Measuring, controlling and managing Measures of Productivity Revision: productivity Dimensions of Performance Metrics •Measures •Require no calculations and are uni-dimensional •Metric •Requires calculation and often contains several measures •Index •Combines two or more metrics into a single value Purpose of measuring and managing performance •Control, Improvement, Communication, Motivation • • Figure 5.1 Characteristics of a Good Measure •Source: Koebler, Durtsche, Manrodt, & Ledyard, Keeping score: Measuring the business value of logistics in the supply chain (Univ. Tennesee Council of Logistics Management, 1999) p8 Figure 5.2 Distribution Center Metrics •Source: 2010 Metrics Report, WERC, (May 26, 2010). Problems in the use of the data • Resource hunger • Lack of impact • (Customer) Satisfaction versus success •Openness to manipulation • •Customer assessment? • The rational approach - a weighted average? • The incident approach Performance reporting • the purpose/objective • the person responsible • trends over time • performance against target • supporting data and analysis • identification of causes/problems • action to be taken, by whom and by when • an assessment of action taken 9 Performance measurement is certainly NOT about profit alone §By early 1980s, Johnson and Kaplan highlighted the shortfalls of financial performance measures to reflect changes in the competitive environment and strategies of organisations §The 1990s saw a “performance measurement revolution” (Eccles, 1991; Neely, 1999) and a proliferation of frameworks that integrate wider criteria: • •Balanced Scorecard (Kaplan and Norton, 1992) •Performance Measurement Matrix (Keegan et al, 1989) •SMART Pyramid (Lynch and Cross, 1991) •Baldrige Criteria for Performance Excellence •Performance Prism (Kennerley and Neely, 2000) •European Foundation for Quality Management (EFQM) Excellence Model •Six Sigma Copyright 2006 John Wiley & Sons, Inc. 2-10 Link to the strategy- Policy Deployment Translating corporate strategy into measurable objectives Copyright 2006 John Wiley & Sons, Inc. 2-11 Key Performance Indicators •Source: •Robert Kaplan and David •Norton, Strategy Maps: •Converting Intangible •Assets into Tangible •Outcomes (Boston: •Harvard Business School •Press, 2004), Figure 3-2, •p. 67 Copyright 2009 John Wiley & Sons, Inc. 1-12 Balanced Scorecard •Balanced scorecard •measuring more than financial performance •finances •customers •processes •learning and growing •Key performance indicators •a set of measures that help managers evaluate performance in critical areas Copyright 2009 John Wiley & Sons, Inc. 1-13 Balanced Scorecard •Balanced Scorecard Worksheet Copyright 2006 John Wiley & Sons, Inc. 2-14 Balanced Scorecard Radar Chart w Dashboard w Supply Chain Operations Reference Model (SCOR):Basic Management Processes •Plan-Source-Make-Deliver-Return • Supplier’s Supplier Make Deliver Source Make Deliver Make Source Deliver Source Deliver Source Customer’s Customer Plan Supplier (Internal or External) Your Company Customer (Internal or External) Return Return Return Return Return Return Plan-Source-Make-Deliver-Return provide the organizational structure of the SCOR-model Supply Chain Operations Reference Model (SCOR) •SCOR: •Integrates Business Process Reengineering, Benchmarking, and Process Measurement into a cross-functional framework. • Benchmarking Best Practices Analysis Process Reference Model Business Process Reengineering Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results Characterize the management practices and software solutions that result in “best-in-class” performance Capture the “as-is” state of a process and derive the desired “to-be” future state Capture the “as-is” state of a process and derive the desired “to-be” future state Quantify the operational performance of similar companies and establish internal targets based on “best-in-class” results Characterize the management practices and software solutions that result in “best-in-class” performance Supply Chain Operations Reference Model (SCOR) •The Primary Use of SCOR: •To describe, measure and evaluate supply chain configurations. •SCOR contains: •Standard descriptions of management processes •A framework of relationships among the standard processes •Standard metrics to measure process performance •Management practices that produce best-in-class performance •Enables the companies to: •Evaluate and compare their performances with other companies effectively •Identify and pursue specific competitive advantages •Identify software tools best suited to their specific process requirements • • • Scopes of Basic Management Processes •Plan (Processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production and delivery requirements) •Balance resources with requirements •Establish/communicate plans for the whole supply chain •Source (Processes that procure goods and services to meet planned or • actual demand) •Schedule deliveries (receive, verify, transfer) •Make (Processes that transform product to a finished state to meet planned or actual demand) •Schedule production •Deliver (Processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management) •Warehouse management from receiving and picking product to load and ship product. •Return (Processes associated with returning or receiving returned products) •Manage Return business rules • SCOR Model: Process D1.3 Metrics Source: Adapted from Supply Chain Council 2011 Assess Costs and Benefi ts of Quality Initiatives Tools for Root Cause Analysis • Add diagrams Diagrams