Driving to the Effective Enterprise with KPI`s

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Explore 2012
Driving to the Effective Enterprise With KPI's
Michael Hennessey
Director, Solution Consulting, QAD
Driving to the Effective Enterprise with KPI's
Safe Harbor Statement
The following is intended to outline QAD’s general
product direction. It is intended for information
purposes only, and may not be incorporated into
any contract. It is not a commitment to deliver
any material, code, functional capabilities, and
should not be relied upon in making purchasing
decisions. The development, release, and timing
of any features or functional capabilities
described for QAD’s products remains at the sole
discretion of QAD.
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Driving to the Effective Enterprise with KPI's
Overview
• Session overview
- Learn how QAD's KPI's, Metrics, best practices and
analytical tools can help monitor and drive to the
effective enterprise.
• Speaker
- Michael Hennessey
• Focus
- Concept and details around QAD’s KPI framework
• Objectives
- Alignment of customer business objectives with Key
Performance Indicators
- Provides KPI framework for identifying best practices
- Establishes a closed-loop monitoring on performance
improvement with a dashboard and metrics
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Driving to the Effective Enterprise with KPI's
The Effective Enterprise
Where every business process is working
at peak efficiency and perfectly
aligned to the company’s strategic
goals.
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Driving to the Effective Enterprise with KPI's
The First Questions:
‘Five essential questions’ to ask about an
organization:
• What is our mission?
• Who is our customer?
• What does the customer value?
• What are our results?
• What is our plan?
Peter Drucker
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Driving to the Effective Enterprise with KPI's
What is Our Mission? Examples
•
Our mission is to "Be the best in the eyes of our customers, employees
and shareholders.“ American Standard
•
Undisputed Marketplace Leadership. Hershey
•
We will be the easiest pharmacy retailer for customers to use. CVS
•
Workforce diversity gives us access to a world of different ideas and
perspectives. XXX XXX is committed to maintaining a corporate culture
where men and women of all ages, races, physical abilities, preferences
and backgrounds are treated with dignity and respect. At XXX XXX we
recognize that when diversity is valued and respected the results are
improved service, customer satisfaction and a positive community
image. We believe our employees make a world of difference and work
to maintain an environment where diversity and inclusion is a critical
component of our success. Our Diversity Vision To build a high
performing environment where individual differences and contributions
of employees, customers and business partners are respected and
valued, the result of which is a business organization where fairness, trust
and integrity govern relationships and the way we do business.
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Driving to the Effective Enterprise with KPI's
Delivering the Effective Enterprise
The Deming Model
Plan
Do
Design
Operational
Model
Implement
Operational
Model
Check
Measure
Results,
Monitor
Performance
Act
Refine &
Strive for
Improvement
“Certainly we want good results, but management by
results is not the way to get good results…work on the
causes of results”
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Driving to the Effective Enterprise with KPI's
Why KPI’s?
• KPI’s monitor the effectiveness of end-toend business processes
• Business processes can involve many
departments and business units in an
organization.
• They help focus Business Operations to
achieve the overall strategic goals of a
company or corporation.
• Complacency can be prevented and value
optimized for the end customer
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Driving to the Effective Enterprise with KPI's
Align Metrics to the Value Chain
• Measures like service levels, inventory,
utilization and cash-flow averaged across
the business, don’t give a clear indication as
to where the problems lie and what drives
Value.
• Applying a ‘cookie-cutter’ model to
different processes results in averaging
• The good processes compensate for the
bad, and the bad bring down the good.
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Driving to the Effective Enterprise with KPI's
Align KPI’s
• Align KPIs with deliberately chosen
performance results.
• Spend time working out the performance results
to align KPIs with, before you worry about what
the KPIs themselves will be.
• Establish KPIs that monitor:
- The most important outputs that the organization
exists to produce
- The greatest influences in support of the results the
organization exists to achieve.
- The results of critically important steps in the business
process, the in-process drivers of its outputs.
