PX Solutions, LLC  Privileged & Confidential SUPPLY CHAIN and  Business Intelligence  SOLUTIONS Converting data to Informa...
<ul><li>Difficult to make sure daily activities meet corporate goals </li></ul><ul><li>Disjointed silos </li></ul><ul><ul>...
<ul><li>Need for Governmental reporting </li></ul><ul><li>Can’t keep pace with change - Global </li></ul><ul><li>Need to l...
<ul><li>By focusing on the right metrics, companies can track performance, diagnose bottlenecks, and uncover opportunities...
PX Solutions, LLC  Privileged & Confidential Dashboards:  These are Real-time, visual snapshots of the Supply Chain.  Prov...
Shipment Reporting Product Supply Sales and Operations Planning Process Order Status Fulfillment & Delivery Performance Sa...
<ul><li>How do you plan your business? </li></ul><ul><li>Executive sponsorship </li></ul><ul><ul><li>Top down driven </li>...
Company PX Solutions, LLC  Privileged & Confidential Time When Customer Who Product What Location Where Sales Transaction ...
Company PX Solutions, LLC  Privileged & Confidential Sales Transaction Hierarchy Month Time Week Year / Qtr Day When Custo...
Strategic level PX Solutions, LLC  Privileged & Confidential KPI Silos Executive Summary Supply Chain Production Scrap % O...
PX Solutions, LLC  Privileged & Confidential Insight Knowledge Information Data Benchmarks (KPIs) Scorecards Sustainabilit...
PX Solutions, LLC  Privileged & Confidential   KPI Hierarchy
<ul><li>Pressure points </li></ul><ul><ul><li>Financial </li></ul></ul><ul><ul><li>Capacity constraints </li></ul></ul><ul...
<ul><li>Lack of visibility </li></ul><ul><ul><li>ERP system reporting is rarely flexible </li></ul></ul><ul><ul><li>Mass o...
<ul><li>Focus on look rather than content </li></ul><ul><li>Too many measures </li></ul><ul><li>Not visible </li></ul><ul>...
<ul><li>Data Visibility: A philosophy of how a company will convert data into information and make it available to decisio...
PX Solutions, LLC  Privileged & Confidential Enterprise: Top down Established - KPI Trusted Scalable Data consistency Pers...
<ul><li>Leverage IT assets </li></ul><ul><li>Utilize existing software licenses </li></ul><ul><li>Reduce manual data manip...
<ul><li>A company can no longer rely on silo reporting, analytics or planning to manage your Supply chain. </li></ul><ul><...
<ul><li>Provide your customers the  right  products at the  right  time in the  right  place and at the  right  cost. </li...
<ul><li>Http://kpilibrary.com </li></ul><ul><li>5,113 established KPIs </li></ul><ul><li>Break down by: </li></ul><ul><ul>...
Thank You Questions?  PX Solutions, LLC  Privileged & Confidential
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Balanced Performance Metrics


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Balancing Supply chain metrics in a changing environment

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  • Hello – my name is Pat Gorey Quick background is that I have been in Supply chain for 30 years and I speak fluent geek!
  • Review: Why do we bother with metrics? Why do we work so hard to get them right? This may seem really basic: but I wonder how many of you feel you have the right measures in place today. (Can I see a show of hands?) These are a few of the problems that are created when there is a lack of visibility within an organization. visibility is the level of information that is available within your organization to make decisions Your ERP system has plenty of data from all the daily transactions, but is information available when your people need it? I am sure many of you are familiar with one or more of these symptoms. People are running around and it is impossible to know if their actions are tied to the company goals. The classic fire drill! I think we have all seen this. Each day brings a new fire drill. At the end of the month we are left wondering why we aren’t any closer to our goals. Some companies have each “silo” with different or conflicting agendas. Example: Finance is looking for leveraged A/R but sales is focused on making budget. Or sales department is only looking at sale growth but has no visibility to inventory effectiveness (hence the old “Just in case versus just in time”) Does anyone have an example where your KPIs are disconnected? Your company just can’t seem to make any headway on customer service (fill rates). is this due to bad or no forecasts or are you having issues in the supply chain? How can you get predictive? What are the levers driving your service? The bottom line is that your supply chain costs are going up due to expediting or having to go to secondary supplies. What is the impact of having to start and stop production due to a lack of predictability? Most companies try to solve the above challenge through safety stock. Increasing inventory has its own downside Challenges managing the product life cycle to insure slow and dead inventory is properly managed rather than ignored and built up over time. Heavy inventory impacts capital return and turn rates. List out some issues people in the audience are having (List on a chart!)
