, etc.--ultimately, to best manage the warehouse capacity.
    • 4.4.3.8 - Manage warehouse transfers (20957) - Shipping items from one warehouse to another in a multi-warehouse environment. A warehouse transfer is typically handled electronically in a system designed to replicate the physical processes involved with transferring items from one warehouse to another.
  • 4.4.4 - Operate outbound transportation (10341) - Creating a plan that specifies the schedule and system for transportation and delivery of the outbound products, as well as tracking the performance of the carrier delivery system. Conduct vehicle management and processing of all carrier-related documents.
    • 4.4.4.1 - Plan, transport, and deliver outbound product (10360) - Organizing the transportation and delivery of outbound products. Plan and organize the transportation, shipping, and delivery of the end products. Create a plan that specifies dispatch and delivery of the product to its destination, as well the transportation.
    • 4.4.4.2 - Track carrier delivery performance (10361) - Monitoring delivery performance when carrying products from the warehouse/distribution centers to the retailers or end consumers. Create a performance metrics based on the key performance indicators.
    • 4.4.4.3 - Manage transportation fleet (10362) - Taking care of a range of functions related to the means of transport used for delivering the end products. Manage vehicle financing, vehicle maintenance, vehicle telematics (tracking and diagnostics), driver management, speed management, fuel management, and health and safety management.
    • 4.4.4.4 - Process and audit carrier invoices and documents (10363) - Organizing and inspecting all account statements and any other documentation for the carriers used in delivery. Create, manage, and inspect all documents related to the financial, regulatory, and administrative accounts of all the carriers/freights. Generate receipts for all freight transactions.