T2-4: Enterprise performance

1. T2-4: Enterprise performance Chin-Sheng Chen Florida International University

2. T2-4: Enterprise performance • Performance measure types • Cost • Lead time • Quality • Benefit (profit)

3. The ESE Framework –Re-visit

4. Readings & References • Readings: • HEA: • Reference • Strategy Maps by Robert Kaplan and David Norton, HBS Press, 2004

5. Performance measure • Foundation for performance measure • Mission>value>vision>strategy (game plan)>strategy map (implementation plan)>performance measure

6. Performance measure • Performance measure levels • At corporate level (financial perspective) • Core performance indicators (CPI) • At division (profit center) level (customer perspective) • Key performance indicators (KPI) • At dept. (cost center) level (internal process perspective) • Department performance indicators (DPI) • At individual level (learning & growth perspective) • Personal performance indicators (PI)

7. Performance measure • CPI: From financial perspective for long-term shareholder value • Strategy types • Productivity strategy • Improve cost structure • Measures: cash expense reduction, defect elimination, yield improvement • Increase asset utilization • Measures: resource utilization, bottleneck elimination • Growth strategy • Expand revenue opportunities • Measures: new revenue sources (new products, markets, partners) • Enhance customer value • Measures: profitability improvement (of existing customers)

8. Performance measure • KPI, From customer perspective • Customer value proposition • Product attributes: price, quality, availability, selection, and functionality • Relationship: service and partnership • Image: brand • Cost-related strategy • Measures: lowest cost supplier, • Quality related strategy • Measures: product performance, quality consistency, quality of solution to customer, • Time related strategy • Measures: availability, first to market, response time • Benefit related strategy • Measures: high switching cost to customers, customer retention, customer’s product lifetime profitability

9. Performance measure • KPI Example • Cost-related • Meting target revenue • Indirect cost ratio • Labor resource utilization • Direct/indirect labor ratio • Equipment resource utilization • Quality related • CDR • Rework counts • T1 accomplishment rate • # of Tests to delivery • Accomplishment rate • Time related • Quotation/EC turnaround time • In-time delivery • Benefit/goodwill • Industrial safety • Customer satisfaction

10. Performance measure • DPI, from internal process perspective (1) • For operations management processes • Supply • Production • Distribution • Risk management • For customer management processes • Selection • Acquisition • Retention • growth

11. Performance measure • DPI, from internal process perspective (2) • For innovation processes • Opportunity ID • R&D portfolio • Design and development • Launch • For regulatory and social processes • Environment • Safety and health • Employment • community

12. Performance measure • DPI, from learning and growth perspective • For human resource • Skills • Training • Knowledge • For information • Systems • Database • Network • For organization structure • Culture • Alignment • Leadership • Teamwork

13. Performance measure • DPI, a generic example • Cost-related • Sales, overhead, gross profit, average revenue per head count, worker & machine utilization • Quality-related • Number of try-outs, rework, IPQC, first article quality, product quality at shipping. • Time-related • Turnaround time • Benefit related • Customer satisfaction

14. Performance measure • DPI, specific example – production engineering • Department overall performance • From sub-departments and/or • From all workers in the dept. • Organization • Resources readiness (counts) • Resources readiness (competence) • Individual (head) • Planning capability (% of work planned) • TQM/6-sigma project • Patent application • Employee training • Industrial safety

15. Performance measure • PI, varying by individual’s functionality (& personal objectives) • Cost-related • Resources uptime • Resources utilization • Expense and overhead • Quality-related • Work quality • Re-work rate • Time-related • In-time work completion • Response time • Benefit related • Customer satisfaction

16. Performance measure • PI, an Example • For a machining worker • Equipment uptime • In-time work completion • Work quality • Tooling consumption rate • Equipment utilization • CAD/CAM worker • Program error • In-time work completion • Tooling consumption rate • Equipment utilization • For a design worker • In-time work completion • Design change rate • Design for manufacturability

17. Performance measure • Specific PI example – production engineer • MPI accomplishment counts • EC accomplishment rate • Test accomplishment rate • Test counts to delivery • Work load • 6 sigma • Training • Industrial safety

18. T7: Exercise • Design a DPI and PI and justify your design for: • A machining department, or • An FIU academic department (say, ISE) • The design should include, for each indicator • its name, formula, target value, data source, frequency, and weight. • Due: Next Week

19. Comments on T7 HW • Each performance measure is a formula or model. It should be quantitative and thus objective. • A target value can be a number, or a range. • The measured value and target value of each performance measure forms the basis for its performance (rating).