  • Here are some other challenges presented by a lack of visibility within an organization: This is not a complete list but some I have run across - It is very difficult to get the information needed for governmental reporting – - take lots of energy and focus - heavy down side risk if not done correctly The company struggles with the ability to keep pace with changes in the market place, whether it is competition or economic - limited ability to look at activity in a global setting meaning data is only available by market / region New products and markets are difficult to integrate into the company - disconnected silo measures where sales and operations have different targets - product launches are not coordinated Lack of KPI visibility drives a company into the fire drill and makes it very difficult to pinpoint effort needed to get results. - need for drill down into the exceptions in order to understand what is the root cause of the problem - it takes a Herculean effort to find the root cause because there too much data., not enough data, or it is not user friendly Other challenge is that there is no single source of data within the company. This is the classic problem where you ask a question and get 5 different answers. Anyone had this problem? A similar problem is that the information needed is buried in numerous spreadsheets that are managed across the company. I call these SPREADMARTS. Basically this is data from your ERP systems that gets re-entered into various spreadsheets in order to get the calculations or formats needed. Usually graphs for the monthly and weekly status meetings. How do you verify they are in synch? Manipulated numbers are similar to the above where the established KPI or more importantly the incentive programs drive a skewed view of reality. Some are legitimate: an example would be measuring fill rates. You may want to exclude “will call” orders where the customer does not pick up the order on the designated day. Some are not legitimate: An example would be customer service changing due dates do to capacity constraints and then measuring service against the revised dates.
  • KPIs are valuable but they are only a tool in the toolbox Success requires 3 things to be in synch: - have the right people who are trained and have buy-in - have the right process and procedures in place - and lastly, use the right tools If any of these are not balanced properly, it is like a 3 legged stool. It will fall. This is the challenge of Change Management and Project management. My experience has shown there are 2 areas that present the biggest challenge: There isn‘t proper ownership at the business level. Meaning KPIs are seen as Executive or IT driven and not “owned” by the business The second is that the process and procedures are not defined to drive the performance you want or need. People will find the “path of least resistance” so it is imperative that the behavior you are striving for IS the path of least resistance. Read these:
  • So let’s talk about the various KPIs that exist. Here are a few buzzwords that are thrown around. I thought I would do a quick refresher: Dashboards are typically for the executive summary and have a set amount of high level data. - they typically cross silos and should be balanced - focus on key area (process cycle, fill rates, cost of service and vendor measure) Scorecards are more detailed and generally focus on specific silo measures - usually used to measure against goals and understand trends - combination of data points and graphs - made up of numerous KPIs Benchmarks (or KPIs) are single elements that focus on a particular activity - typically a calculation of events - there are over 5,000 various KPIs This is from AMR research – Need to measure the entire process from end to end. Not just links in the chain Selecting the right metrics helps insure balanced and complete visibility (remember you can’t manage what you can’t measure) Feasible scope – find a level of granularity that is manageable and meaningful The KPI definition needs to be doable! Example: I had a client who wanted to measure customer service based on the receipt date of the order by the customer. Very difficult to get the data. KPIs need to be event and characteristic driven not product driven. Example: inventory turns rates based on ABC classification rather than by SKU Use the right resources and be realistic about time frames – don’t try to boil the ocean Turn data into action – use interdependencies between metrics to determine the most appropriate projects to attack first Make it stick – ensure benchmarking measures are usable and sustainable over time Event management – alert structure that is not a KPI but is a warning when specific activity happens or doesn’t happen. - very useful for drill down activity and root cause - need to be realistic and prioritize
  • Balanced metrics requires focus on both Supply and demand side Supply side are all the functions surrounding getting the products. This includes sourcing, supplier management, purchasing, sourcing, inbound transportation, outsourcing, etc Also includes all manufacturing functions The demand side includes all the processes associated with the customer demand Inventory management, logistics and transportation Sales and marketing, advertising / promotions Supply chain is the glue that holds these competing functions together So Balance is needed to keep from subjugating either the Demand (sales side) or the supply side (production or sourcing) I am sure you are all aware of the tricky balance this can be. Sales is just in case and production wants long production runs Hence why Supply Chain is such an important function within a company
  • So we want to get a balanced metric system in place. Where do we start? What or who are the business drivers? Is it Sales $, sales growth, profits, Market share? Who drives the goals for the business? The CEO? NYSE? What are the key drivers for your company? How is this translated into YOUR business plan? Meaning – how do these goals get interpreted? How is this made visible within the company? Are they in the Annual report only? Keep in mind virtually all business plans are top down driven BUT bottom up delivered! This means your KPIs have to work and be balanced in order to make the overall business plan. What does “work” mean? It means you have to insure your KPIs tie to the overall goals or you will be “sideways” and disconnected. getting disconnected is extremely easy to do ----- anyone have an example where a company has gotten sideways? Bad communication, miss-interpretation of corporate goals by middle management, “silo focus” all lead to getting “sideways” So with all this said: how do you really get started in getting balanced measures? In a perfect world you start with White board discussions with key decision makers Get buy in from the top down (Need an executive sponsor) Make sure you have representation from all the stakeholders (Finance, Operations, Sales, Marketing, of course Supply Chain) NOTE: these are the same silos that need to be represented in an S&amp;OP process S&amp;OP is a discussion all its own, but there is a huge connection between a balanced scorecard and the S&amp;OP process! Next is to determine What measures are important for each silo to make plan? Prioritize the measures – use a magic quadrant or simple ABCD to get the measures aligned - don’t try to boil the ocean! Keep a focus on key factors rather than get every little aspect measured - balanced measures should be at the 5,000 foot level. Not 20,000 and not down in the forest. - each company will have a different version of what this means. There is no single right answer - Don’t limit yourself based on what is available but what you need to know to “manage your business” Get Executive sign off on the agreed upon measures establish a structured way to make them Visible – across the enterprise ( I prefer the S&amp;OP process as a structured approach) Publish, publish and publish!!!! The KPIs should be systematic and your people should be looking for the updates routinely Keep in mind that each silo will have other KPI measures in addition to the Supply chain metrics Publish in a visible locations that is relevant for the people. Balanced measures should be everywhere and silo measures should be maintained where they get the optimal exposure. Example: Freight cost per order may be great in the warehouse or customer service areas. Total SCM cost would be visible to all. Lastly --- make sure to review the measures on a scheduled basis. At least one a year to verify they are still valid and relevant. If you aren’t evolving, then you are standing still!
