Kristofor Williams

October 11th, 2007

IMMM

Integration Measurement Maturity Model

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Introduction

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Integration Measurement Maturity Model

Primary goal is to demonstrate concrete business value that eCommerce and integration IT activities contribute to organizations.

Can assist in understanding “what to measure” based on an organizations process maturity.

Provides a framework to answer the questions:

– Who (Population).

– What (Standards).

– How (Measurement Methodology).

– Why (Demonstrate the business value of eCommerce and Integration IT activities).

Can move the dialog between the business and IT from emotional to data driven conversations.

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Data Driven Conversations

IT is required to do more with less.

– At the same time manual tasks are being pushed to the back office.

eCommerce provides many tangible benefits to the enterprise but:

– IT should continue to engage the business in business terms.

– Old methods of measuring the business value of eCommerce have room to grow.

• i.e. eCommerce saves paper (Green Computing).

Remove emotion and drive towards data driven conversations.

– “We need to get this customer on-boarded because it represents X dollars in business”.

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Measurements

The “data” in data-driven conversations come from measurements.

Start small.

– Know what you want to measure before you measure it.

– Examples: Hours Saved, On-Time Delivery (OTD), Variance Reduction.

Conduct informal surveys to test if the data to support your measurement exists.

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The Measurement Problem

“ When it comes to specific measures concerning employee

skills, strategic information availability and organizational

alignment, companies have devoted virtually no effort

for measuring either the outcomes or the drivers of these

capabilities. This gap is disappointing since one of the most

important goals for adopting the scorecard measurement and

management framework is to promote the growth of individual

and organizational capabilities.”

—Robert S. Kaplan and David P. Norton, The Balanced Scorecard

Apply a measurement model to identify “what to measure”.

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Organizational Processes

Processes are the key to adding velocity to customer satisfaction, operations and overall competitive advantage.

“Continuous Process Improvement: A never-ending effort to expose and eliminate root causes of problems; small-step improvement as opposed to big-step improvement.”

— APICS (Association for Operations Management) Dictionary 11th Edition

Apply a measurement model based on your organizations process maturity.

– Conduct informal random surveys to assess organizational process maturity.

– Organizational process maturity can vary by user, department, or enterprise.

– Kaizen: Continuing improvement for everyone – managers and workers.

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Integration and Process Maturity

Integration Measurement Maturity

– Follows Process Maturity

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User Tier

Process Maturity:

– Process improvement occurs at the user level.

Standards:

– None.

Measurement Methodology:

– ABC (Activity Based Costing) Concepts

Population:

– Users

• Customer Service Rep, Receiving Staff In

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Process Maturity

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Activity Based Costing (ABC) Concepts

– Analyzes “activities”.

– Assigns “cost drivers” to activities.

– Measure units produced or hours consumed.

– Differentiates value added (VA) from non value added (NVA) based on the customer’s viewpoint.

Example – User Tier

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Department Tier

Process Maturity:

– Process improvement occurs at the departmental level.

Standards:

– Key Performance Indicators (KPI’s)

Measurement Methodology:

– SCOR, Balanced Scorecard

Population:

– Manager or Director

• Sales, Logistics, Receiving

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SCOR - (Supply- Chain Operations Reference) published by The Supply Chain Council.

Member organization that publishes hundreds of KPI’s to monitor the health of an organizations supply chain.

Multiple levels of measurement.

Example – Department Tier

Performance Attribute Performance Attribute Definition Level 1 Metric

Supply Chain Reliability

The performance of the supply chain in delivering the correct product to the correct place at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation to the correct customer.

Perfect Order Fulfillment

Total Perfect Orders Total Orders

The perfect order must satisfy the following requirements:• A product is considered perfect if the product ordered is the product provided.• A quantity is considered perfect if the product ordered is provided in the ordered quantity.• A delivery is considered perfect if the location and delivery time ordered are met upon receipt.• A customer is considered perfect if the product is delivered to the specified entity• etc.

