Smart Metricsconsultingeig.com/wp-content/uploads/2019/07/EIG-Smart... · 2019-07-09 · • Reduce cycle time for data reconciliation • Reduce cycle time for removing assets from

1 © Copyright: Enhance International Group, LLC

Smart MetricsJim de Vries

Enhance International [email protected]

713-446-5934


What makes great metrics? What should you consider when investigating KPIs? How do you establish targets? How should you track your metrics for root cause analysis … How do

they know when a target is met? What should you glean from data? Do metrics give you the answer or provide you a method to discover

the answer? What are the steps (Roadmap) to ensure success? How do you sustain metric vitality?

Objectives

3 © Copyright: Enhance International Group, LLC© Copyright: Enhance International Group, LLC


Heat

ChainReaction

© Copyright: Enhance International Group, LLC


Sales: Who knows how to best manage a measurement when your bonus depends upon it?

The Fed: Who set the rules of measurement? How many ways have been developed to make $ on finding different ways to report out performance? Sell Short, Sell Long, Derivatives, Futures, Balanced Portfolio

What are your Assumptions behind your KPIs?

General Examples


Right Data– Meaningful to Stakeholders (Actionable)– Represents Process Success / Pain Data – Believable Credible (MSA: Who, how much will it cost?)

Right Process – Hierarchical Linkage to Client Success– Prioritized KPIs with Targets– Affordable Cost Collection– Independently assessed– Data provides insight to launch investigation– Enforceable (Accountability)– Represents common and special events– Reflects Reality – Takes into account all stakeholder perspectives

Smart Metrics Challenges


Credible (Independently assessed, MSA)

Lifelike: Reflects process pain (Impact of inactions/actions is felt at every hierarchical level)

Enforceable (Repercussions)

Actionable (Real time vs. Post)

Realistic (Reflects Reality)

Smart Metrics Attributes


Credible (Independently Assessed, MSA)







Attribute: Number of times it goes wrong– Volume, Percentage (%)– X% in 4 days– Defects per Day– Ordinal Rating

Variable: Time and Money– Can be subdivided into equal units,

endlessly– Length, Weight and Height– Specification Limits determine Defects

What type of data do you have?

Measurement Types


Average of an average is a ….

Can we even measure it? (e.g., on time to the minute)

Is the data categorized? (e.g., unloading charges)

Do we live in a normal world?

Target (s) Substantiated?

Tracking Planned (Target) vs. Actual?

Is the data designed to provide insight?

Variable Data


Variable Data (Normal) Distribution

How to Control Process Variation?

MeanMedian

Variable Data Parameter(e.g., Cycle Time, Money, Weight)

LSLVOB

USLVOC

Freq

uenc

y (C

ount

)

DefectsDefects

Target


Mean

Variable Data Parameter(e.g., Cycle Time, Money, Weight)

LSLVOB

USLVOC

Freq

uenc

y (C

ount

)

DefectsDefects

TargetVariable Data (Non-Normal) skewed Distribution

How to Control Process Variation?









Are your Metrics Meaningful?

Measurement

• Quality• Delivery• Cost• Capacity

Operational

• Owner• Evaluator• Implementer

Hierarchical

• Strategic• Tactical• Operational

Elements of Smart Metrics


Quality: TGW … VOC– The mismatch in our ability to provide the deliverable to the customer’s

expectations.

Delivery: How late is bad?– The mismatch in our ability to provide the deliverable when the customer expected

it to be delivered.

Cost (EBIT): How to increase margin?– The amount that it costs the company to be capable to deliver when the customer

expected and/or what the customer expected.

Capacity: The capability of your process/product– The amount of product that’s made in a batch within consistent conditions &

timeframe.