  • So let’s take a look at how companies PLAN their business Every transaction has 4 variables: WHO, WHAT, WHEN and WHERE Everything else about the transaction is an attribute of on or more of these variables Price – a combination of customer and product, or a combination of time if there is a promotion Here area few examples of attributes within the variables
  • Within the variables and attribute combinations is how you plan your business A practical example is a company has a Financial plan by sales channel (OE, retail, wholesale), the plan is by month at the product category level and by Region. All the measures above the planning level is considered Executive summary And all the measures below are tactical operations measures. It is important that all KPIs tie to the planning level in some way so as not to become disconnected. The key is to make sure they tie That is not to say, for instance, that a company will have only three or four total KPIs. There will be three or four Key Performance Indicators for the company and all the units within it will have three, four, or five KPIs that support the overall company goals and can be &amp;quot;rolled up&amp;quot; into them. If a company Key Performance Indicator is &amp;quot;Increased Customer Satisfaction&amp;quot;, that KPI will be focused differently in different departments. The Manufacturing Department may have a KPI of &amp;quot;Number of Units Rejected by Quality Inspection&amp;quot;, while the Sales Department has a KPI of &amp;quot;Minutes A Customer Is On Hold Before A Sales Rep Answers&amp;quot;. Success by the Sales and Manufacturing Departments in meeting their respective departmental Key Performance Indicators will help the company meet its overall KPI. This is how you balance measures both horizontally across silos and vertically
  • Balancing KPIs across the silos is just as important as vertical balancing from Top to Bottom Not only tie KPI from the executive level to the tactical level but verify that each silo has measures that tie across boundaries I mentioned earlier about the use of S&amp;OP methodology to help drive silo balance (at the planning and strategic levels) If you have proper balance vertically you can then push this down to the tactical levels within each silo S&amp;OP helps to reinforce the horizontal balance due to the structured monthly process The Planning component of S&amp;OP keeps all the vested departments on the same page and using the same collaborative measures. Each silo then takes these collaborative measures and develops their own detailed measures. If the measure doesn’t tie to one of the major KPIs, then it should be challenged I call these “secondary measures”. They have to tie to “Primary measures” or they are not relevant. Can anyone think of a measure that is not relevant within your organization? - many cases I see valid measures within the silos but NO upper level KPI at the executive level. - example: Inventory measures – turn rate or GMRIO. These are valid but many times there is no tie to TCO at the Exec level.
  • I like this slide as a way to summarize how important it is to have vertically integrated KPIs this shows the progression of data from the transactional level up to the executive level Key data elements are summarized into information within departments (or silos) Further summary of information drives Knowledge up through the executive levels And in a perfect world, data gets summarized into INSIGHT to help drive business sustainability Most trouble comes when the Executive level measures and targets don’t tie or match to the transactional levels. The key is to verify that the TOP DOWN goals are matched to the BOTTOM UP measurements Changes in Executive goals have to be drilled down to the departmental measures. This can be done by changing the actual targets or the measure itself. An annual review at budget time is a chance to verify you are still connected. Any disconnection can cause havoc within the organization. Anyone have an example? Most of my examples deal with departmental measures that don’t have a primary measure! If this is the case then there are two options: 1) get rid of the measure 2) define a primary measure to tie to and get executive buy in!