The perfect order must satisfy the following requirements:• A product is considered perfect if the product ordered is the product provided.• A quantity is considered perfect if the product ordered is provided in the ordered quantity.• A delivery is considered perfect if the location and delivery time ordered are met upon receipt.• A customer is considered perfect if the product is delivered to the specified entity• etc.

850/ORDERS

856/DESADV

855/ORDRSP

Simple Example:

Total eCom Orders vs Total eCom Orders Total Orders Total Perfect Orders

= eCom contribution to the Perfect Order.

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Enterprise Tier

Process Maturity:

– Process improvement occurs at the enterprise level.

Standards:

– 6S

– Lean

– TQM

– ISO 9001

Measurement Methodology:

– Continuous Process Improvement (CPI)

Population:

– VP or C Level

• Sales, Ops, COO, CEO

Integration Measurement Maturity

– Follows Process Maturity

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A Note About CPI Standards

Many types of CPI Methodologies

– Lean

– Six Sigma

– TQM

– ISO 9001

– Etc.

Which ones do your organization utilize?

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Making Sense of CPI

All CPI methodologies contain at least one aspect of these four areas:*

– Cycle Time

• ISO 9001: Monitoring processes to ensure they are effective.

– Mean and Variance

• TQM: Get processes "in control“.

– Defects

• Six Sigma: 3.4 Defects Per Million Opportunities.

– Reduction of Waste

• Lean: Overproduction, Waiting, Extra Processing, Transportation, Inventory, Motion, Defects.

• TQM: Reduce Chronic Waste.

Pareto Principle (80-20 Rule)

– 80 percent of results are attributed to 20 percent of causes.

* Dr. Kiran Garimella

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Example – Enterprise Tier

Out of control processes and high variance.

Analyze using enterprise CPI methodology.

Can eCommerce contribute?

OTD% By Customer Per Quarter

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OTD %Q1FY06

OTD %Q2FY06

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OTD %Q4FY06

OTD %Q1FY07

OTD %Q2FY07

OTD %Q3FY07

OTD %Q4FY07

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Example – Enterprise Tier Organizational CPI team verifies that a process contains high degree of variance.

– Could be related to human error.

• Defects in manual order entry (Defects).

– Could be related to waste.

• Check customer part number and pricing (Process Waste).

• Customer, Supplier, or Enterprise in receiving dock spending hours upon hours performing manual receipts (Extra Processing Waste).

– Cycle time such as On Time Delivery (OTD) has increased.

• Order Entry, Inventory Control and Shipping staff burdened due to recent implementation of Vendor Managed Inventory (VMI) agreements.

eCommerce can decrease all of these variances.

– Implement eCom Orders to reduce defects in order entry.

– Implement eCom Orders to interact with ERP system to perform part number and pricing checks.

– Implement eCom Advance Ship Notice to reduce extra processing waste in receiving.

– Implement eCom suite of signals to manage high transaction count in VMI agreements thus reversing rising OTD trend.

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Summary

IMMM can provide a framework to demonstrate the concrete business value of eCommerce and integration IT activities.

Understand “what to measure” based on an organizations process maturity. Answer the questions:

– Who (Population).

– What (Standards).

– How (Measurement Methodology).

– Why (Demonstrate the business value of eCommerce and Integration IT activities).

Data Driven Conversations.

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Questions?

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References and Resources

“The Power of Process: Unleashing the Source of Competitive Advantage”

– Kiran Garimella, Ph.D. “APICS Dictionary”

– APICS “Managerial Accounting”

– Wegandt/Kieso/Kimmel Lean Enterprise Institute (Jim Womack)

– www.lean.org SCOR Model 8.0

– www.supply-chain.org International Organization for Standardization (ISO)

– www.iso.org Object Management Group (OMG)

– www.omg.org Dilbert

– www.dilbert.com

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Addendum 1: Labor Required for IMMM

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Addendum 2: Software Required for IMMM

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