Measurement


Strategic (Scorecard): Net Income, EBIT, Cash Flow Project Financial Y’s (Savings): Internal and Customer Executive Felt Pain Macro Level (bonus)

Tactical (Pulse): Trans per Person per Day, Cost per Transaction Bounded Process Output Deliverables Ops Mgr Felt Pain Grouped Transactional Level

Operational (Front Line): Turns, Queue, Resolution Time, Manual Steps Time and steps to resolve issue (torturous route) Implementer (Ops) Felt PAIN Transactional Level (Daily Routines)

Do you have all Perspectives Covered?

KPI Hierarchy Development Strategic, Tactical & Operational


Establishing Realistic Targets

Where are we today? What are our constraints? What can we achieve?

Targeting Your Success toward Ideality

Start IFR

CurrentState

Improve Phase

Ideality is the measure of progress toward the Ideal Final Result (IFR)

CurrentState









Prioritized Hierarchical Alignment

Perfect Order Operational to Strategic Alignment


Can you Track your Success in Achieving Your Vision?

Strategic Intent

Core Compe-tencies

(Existing/New)

Competitive Strategy “Winning Formula”Critical

ResourcesMarket &

Customers

Products & Services,

Distribution Channels

Corporate Culture

Systems & Structures

Business Scenarios &

Risk Response

Plans

• Strategic Objectives

• Strategic Initiatives

• Programs/Projects

• Measures/Targets

• Milestones

• Roles/Responsibilities

Elements of Strategic Management


Balanced ScorecardFinancialStakeholderValue O

bjec

tives

Mea

sure

men

t

Targ

ets

Gap

Pla

n

Customer BusinessInternalProcess

Employee Learning &Growth

Obj

ectiv

es

Mea

sure

men

t

Targ

ets

Gap

Pla

n

Obj

ectiv

es

Mea

sure

men

t

Targ

ets

Gap

Pla

n

Obj

ectiv

es

Mea

sure

men

t

Targ

ets

Gap

Pla

n

Are you Balanced?


Are your Perspectives Covered?

Quality, Cost and Delivery

Strategic, Operational and Tactical

Balanced Scorecard

Supply Chain Operational Reference (SCOR)

Tollgates

Your P&L

Standard Measurement HierarchiesPerspective









Are you Measuring the Right KPIs?

Customer Satisfaction (Y-axis) As A Function Of

Needs Fulfillment (X-Axis)

Satisfied Feeling

Dissatisfied Feeling

UnfulfilledCondition

(Broken Process)(Product Failure)

FulfilledCondition

(Perfect Process)(Product Performs)

FulfillmentCus

tom

er S

atis

fact

ion

Delighters

One-Dimensional

Must-Bes

Kano’s Model Three Dimensions of Customer Needs


When do you really need it? Customer package delivery:

– Where does the customer want the line drawn?– % on-time to Spec.; Days Late; # of reschedules (FTE to perform);

#, $ OS&D; # of shipments that effect dock management slots/production (FTE to perform; Restocking; Production Line Management)

How Bad is Bad? ..to what Degree? …does it Matter?

12:00Noon

AfternoonMorning

8:00a.m.

4:00p.m.

Pain Thresholding: Specification Limit Justification









Who Ultimately Controls Transactional Flow?

Sales/Stock Broker: You can control the transactional flow

Supply Chain: “Back Office”: Sales and Operational Infrastructure controls the transactional flow

What is the difference between Sales and Operations?


How do we attack the Entire Iceberg?

Inspection

Warranty

Rejects

Scrap

Rework

(Tangible)

Giveaways

Long Cycle Times

Duplicate Work

Contradictory Actions

Expediting Cost

Customer Productivity Loss

Lost SalesCustomer Satisfaction

OvertimeLost Deliveries

Increased Setups

Excess Inventory

Lengthy Installs (VTP)

Lost Customer LoyaltyEmployee Morale, Productivity, Turnover

Engineering Change Orders

(Intangible)

Lost Opportunity

Traditional Quality Costs(Easily Identifiable)

Hidden Quality Costs(Difficult to Measure)

Iceberg Management


Ensuring the Right KPIs for Your Business’ Success

Perfect Order Definition• Forecast = Actual• Customer Submits Order• Pre-approved pricing • Confirmed Inventory• Customer Credit Approved• Picked at the Warehouse Correctly