  • This is from the AMR that shows a similar hierarchy structure: (specific to Supply chain) This shows some practical examples of actual measures used at the various levels within your company You can see the top 3 KPIS: This is the assessment level where strategic goals are interpreted Demand forecast accuracy Perfect order fill Total supply chain cost On the opposite end of the pyramid is the corrective action level As you move down the pyramid the KPIs are more detailed and components of the higher level KPIs Not to beat a dead horse – but if they don’t tie------- do something about it
  • There are specific factors that drive KPI measures Financial: Are there specific GP $ or growth % targets that over ride all other measures. example – I spoke to a company coming out of bankruptcy. Cash flow was the number one goal and all other KPIs were secondary The question was asked how I would deal with having to subjugate optimizing key measures for the sake of cash flow. Meaning – sacrificing customer service for the sake of inventory investment, etc Reality is key and your balanced measures have to match to the corporate strategy, no matter what it may be. Capacity: Do limited resources drive KPI values one way or another? This hasn’t been very typical in the last few years with the slow economy. but in previous periods it was a reality: Higher growth periods were full of issues where space or production capability was limited. Symptoms are high BKO rates, fire fighting, shorter production runs, higher expediting costs, etc……you know the issues. We have all seen them Keeping balanced and adaptive is critical in growth. Keeping focus and actionable is critical in slow economies. Sourcing issues: what can I say! The heavy outsourcing push, globalization, Asia sourcing, etc have all added complexity to the supply chains. Complex lead times, increased SC risks, currency fluctuations, commodity prices all add a need for balance and visibility. Slow economic times has raised the SC risks where product sources can / or are financially suspect. The US Economy and debt structure has and will continue to drive higher commodity prices as the dollar continues to lose value. There will be inflationary pressure coming in the next few years Data: Wow – this cannot be understated. It is critical that each person who “owns” a KPI understand the way data is handled. data integrity – how clean is the data coming from the transaction systems and what distortions exist from this? How is data manipulated to meet KPI targets? I worked with a company that used Perfect order fill. We found that customer service was changing delivery dates based on delivery capability not what the customer originally requested. This distorted the fill rates and created a false sense of success. We found a solution where delivery dates could be moved if the customer requested the change, otherwise the original request date was locked. An exception report was made available for tracking date changes in order to get to the root cause of delays. The company ended up looking at Perfect order from the customer perspective. Line fill was driven from the internal dates which is how to measure the operations and sourcing groups. But they all tied together and had a primary measure of “Perfect order”. Is data available to drive the measures needed? This will be driven out from the WHITE BOARD discussion where measures are discussed (previous slide) Define what data fields are required and how is the field entered and by whom What issues exist for the required fields? Example: I had a client where we were looking to measure production activities. We did a white board discussion to drive the measures needed to manage the business. Linear feet per hour, scrap rates, changeover times, production times, etc They had no available data, so a project was initiated to capture key elements during the production process. Benchmarks were established and the project was implemented to drive daily, weekly and monthly KPIs to allow them to manage their business. The idea is that data doesn’t always exist to measure / manage the business. Many times it has to be chased down. Incentive programs: I cannot state strongly enough that Incentive programs can be one of the largest drivers for KPIs. This can be either direct or indirect. Meaning people will drive the business performance based on how they are rewarded. (I call this the path of least resistance). This is really apparent within silos. An Example: Sales is incentivized based on sales growth ONLY. There is no “skin in the game” for other KPIs. In other words there is no balance between silo measures. Therefore there is no proper balance! This is another reason why S&amp;OP is so valuable within an organization. The cross functional group has common and balanced measures rather than the trend to be Soli focused. Executive: Who owns the KPI? What motivating factors exists? Example: I worked at Firestone back in the 80’s. Our CEO made an edict that the Primary measure for success was ROI. Each division started shedding assets and replacing them with leases to get the assets off the books and inflate ROI. “Be careful what you ask for!” Strategic KPIs need to be shared throughout the organization. Proper balance means that no one group owns the KPI. They will own the secondary measures but should not own the primary measures. Tactical KPIs that are owned by individual silos EXAMPLE: freight costs, receiving accuracy, WMS measures, etc) The important fact is to make sure ownership has been defined and acknowledged KPIs are not to be static. The organization should review them systematically and modify as needed. They need to be realistic and actionable KPIs are the flip side of targets. If the targets are unrealistic, people will focus their attention elsewhere. Sort of like when a football team is getting beat 52-0 and asking the offense to give 100%. Easy to say, but very hard to get everyone focused and performing. Bad: Title of KPI: Increase Sales Defined: Change in Sales volume from month to month Measured: Total of Sales By Region for all regions Target: Increase each month What&apos;s missing? Does this measure increases in sales volume by dollars or units? If by dollars, does it measure list price or sales price? Are returns considered and if so do the appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales office&apos;s volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage or dollars or units, do we want to increase sales volumes each month?(Note: Some of these questions may be answered by standard company procedures.) Good: Title of KPI: Employee Turnover Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation. Measured: The HRIS contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly, or when requested by the SVP, the HRIS group will query the database and provide Department Heads with Turnover Reports. HRIS will post graphs of each report on the Intranet. Target: Reduce Employee Turnover by 5% per year.
