Measuring Supply Chain Performance : Measuring Supply Chain Performance Before Designing the Strategy We Need to Decide the Goal of the Game!
Skipping the Obvious : Skipping the Obvious Why measure?
Strategic Value of Performance Management
What/How to measure?
Balanced Scorecard
SCOR
Six Sigma
Activity-based Costing
Total Quality Management
Total Cost Management
… [approach du jour]
First Point : First Point Not everything that is quantitative is a performance measurement
Statistics (Neutral)
Profiles (Behavioral but not Judgmental)
Performance Indicators (Judgmental)
Architecture Design : Architecture Design Conceptualize > Top-Down
Align to strategic objectives
Do more, with less, better and faster
Construct > Bottom-Up
Adding is easier than subtracting
The devil is in the details
Understand the 3D Characteristics of a Performance Measuring Architecture
Performance Management & Organization Design
Architecture > Conceptual Design : Architecture > Conceptual Design Alignment is the key word
Top-down view
From the shareholder’s objectives…
…to the forklift operator activities
3D View
1D Types of Measurements > Competitiveness
2D Perspectives > Different stakeholders
3D Hierarchies > Multiple levels of detail and complexity
Our 3D Understanding of Performance Measurements : Our 3D Understanding of Performance Measurements Hierarchies Perspectives Types
Perspectives of Interest : Perspectives of Interest How is Success Defined Among Different Stakeholders?
The Universe of the Stakeholders : The Universe of the Stakeholders Regal Forest Holding... Customers Suppliers Consumers Employees Competitors Media Policy Makers Lost Customers Investors
Hierarchies : Hierarchies Different Levels of Detail and Views of Performance (Scope)
Organizational Design vs. Performance Hierarchies : Organizational Design vs. Performance Hierarchies Management Planning Supervisor Operator Performance @ Stores Suppliers’ Performance Indicators
Hierarchies respond to the Aggregation Property of KPIs : Hierarchies respond to the Aggregation Property of KPIs Watch out for independent performance vs. interdependent performance!
Detail, Frequency, Scope : Detail, Frequency, Scope
Detail, Frequency, Scope : Detail, Frequency, Scope
Types of Metrics : Types of Metrics What is Success, After All?
Performance Types : Performance Types Do More > Productivity
With Less > Financial
Better > Quality
Faster > Velocity
Success > Satisfaction
Productivity Measurements : Productivity Measurements Do more with less
Resource conservation
Resource utilization
Process efficiency
Productivity is measured at the resource level, identifying the expected output of its consumption. : Productivity is measured at the resource level, identifying the expected output of its consumption. What’s the resource? What’s the Output? Pr = Output r Consumption r
Identify resources involved in every process and activity… : Identify resources involved in every process and activity… Human
Resources Facilities Machinery Equipment Fleet Inventory Systems
Then, quantify associated outputs… : Then, quantify associated outputs… Resources Logistics & Supply
Systems Outputs Can you tell what the logistics/SCM output should be?
Velocity Measurements : Velocity Measurements Cycle times
Response times
Elapsed processing times
Measuring Time : Measuring Time A cycle time measurement will capture the total elapsed time of an activity from beginning to end.
It’s like having customers, stores, consumers and suppliers with stop watches… t1 t4 t0 t2 t3 t5
Where to start? Where to end? : Where to start? Where to end? Elapsed Time in Hours
Velocity Indicators at the Distribution Center > Association with Productivity Metrics : Velocity Indicators at the Distribution Center > Association with Productivity Metrics
Quality Measurements : Quality Measurements Likelihood of mistakes
Deviation from goal
Defects
Overall satisfaction
Unwanted variability
“Manufacturing” perfect purchase orders is the real goal! : “Manufacturing” perfect purchase orders is the real goal! What is takes to “create” a perfect purchase order?
Perfect Order in Food Logistics : Perfect Order in Food Logistics Complete Order (Discrete Measure 1 or 0, Not Continuous Measure as Case Fill)
On-Time Delivery (1 hour +/- range (FDI) or 30 min +/- range (GMA))
Damage-Free Shipment
Accurate Invoice (Non-Invoiceable Items have Accurate Invoice =0) Source: Grocery Manufacturers of America and Food Distributors International (FDI)
Financial Measurements : Financial Measurements Cost of resources employed
Cost of activities performed
Financial implications of current performance
Management intuition at work! : Management intuition at work! Cost of Logistics Resources + Cost of Holding Logistics Assets
People & Assets
Logistics Expenses
Views by
Resource, Activity (Output), Process Logistics Decision Objective = Max (Corporate EVA)
Logistics Decision = Min (Operating Cost + Capital Cost + Lost Sales)
Ways to Present Financial Indicators : Ways to Present Financial Indicators Aggregate/Absolutes
Per Unit/Activity
Relative Terms (%)
3D View of Performance Measurements : 3D View of Performance Measurements
Mapping of SC Metrics vs. Corporate Goals : Mapping of SC Metrics vs. Corporate Goals