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Question 2b

Zones: Company information
Zones is an overnight parcel delivery business. Since it was founded by the current CEO, it has grown rapidly due to a boom in online shopping. It now operates 1,000 delivery vehicles of various sizes. Recently, financial performance and market share have deteriorated. Zones has had no clear corporate vision, an excessive focus on financial objectives and inadequate systems to measure and manage performance of the underlying processes driving its financial performance.

Business model
Zones’ collection and delivery service uses delivery vehicles to transport parcels to and from local depots and individual addresses. Vehicles may also pick up parcels from the addresses to which they deliver. Each time the vehicle calls to pick up or deliver parcels is known as a stop, and the time of day for each stop is booked in advance. At the end of each day, vehicles, along with any parcels not delivered, return to the depot. Regardless of who pays for the service, Zones regards anyone to whom it delivers, or from whom it picks up parcels, as a customer. In the long term, the requirements of both of these groups for a competitively priced, reliable and flexible service will be similar.

Performance improvement proposals
The CEO believes that reductions in customer satisfaction and flexibility, caused by a decline in operational performance, may have led to the recent deterioration in financial performance and market share. It has been suggested that Zones use the Lynch and Cross performance pyramid (Appendix 1) to reverse this deterioration, and three new measures for operational performance have been suggested in Appendix 2. The CEO has stated that Zones’ corporate vision should be:

‘To increase shareholder wealth by becoming the leading overnight parcel delivery business, providing quality, reliability and value for customers.’

It is also proposed to use the DMAIC (define, measure, analyse, improve and control) method to implement the six sigma methodology to improve the quality of delivery. Two measures have been defined in Appendix 3 which may help improve Zones’ delivery performance.

Required:
(b) Using the performance pyramid, evaluate the extent to which the suggested new measures in Appendix 2 can be used to measure and manage operational performance at Zones. (9 marks)

Appendix 1

Appendix 2

Suggested new measures for operational performance

Measure Description
Vehicle utilisation Average utilisation of all vehicle capacity. This is measured by taking the average of vehicle load as a percentage of capacity when the vehicle leaves the depot at the beginning of each day and the vehicle load as a percentage of capacity when the vehicle returns to the depot at the end of each day. Capacity is measured either according to the internal volume or the length of the vehicle, depending on the type of vehicle being used.
Fuel consumption Average litres of fuel per kilometre travelled for all vehicles.
On-time stops Percentage of stops made within 30 minutes* of the booked time.
* Zones receives complaints from customers relating to deliveries not made on time. Of these, less than 0·0001% relate to deliveries made within 30 minutes of the booked time.

Appendix 3

Suggested new measures for improving quality of delivery using the DMAIC methodology

Measure Description
On-time stops Percentage of stops made within 10 minutes of the booked time.
Failed deliveries Percentage of deliveries which cannot be made due to the customer being unavailable to take the delivery, or by parcels being incorrectly addressed. Currently, 5% of deliveries are failed and have to be returned to the depot.