  • Post the KPIs everywhere: in the lunch room, on the walls of every conference room, on the company intranet, even on the company web site for some of them. Show the target for each KPI is and show the progress toward that target for each of them. People will be motivated to reach those KPI targets. Celebrate the victories! Another KPI pitfall is that tools don’t exist to easily drill down into the details - or there is too much data and no exception reporting the pinpoints the issues. - Exceptions need to be flexible where the USERS (not IT) can adjust the bar as needed. Could be seasonal changes, or as performance improves the bar needs to be raised or lowered to reduce the need to chase exceptions that aren’t really exceptions. - focus on KEY exception (not all exceptions). Use the 80-20 rule or you will find yourself chasing everything and getting nowhere. - again: celebrate the victories, drive enthusiasm and ownership through the organization Many KPIs are reactive measures only. You want to track the changes and trends to understand the “levers” and pressure points that drive each KPI. - drive towards predictive measures I try to stay away from KPIs where the data is incomplete or partial. These would include subjective KPIs. - there may be times when this is the last resort, but this is no place to live when trying to manage and drive change in your business. - If you must SWAG, then at least find a direction that would allow for collection of better data to eliminate the situation. An example: I dealt with a customer who had no production measures. We set up a cross functional team of the production management and Operations sponsor to outline what measures were needed to manage the business. A white board discussion was facilitated to define what data elements were required (we ignored what was actually available). In this case the main criteria was linear feet. The challenge to the team was that the daily operations did not capture linear feet. Sales orders were based on square feet. The machine were all linear feet slitters and cut to length. The initial implementation required a considerable process change where operators were required to enter production values after each unique step. (The machines did not have PCL capability). The training was done and a rollout was implemented. We found that the adoption rate on the new process took longer than it should so the data coming through the KPIs were a SWAG. this reinforces the fact that the path of least resistance has to be the performance you want or need. People will find the path of least resistance and use it. In this case the operators were allowed to “tab” through the step so as not to stop actual production. So the process had to be refined to improve the data capture accuracy. This reduced the SWAG effect over time as the adoption rates improved. Keep in mind that your balanced measures need to have a global view. Focus on one continent will keep you in a silo based on geographic. - this can be a tricky area in that the UOM may be different by geography. (say currency) - in many cases the data is not available at the same level of detail from other geographic regions - An example would be where there are different ERP systems in play by region and the data has unique hierarchies when rolled up. - Balancing at the global level will require a stronger executive sponsorship (typically the CEO level) to be successful.
  • There are numerous things that can distort the value of your measures: These are very common Too much effort focused on how they look rather than what they say - go for the content then worry about the look - hours are spent putting KPIs in a fancy graph or format for the monthly management meetings - this will require executive sponsorship Over crowding – keep it to 4-5 measures with drill down capability - keep it simple and straightforward I was working with a new client. I asked what their existing KPI measures were and was handed an 81/2 x 11 sheet of paper that was absolutely packed on every square inch with at least 30 different measures. I asked which ones were primary or secondary and was told that they all were just as important. - in reality most were secondary measures to the 5-6 key measures on the page. Identify the top 4-5 measures needed for balance - they need to be actionable Post the KPIs everywhere: I mentioned this earlier. -show the progress toward that target for each of them. People will be motivated to reach those KPI targets. Disconnected measures are those that don’t tie to any management target or are irrelevant. They look good but have no real value. example: monthly turn rates (one month X 12) Verify that the cost of capturing the required data elements are worth the benefits. typically these are the KPIs that look good, but either aren’t actionable or balance to anything Does your data tell the right story? Example: Do you use ship date or invoice date when measuring Service rates? Is there a legitimate need to filter out specific transactions (say Will call orders should be excluded from fill rate calculations? - Are transactions manipulated to tell the story that you want? There are times when Executive orders are created contrary to industry or common sense could be new strategies could be self-serving example: company coming out of bankruptcy – requires cash flow to be #1 even at the detriment of other performances Incentive plans can be a real tricky area when group plans are paid based on one measure but are not tied or balanced. These can cause inefficiencies in the measures. (I call this path of least resistance) as people will find the path and follow it. KPIs need to BE THE PATH of LEAST RESISTANCE to be optimized Too often silos don’t have “skin in the game” for specific measures and you get distorted results. I am sure all of you know an example where the sales department is measured on sales $ or sales growth, but maybe GP is excluded or inventory efficiency is not part of the salesperson’s incentive plan. (this is the old – “just in case!”) Static KPIs can be a self fulfilling prophecy. They need to be reviewed and challenged systematically Usually around annual budget