1st Time (no changes)• No Overage/Shortage• Ship and Deliver On-time• Invoiced on-Time• No Damages• Carrier Submits Accurate Invoice• Satisfied Customer• Timely Reconciliation

Perfect Order Aligned KPIs• VTP: Forecast vs. Actual• Order Lead Cycle Time; % Short Lead• $, # Orders on-Hold/Delayed/Rebuilt/ Cancelled orders• $, #, % Inventory Not Available/Delayed/ Warehouse

Changes• $, #, % Lost in Change orders• $, #, % Customer Credit Approved that are Delayed/

Abandoned Changes• $, #, % Shortages/Overages that are

Delayed/Cancelled Changes• $, #, % Carrier Route Guide Changes that are

Delayed/Cancelled• VTP Pick-up, Delivery, % On-time• VTP Invoiced, % On-time• $, #, % Damages• #, % of Reconciled Invoices• # Customer Satisfaction (Recommend)

Perfect Order Alignment


Finance• Reducing A/R days outstanding• Reducing A/P days variability• Reporting accuracy improvement• Reduce cycle time for data reconciliation• Reduce cycle time for removing assets from books• Reporting cycle time reduction

Human Resources and Training• Improve employee retention • Improve employee hiring speed• Reduce cycle time to add employees to payroll and benefits• Reduce defects in changing employee information• Improve effectiveness of training (Time to Productivity)• Employee knowledge Assessment

Industry Project Examples


Manufacturing• $ Hourly Rates (Internal, Contracted)• $ in FTE Overtime• $ in Manufacturing Changes (Expedite)• #, $ in Union Fines • #, Volume ….# Turns• #, $, % Changes• Days Late: % Late• Takt Time• % Scrap• TPY• # of Updates/Changes• Time to find a part• Time to manage “special” situations

Variance to Plan (VTP)

Industry Project Examples


Transportation• $ in Expedited• $ in Manufacturing Changes• $ in Customer Fines• $ Rates, $ Accessorial Charges• #, $ in Union Fines • Days Late: % Late• #, $, % Changes• Transactional Cycle Time• % of Drop Trailers• # of Drop Trailers waiting for PU• # of manual changes• Time to find load• Time to manage “special” handling


Industry KPI Examples


Warehousing• Cash Flow• $ Warehousing• $ in Inventory• $ Personnel (Overtime)• $ External Warehouse Renting• % of unused space (Storage, Doors)• Number of Turns• % Short Shipped; $Rev Lost in Order Fill• Time to Stage• Stage to Load Cycle Time• # of loads w/o PODs• Time to find paperwork• Time to find inventory


Strategic

Operational

Tactical

Industry KPI Examples


Customer Experience & Service Benchmarking

34


1. Identify the pain2. Establish KPI Hierarchy3. SOT Alignment4. CT … QCD Perspectives5. Link to Financials6. Prioritize to Initiatives of Success7. Ensure KPIs are believable(MSA) and enforceable8. Confirm that KPIs provide tangible results; linking

to Customer Satisfaction and Margin Improvement9. Prepare yourself for change.

Enabling Your Success

Roadmap


Ensure Alignment• Reliable and consistent information• Understand key relationships• Build metrics and scorecards into Hierarchy (SOT)

Ensure Focus on Key Issues• Flexible believable KPI visibility• Immediate awareness of issues• Enable Dynamic Accountable Action Plans

Ensure Ownership and Accountability• Metric Ownership• Manage Corrective Actions• Embed Business Intelligence Capabilities

KPI Best-in-Class Practices



END

Personalize Your KPIs to Drive Success

© Copyright: Enhance International Group, LLC

Thank You

Documents

Smart Metricsconsultingeig.com/wp-content/uploads/2019/07/EIG-Smart... · 2019-07-09 · • Reduce cycle time for data reconciliation • Reduce cycle time for removing assets from