Driving to the Effective Enterprise With KPI's Michael Hennessey Director, Solution Consulting, QAD Explore 2012

Driving to the Effective Enterprise With KPI's

Michael HennesseyDirector, Solution Consulting, QAD

Explore 2012

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Driving to the Effective Enterprise with KPI's

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• 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

Overview


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Where every business process is working at peak efficiency and

perfectly aligned to the company’s strategic goals.

The Effective Enterprise


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‘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

The First Questions:


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• 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.

What is Our Mission? Examples


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Delivering the Effective Enterprise


Plan

DesignOperational

Model

Do

Implement Operational Model

Check

Measure Results, Monitor

Performance

Act

Refine & Strive for

Improvement

The Deming Model

“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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• KPI’s monitor the effectiveness of end-to-end 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

Why KPI’s?


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• 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.

Align Metrics to the Value Chain


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• 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.

Align KPI’s


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QAD KPI’s & Business Performance


Return on Net Assets

Net Income

Net Assets

Revenue

Costs

Working Capital

Fixed Assets

COGS

R&D

SG&A

Distribution

Inventory

Receivables

Cash

Gro

wth

& P

rofi

tab

ilit

yC

ap

ital

Uti

lizati

on

QAD Key Performance Indicators (KPI’s)


Growth & Profitability Capital Utilization

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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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Sub-Metrics: Inventory Effectiveness


Forecast Accuracy

Inventory Accuracy

Supplier Delivery Performance

Requirements Plan Accuracy

Unplanned Downtime

Schedule Achievement

Excess Safety Stock

Obsolete Inventory

Production Plan Accuracy

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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Business Strategies to Improve Metrics


Inventory Accuracy

Inventory Turns

Safety Stock Level

Forecast Accuracy


Unplanned Maintenance


Inventory Turns


Obsolete Inventory Ratio

Forecast Accuracy


Safety Stock

Utilize Industry Forecast Data

Deploy Forecast Review Process

Deploy S&OP Feedback Loop

Solicit Varied Input

Leverage SophisticatedForecasting Systems

Historical Data

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Strategy Enablers Within QAD Applications


Leverage SophisticatedForecasting Systems

QAD Demand Management

QAD Customer Relationship Management

QAD Forecasting Application

QAD Quote Management

QAD BI, Browse, Reports

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• 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...

QAD Tools - Analytics


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Op Metrics – Inventory Metrics


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Alerts & Reports – (Condition Out of Tolerance)


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QAD BI 3.x – Dashboard Example


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QAD BI 3.x - Inventory Dashboard ExampleDriving to the Effective Enterprise with KPI's

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QAD BI Roadmap


BI 3.7 Sept

BI 3.5 exists

BI 3.6 March

Future – 2013+

to be determined

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• 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

Customer Example


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• 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

Summary


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• 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

Make a Start


“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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Michael A. HennesseyDirector, Solution Consulting, [email protected]

Questions & Answers


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www.qad.com© QAD Inc 2012

http://www.qad.com/

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Driving to the Effective Enterprise With KPI's Michael Hennessey Director, Solution Consulting, QAD Explore 2012