  • We reviewed why KPIs are needed: Pretty basic stuff We did a high level review of the different types of KPI measures We discussed how to look at both vertically and horizontally balanced measures across the transaction hierarchies We discussed what to watch out for in setting up KPIs. We walked through the process of getting balanced measures into the organization Then we talked about various issues in getting balanced and pitfalls you will most likely run into along the way Next I would like to speak briefly about the KPI toolset itself I would be remiss if I talked about measures but ignored the best way to get them into play Historically KPIs were defined, and then IT would be sent on a mission to build a reporting structure that captured the data and rolled it up into Dashboards or Scorecards. - OR a large project was put into place to build out executive reporting. These were very static (non-flexible) and expensive -they answered the basic questions but were rarely Insightful Measurement systems today are much more user friendly. Using business intelligence tools that are available you can-------Implement performance measures and business intelligence solutions together - BI tools have drill down functionality built in - BI virtually requires KPI measures to tie vertically - BI doesn’t necessarily tie measures horizontally though! I mentioned earlier that many good secondary measures don’t have a primary measure available. The use of BI (I like to call it data visibility) makes it much more obvious that there is a vertical disconnect. An example: I have 10+ years of procurement experience. We measured Vendor performance (say lead time accuracy), but there was no Primary measure to tie into. I needed to be able to tie this up to Total SCM costs as this it the Primary KPI. More volatile lead times will drive safety stock up for the same level of demand. We were able to calculate the cost of erratic lead times using standard deviation, but we did not have the ability to roll this cost up to reflect the impact on Total supply cost. This is the difference between having Information and having Knowledge or Insight. We have the ability to react to tactical problems with specific vendors but there is no Executive Insight over what is happening to the total Supply chain picture. This is a disconnect! Your company’s Data visibility philosophy will allow you to drive your transactional data into Executive insight while keeping the business decision makers informed. Either exception based or target measures. Data visibility will allow you to make smart and timely decisions based on INSIGHT. Finally Data visibility will empower the business decision makers to allow quicker adaptation to changing business conditions. - I am not a fan of the term Business Intelligence as it has an IT connotation. BI is misunderstood and thought of to be a very complex and expensive proposition. It is neither. Look at BI as nothing more than how you share data transaction information throughout your c
  • I tossed this slide in at the last minute ----- I was going to skip it thinking this was too much information. If it is, then doze off for the next couple minutes if you aren’t asleep already! Data Visibility or BI has been around for a while. The original concepts talked about data warehousing, data marts, etc. The tools became available ---- typically VERY EXPENSIVE: tolls like Business Objects, Cognos, etc. These tools have recently been bought up by the big ERP systems as a way to tap into their technology and leverage the transactions inside the ERP system - they were also trying to cover a large gap in reporting Typically the BI tools were Enterprise systems maintained / controlled by the IT departments. - They focused on established KPIs from the TOP - They were scalable and the data was trusted - there were few issues with data consistency - and people in the organization were aligned around these Now the push is more personal BI -this can be seen with the SQL2005/8 tools tied directly into Office 2010 (like Powerpivot) - cost of ownership has dropped significantly (no longer 7 figure projects) These tools now empower the decision makers with the information in the formats they need - the data is flexible, filters, additional calculations, etc are easy to do This move to Personal BI is leading to Collaborative BI where users can “publish” documents for others to use. - tools like SharePoint are perfect for this collaboration So the bottom line is that BI (data visibility) is becoming more personal (user empowerment) and this will drive towards more information collaboration
  • I spent the first part talking a lot about balancing your measures I firmly believe the power of your KPIs are based on the tools you have to drill down into the measure exceptions Data visibility is the philosophy used to provide this capability within your company. BI is no longer the complex, expensive, IT project. It does, however, require an executive sponsor – typically the business decision makers not the CIO Some of the benefits to Data visibility are: Allows IT to leverage existing resources as BI moves to Personalized BI and collaborative information sharing. - IT remains focused on the Enterprise and facilitating the movement of data from the legacy systems to the BI tool There are solutions that use existing Microsoft licenses - most companies have a SQL box somewhere. Included in the SQL license are the SSRS and SSIS tools needed for the BI - Microsoft also has the desktop interface built in with Office Excel There is a huge improvement in removing the need to print out reports and have someone re-enter the data into a worksheet to create the calculations or elements that were not combined in the report. Make data transactions visible as information and knowledge at all levels in the company. - tie both vertically and horizontally - drive collaboration throughout the Supply chain and the entire company - very good for S&amp;OP! (If I haven’t mentioned it yet!) BI makes getting critical information much easier and available when the decision makers need it And mostly BI provides “one source of the truth” where everyone gets the same information from the same place. This gets rid of the problem of getting 5 different answers to the same question.