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Driving to the Effective Enterprise with KPI's
QAD KPI’s & Business Performance
Net
Income
COGS
Costs
R&D
SG&A
Return on
Net Assets
Growth & Profitability
Revenue
Distribution
Working
Capital
Receivables
Cash
Net Assets
Fixed
Assets
Capital Utilization
Inventory
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Driving to the Effective Enterprise with KPI's
QAD Key Performance Indicators (KPI’s)
Growth & Profitability
Capital Utilization
Driving to the Effective Enterprise with KPI's
Inventory Effectiveness - KPI
Description:
Inventory Effectiveness measures the
process of having the right part at the
right place at the right time, with
minimal investment to ensure that
deliveries meet the customer
requirements.
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Driving to the Effective Enterprise with KPI's
Sub-Metrics: Inventory Effectiveness
Certainly we want good
results, but management
by results is not the way
to get good results…work
on the causes of results
Obsolete Inventory
Excess Safety Stock
Schedule Achievement
Unplanned Downtime
Production Plan Accuracy
Supplier Delivery Performance
Requirements Plan Accuracy
Inventory Accuracy
Forecast Accuracy
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Driving to the Effective Enterprise with KPI's
Business Strategies to Improve Metrics
Leverage Sophisticated
Forecasting Systems
Forecast Accuracy
Forecast Accuracy
Inventory
Turns
Inventory
Turns
Solicit Varied Input
Deploy Forecast Review
Process
Inventory Accuracy
Safety Stock
Level
Production
Plan
Accuracy
Utilize Industry Forecast Data
Requirements Plan
Safety Stock
Accuracy
Production Plan
Requirements
Plan Accuracy
Accuracy
Deploy S&OP Feedback Loop
Unplanned Maintenance
Obsolete Inventory Ratio
Historical Data
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Driving to the Effective Enterprise with KPI's
Strategy Enablers Within QAD Applications
QAD Forecasting Application
Leverage Sophisticated
Forecasting Systems
QAD Demand Management
QAD Customer Relationship
Management
QAD Quote Management
QAD BI, Browse, Reports
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Driving to the Effective Enterprise with KPI's
QAD Tools - Analytics
• Operational metrics and browses
- at the operational level
• Alerts and reports
- at a tactical level
• Business intelligence dashboards etc.
- in aggregate
• And good consulting services to help
customers ensure alignment...
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Driving to the Effective Enterprise with KPI's
Op Metrics – Inventory Metrics
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Driving to the Effective Enterprise with KPI's
Alerts & Reports – (Condition Out of Tolerance)
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Driving to the Effective Enterprise with KPI's
QAD BI 3.x – Dashboard Example
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Driving to the Effective Enterprise with KPI's
QAD BI 3.x - Inventory Dashboard Example
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Driving to the Effective Enterprise with KPI's
QAD BI Roadmap
BI 3.5 exists
BI 3.6 March
BI 3.7 Sept
Future –
2013+
to be
determined
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Driving to the Effective Enterprise with KPI's
Customer Example
• Customer Strategy:
- Develop and maintain a competitive edge
through constant technical product innovation –
30% + of revenue should be derived from ‘new’
products incorporating new technologies.
• KPI: “Technology Vitality Index”
• Measures the revenue generated from new
product sales (‘new product = introduced in
last 4 years
• How measured: Using QAD BI 3
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Driving to the Effective Enterprise with KPI's
Summary
• The value of performance measurement is
evident in how it has transformed
performance
• Choose a goal
• Make your goal measurable by teasing out
the performance result(s) it implies
• Name and describe your selected measure
• Define exactly how to calculate your
measure’s values
• Interpret what your measure is saying, and
understand why it’s saying that
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Driving to the Effective Enterprise with KPI's
Make a Start
• Many people are on a quest to find the
perfect performance measures or KPIs.
• Buy-in matters more than the perfect KPI
• Collaborate to choose a few reasonably
good KPIs that they feel confident in
• Start with QAD standard offerings & use the
tools available to refine existing or create
new
• Engage QAD Services to help
“It is wrong to suppose that if you can’t measure it, you can’t
manage it – a costly myth”
W. Edwards Deming
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Driving to the Effective Enterprise with KPI's
Questions & Answers
Michael A. Hennessey
Director, Solution Consulting, QAD
[email protected]
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www.qad.com
© QAD Inc 2012
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