Daimler will consider a performance-based incentive scheme for its inbound logistics providers based on the success of a scheme already in place for outbound carriers, according to Dr Holger Scherr, head of Worldwide Transport Logistics. Such incentives could potentially reward high-performing providers with a bonus percentage of their contracted rate, while penalising those that fail to meet certain standards.
While Daimler began its ‘performance-related pay’ scheme for passenger car carriers in 2007, and commercial vehicle carriers in 2009 (read more here), the company has yet to use or agree upon a specific programme for inbound. However, Scherr, commenting in a forthcoming interview in the April-June issue of Automotive Logistics, called such an incentive for inbound “a field that is worth exploring”.
He noted that for such an approach to work for inbound, Daimler would have to define reliable key performance indicators (KPIs) that could be legally proven and measured in contracts, as well as be equally measurably across Daimler’s various plants and business units–including passenger car, commercial vehicle and van production. For outbound, the current measurements are based on transport damages, pick-up performance, loading audits and the age of fleets. Inbound, however, with its disparity of commodities, modules and strict timings would likely require a different measurement system.
“At this point we are measuring inbound logistics performance in the plants but there is no standardised methodology across all business units,” he said. “Therefore, we would have to implement a couple of strong KPIs, which are valid for all plants, to gain a common and clear understanding of the service performance of our logistics providers.”
But despite the complexities, Scherr believes that the success of the programme for outbound suggests that it is applicable for inbound. According to Scherr, Daimler’s internal performance audits have shown an increase in overall performance since the programme’s inception, which therefore has meant an overall bonus for providers.
“At the beginning, our LSPs feared that we just wanted to reduce cost, which is not true,” said Scherr. “We have very significant statistics that demonstrate how the overall performance is improving continuously since the performance-related pay is placed from the top performers down to those with lower scores. We purposely pay a little bit more to enjoy constantly improving services.”
Daimler has yet to give an indication as to when such an incentive scheme would be put into place for inbound, however, Scherr noted that it was among several of the strategies that he is considering in his view toward “changing” logistics at Daimler in the short to medium term. More details will be available in the magazine.