  • So finally in conclusion:
  • Free resource on the web Can select those that you believe make sense and create your own listings Available groups (similar to LinkedIn)
  • Balanced Performance Metrics

    1. 1. PX Solutions, LLC Privileged & Confidential SUPPLY CHAIN and Business Intelligence SOLUTIONS Converting data to Information, and Information to Knowledge! SCM Metrics - Balancing a Changing Environment
    2. 2. <ul><li>Difficult to make sure daily activities meet corporate goals </li></ul><ul><li>Disjointed silos </li></ul><ul><ul><ul><li>Sales, Production, Finance have different agendas </li></ul></ul></ul><ul><li>Poor customer service </li></ul><ul><ul><li>Inaccurate forecasts </li></ul></ul><ul><ul><li>Stock outs </li></ul></ul><ul><ul><li>Increased logistic costs </li></ul></ul><ul><li>Inefficient inventory </li></ul><ul><ul><li>Too much “dead” inventory </li></ul></ul><ul><ul><li>Low turn rates </li></ul></ul><ul><ul><li>Subpar ROI </li></ul></ul>PX Solutions, LLC Privileged & Confidential Business Challenges
    3. 3. <ul><li>Need for Governmental reporting </li></ul><ul><li>Can’t keep pace with change - Global </li></ul><ul><li>Need to leverage new opportunities. </li></ul><ul><li>Where should you concentrate your efforts? </li></ul><ul><li>Can’t resolve potential problems quickly. </li></ul><ul><li>Lots of data but can’t find important information. </li></ul><ul><li>“ Multiple versions of the truth” </li></ul><ul><li>Spreadmarts! </li></ul><ul><li>Manipulated numbers </li></ul>PX Solutions, LLC Privileged & Confidential Business Challenges
    4. 4. <ul><li>By focusing on the right metrics, companies can track performance, diagnose bottlenecks, and uncover opportunities. </li></ul><ul><li>Companies can take informed action towards improved supply chain performance. </li></ul><ul><li>Enhanced supply chain performance will in turn improve financial performance by reducing costs, increasing working capital, and strengthening customer loyalty. </li></ul><ul><li>Balanced </li></ul><ul><li>“ One Source of the Truth” </li></ul><ul><li>Can’t manage what you can’t measure! </li></ul>PX Solutions, LLC Privileged & Confidential KPI Value
    5. 5. PX Solutions, LLC Privileged & Confidential Dashboards: These are Real-time, visual snapshots of the Supply Chain. Provide high-level overview of performance across any number of key areas: Cycle time, shipment performance, quality, cost to serve, and supplier response. Scorecards: Provide extra level of detail by displaying results against pre-established targets. Plot changes in performance, trends SCOR: Benchmarks: (AMR research report) Keep eye on end-to-end goal Select the right metrics Define a feasible scope Compare characteristics not products Use the right process Turn data into action Make it stick Event management: Alerts based on predetermined conditions Reporting: Which way to go?
    6. 6. Shipment Reporting Product Supply Sales and Operations Planning Process Order Status Fulfillment & Delivery Performance Sales Planning & Forecasting Vendor scorecards Production Counting Performance Measurement Capacity Planning Sales & Operations Planning Operations Performance PX Solutions, LLC Privileged & Confidential Demand Generation & Commercial Activity Balancing Supply & Demand
    7. 7. <ul><li>How do you plan your business? </li></ul><ul><li>Executive sponsorship </li></ul><ul><ul><li>Top down driven </li></ul></ul><ul><ul><li>Bottom up delivered </li></ul></ul><ul><li>Silo focus </li></ul><ul><ul><li>Production (long runs – low changeover) </li></ul></ul><ul><ul><li>Sales & Marketing (just in case) </li></ul></ul><ul><ul><li>Finance (margin) </li></ul></ul><ul><ul><li>Supply chain (balancing equation) </li></ul></ul><ul><li>Collaborative definition </li></ul><ul><ul><li>Define Balanced KPIs </li></ul></ul><ul><ul><li>Review process </li></ul></ul>PX Solutions, LLC Privileged & Confidential Where to start?
    8. 8. Company PX Solutions, LLC Privileged & Confidential Time When Customer Who Product What Location Where Sales Transaction Hierarchy Channel OEM Distributor Retail Account Product class Brand Category Product detail Item Ship from Region North America - Country Plant Month Week Year / Qtr Day
    9. 9. Company PX Solutions, LLC Privileged & Confidential Sales Transaction Hierarchy Month Time Week Year / Qtr Day When Customer Channel OEM Distributor Retail Account Who Product class Brand Category Product detail Product Item What Location Ship from Region North America - Country Plant Where Planning level: Operational level: Summary level:
    10. 10. Strategic level PX Solutions, LLC Privileged & Confidential KPI Silos Executive Summary Supply Chain Production Scrap % OEE Production per Man-hour AR leverage Sales/ Marketing Finance BKO Fill rates Revenue AR aging Planning level Item / customer segmentation Inventory measures Management KPIs Tactical level Service Levels Cost modeling Up channel Down channel One Source of the “Truth”
