The Balanced Scorecard in Logistics Management

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Table of Contents

Introduction
Operations
Customer Service
Financial Performance
Learning and Growth
Conclusion
References

Introduction

The Balanced Scorecard is one of the important ways of specifying, presenting, and implementing the supply chain strategy to form a tool to assess its performance adequately. This concept contributes to the probability of implementing the intended supply chain strategy (Harmon, 2019). One of the strengths of the balanced scorecard is that it serves as a platform for integrating a wide variety of frequently used supply chain management elements (Bowersox, 2019). Instead of a disjointed list of indicators, strategic supply chain goals are presented as KPIs. Strategic goals are developed based on the existing vision and strategy and have the status of decisive supply chain goals (Harmon, 2019). To plan and deliver the goals, relevant financial and non-financial indicators are developed for each of them, for which, in turn, target and actual values are defined. Implementation of the balanced scorecard has allowed many firms to significantly improve the quality of their logistics, leading to commercial success.

Operations

Amazon is a company that, guided by the principles of a balanced scorecard, has been able to achieve significant success. Among the objectives of internal processes are same-day delivery and the creation of a virtual assistant. The key metrics are the number of purchases in new product segments and customer interaction with the new tool (a virtual assistant). Amazon’s separate, powerful analytics system calculates the most economical way to deliver packages. It calculates the shortest route for each package, so the company saves millions of dollars on fuel and manages to deliver packages ahead of schedule by several hours and sometimes days.

To cut shipping costs and reduce the fees that intermediary shipping companies have to pay, Amazon is developing its own shipping system. This includes courier services and vehicles and the creation of a fleet of drones and aircraft, on which the company plans to spend about $1.5 billion soon. Year after year, Amazon reduces the delivery time, and in China, it takes one day to transport the goods to the buyer. Besides, Amazon’s virtual assistant conducts product research, processes orders, and performs other important tasks, saving customers valuable time. It is statistically proven that 75% of customers will continue to shop with a brand that provides a consistent service experience across all platforms (Amazon Listing Service, 2021). Due to the implementation of Virtual Help, Amazon has been able to improve its KPIs.

Customer Service

In terms of customer satisfaction, the company’s objectives were to build customer trust and improve the shopping experience. To do this, Amazon used metrics such as the number of returning users with a purchase and an estimate of the customer loyalty index based on a typical shopping session. In the 1990s, the company invented the visitor feedback system and product rating and then created the loyalty program with paid subscriptions. Today it is enjoyed by more than 140 million customers in the U.S. alone (Rodríguez, 2021). A retention rate is consistently over 90%, which is a record among competitors (Rodríguez, 2021). Achieving such impressive successes becomes possible using personalized return customer experience, free shipping, refunds, and bonuses for regular customers.

Financial Performance

The conversion rate on Amazon Market Place is a metric that is evaluated in the financial performance category. High conversion rates mean more sales, fewer customer losses, and a greater return on one’s advertising investment; that is why increasing conversions is Amazon’s objective. Currently, the average rate of this kind for Amazon ads is 10-15% (EcomCrew, 2022). For Prime members, the conversion rate is much higher at over 70% (EcomCrew, 2022). The number of clicks determines how many deliveries are made, that is, how many products are purchased. Evaluation of key indicators in this category makes it possible to assess how effectively Amazon is functioning.

Learning and Growth

Increasing the quality of human capital is a goal from the category of learning and growth. Such a measure as an increase in productivity is used to assess this parameter. So far, Amazon has struggled to maintain workplace standards for its employees. Monotonous work and a well-developed penalty system do not help to reduce employee turnover. Therefore, measures are needed to improve employee satisfaction, such as higher wages and shorter working hours. However, due to a balanced scorecard, all of these shortcomings can easily be taken into account and adjusted.

Conclusion

To succeed in today’s dynamic environment, companies must be able to adapt quickly to changing market conditions and outperform their competitors in quality, speed of service, product breadth, and price. Only by obtaining information about a company’s operations quickly will management be able to make timely decisions. At the same time, the company’s operative actions should be coordinated and directed to achieve certain long-term goals; otherwise, there is a risk of falling short. Implementing the analytics approach helps Amazon track key metrics, which increases customer satisfaction and boosts profits.

References

Amazon Listing Service. (2021). Where to find the right Amazon virtual assistant for your business? Web.

Bowersox, D. (2019). Supply chain logistics management. McGraw-Hill Higher Education

Harmon, P. (2019). Business process change: A business process management guide for managers and process professionals. Elsevier Science.

EcomCrew. (2022). Amazon conversion rate: Everything you need to know. Web.

Rodríguez, M. (2021). How Amazon maintains over 90% customer retention? Beamer. Web.

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