    11. 11. PX Solutions, LLC Privileged & Confidential Insight Knowledge Information Data Benchmarks (KPIs) Scorecards Sustainability Vertical Horizontal Types KPI Delivery Dashboards Summary level (Executive) Organized at business level (departmental) Transactional detail (departmental)
    12. 12. PX Solutions, LLC Privileged & Confidential KPI Hierarchy
    13. 13. <ul><li>Pressure points </li></ul><ul><ul><li>Financial </li></ul></ul><ul><ul><li>Capacity constraints </li></ul></ul><ul><ul><li>Sourcing issues </li></ul></ul><ul><li>DATA! </li></ul><ul><ul><li>Data integrity </li></ul></ul><ul><ul><li>Data manipulation - “Path of least resistance” </li></ul></ul><ul><ul><li>Data Access </li></ul></ul><ul><li>Incentive programs </li></ul><ul><li>Executive directives </li></ul><ul><ul><li>KPI ownership </li></ul></ul><ul><li>Evolution plan for KPIs </li></ul><ul><ul><li>No such thing as static – continuous improvement </li></ul></ul>PX Solutions, LLC Privileged & Confidential KPI Drivers
    14. 14. <ul><li>Lack of visibility </li></ul><ul><ul><li>ERP system reporting is rarely flexible </li></ul></ul><ul><ul><li>Mass of transactional data </li></ul></ul><ul><ul><li>Hard to focus on exceptions </li></ul></ul><ul><ul><li>Disconnect between Supply side and Demand side </li></ul></ul><ul><li>Unpredictability </li></ul><ul><ul><li>Unable to find root cause </li></ul></ul><ul><ul><li>Responsive rather than predictive </li></ul></ul><ul><li>Incomplete information </li></ul><ul><ul><li>Forced into SWAG </li></ul></ul><ul><li>Local optimization </li></ul><ul><ul><li>Need global view </li></ul></ul>PX Solutions, LLC Privileged & Confidential Balancing Pitfalls
    15. 15. <ul><li>Focus on look rather than content </li></ul><ul><li>Too many measures </li></ul><ul><li>Not visible </li></ul><ul><li>Disconnected measures </li></ul><ul><li>Balance benefit of data vs. cost to capture </li></ul><ul><li>Bad data </li></ul><ul><li>Executive over rides </li></ul><ul><li>Incentive plans !!!!!!!!! </li></ul><ul><li>Static </li></ul><ul><li>Not actionable </li></ul>PX Solutions, LLC Privileged & Confidential KPI Summary
    16. 16. <ul><li>Data Visibility: A philosophy of how a company will convert data into information and make it available to decision makers when the information is needed. </li></ul><ul><li>Implement Performance Measures and Business Intelligence solutions together to drive business transformation from the strategic level to the process level. </li></ul><ul><li>Make smart and timely decisions based on solid insights and accurate information to distinguish you from the competitive pack. </li></ul><ul><li>Solutions must be able to adapt to your changing business needs. </li></ul>PX Solutions, LLC Privileged & Confidential Value of BI
    17. 17. PX Solutions, LLC Privileged & Confidential Enterprise: Top down Established - KPI Trusted Scalable Data consistency Personal: Bottom up Flexible Self service Timely Team: Collaboration Adaptive - measures Effective Leveraged Aligned Empowered SQL2005/8 SharePoint Office 2007 / 2010 Trend in Data Visibility
    18. 18. <ul><li>Leverage IT assets </li></ul><ul><li>Utilize existing software licenses </li></ul><ul><li>Reduce manual data manipulation </li></ul><ul><li>Improved visibility at all levels </li></ul><ul><ul><li>Exception and drill down reporting </li></ul></ul><ul><ul><li>Increase collaboration </li></ul></ul><ul><li>Easier to find answers </li></ul><ul><li>“ One source of the truth” </li></ul>PX Solutions, LLC Privileged & Confidential ROI of Data Visibility
    19. 19. <ul><li>A company can no longer rely on silo reporting, analytics or planning to manage your Supply chain. </li></ul><ul><li>Need to create a management plan that links top-level strategy with departmental plans. (connected VERTICAL) </li></ul><ul><li>S&OP serves as the basis for aligning sales, marketing, supply chain and finance. (connected HORIZONTAL) </li></ul><ul><li>Use metrics to measure end-to-end </li></ul><ul><li>Provide visibility of actual performance </li></ul>PX Solutions, LLC Privileged & Confidential Conclusion
    20. 20. <ul><li>Provide your customers the right products at the right time in the right place and at the right cost. </li></ul>PX Solutions, LLC Privileged & Confidential Improved Customer Service
    21. 21. <ul><li>Http://kpilibrary.com </li></ul><ul><li>5,113 established KPIs </li></ul><ul><li>Break down by: </li></ul><ul><ul><li>Industry </li></ul></ul><ul><ul><li>Process </li></ul></ul><ul><ul><li>ERP framework </li></ul></ul><ul><li>166 Supply chain, Inventory and Logistics </li></ul><ul><ul><li>Supply chain (47) </li></ul></ul><ul><ul><li>Warehouse (22) </li></ul></ul><ul><ul><li>Inventory (59) </li></ul></ul><ul><ul><li>Logistics (18) </li></ul></ul><ul><ul><li>Order fulfillment (30) </li></ul></ul><ul><ul><li>Shipments (20) </li></ul></ul>PX Solutions, LLC Privileged & Confidential Available Resource
    22. 22. Thank You Questions? PX Solutions, LLC Privileged & Confidential