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andy: everyone, thank you for taking the timeout to join us for our measuring and managing performance in supply chainand logistics operations webinar. this webinar in the next hour gives you a high-level overview of the topics that are covered as part of the class of the same name. this youropportunity to talk to an expert, ask a question, if you're interested we have acourse november 4th through 6th here on the georgia tech campus in atlanta, georgia. if you'd like to learn more about that course there's the url: www.scl.gatech.edu/mmpsclo. click on that, it'll give you each day's agenda, who the course it tailored for, and links to register online. today, our presenter will be paula ferguson. paula is a
consultant and she's a lecture forgeorgia tech. she specializes in demand driven supply chain networks. in particularshe specializes in strategic procurement and business performance management.here at georgia tech in scl she also teaches courses in demand driven supplynetworks and performance management systems. she's also the managing partnerof people with solutions. they're a boutique consulting firm. they're out of oklahoma.they specialize in assesing and redesigning supply chain networks for small andmedium companies. before that she led the strategic sourcing and performancemanagement practice for mrmplus partners. with that introduction, i'm going to go ahead and turn the session over to paula.
paula: good afternoon, everybody. i want towelcome all of you to this webinar. i was taking a look at the roster of participants and i am very excited to see that we have people from several countries inlatin america, from north america, and from asia, and a few from europe. so this is definitely adiverse crowd and i hope that i can give you some of the- an idea of some of thetopics that will be discussed during the measuring and managing performance seminar that will take place the first week of november and i also hope that we get a lot ofquestions today so we can hear a little bit about what are the concernsthat people in different parts of the globe
have when it comes to measuring and managing performance. so of course the first thing, first order of business, is to talk a little bit about why is performance measuring and management an important topic today. the first aspect of the relevance of this topic is of course leadership. managing performance, i'd say, is one of the top three responsibilities of leaders nowadays because it is onlythrough the measuring and managing of performance that you can really developthe potential of your team. which is of course is of the utter most importancefor leaders today. the second aspect
which is relevant is of course performance improvement.we are today dealing with a marketplace has become more global and more global, has become also more competitive. so only to the extent thatwe can exceeded every expectation in terms of performance in the marketplacewhere we are at, will be able to compete in these particular scenarios. so leadership,performance improvement, and then of course the data explosion. today we haveso much data available. it is so big. it has the potential to bedo detailed, so there's so many different ways in which it can be dissected and understood, that it can become very overwhelming. so only to theextent that you are able to manage the
way in which you are not only gathering that data, but using it for yourleadership purposes and to improve your performance you'll be able to get the best use outof the mountains and mountains of data that your erps and other systems are probably providingyou nowadays. so with that said, these are the three conceptual blocks, if you will, that we will be covering and discussing during our time in november at georgiatech. first of all, we're going to talk about performance metrics, which is ofcourse the basis of managing and measuring performance. then we're goingto be talking about dashboards which
i'm sure you know, thecompilation of the appropriate metrics in order to be presented, aligned, and used in a strategic way. and finally, we will discuss also whattype of strategic functions can be achieved through the use of performancemeasurements and the way in which we manage those. so lets talk a little bitabout performance metrics. the first and most important thing to understand is thatthere is four different types of performance metrics, and after about 10years of doing these i have yet to see a performance metric does not fitamong one of these. so the first ones are of course your financial metrics. those are those related
to the costs and you know the utilizationof financial resources within your organization. the second type of metrics arethe productivity metrics. a lot of us understand them also as efficiency metrics. and it basically refers to "what are we doing with the available resources?" byresources i mean of course our human talent, the assets that we have in thecompany, and of course those resources that we gather from third-parties, those words or those assets that comes from organizations outside of our own. sofinancial metrics, productivity metrics, the third type is what we know as velocity metrics. some people call them also time metrics, and they basically measure howlong does it take us to do something,
whatever the activity is. as you can imagine, the time it takes us to do something has implications not only the more evidentyou know day-to-day activities to measure performance but also in verykey aspects of our financial performance. these velocity metrics include, thinklike the cash to cash flow, cash to cash cycle. the purchasing cycle which has an impact in our receivable and payable accounts. so these type of metrics that are sometimes seen as less than crucial become very important when you think about theperformance metrics for your organization. and the last type of metric that we will explore are those related to quality, which is basically "what is the probability that whatever function we do is done
without making an error, is done perfectly?"so the first thing, the first question that i'd like to ask you today once we've taken a look at theseperformance metrics, is according to you, within your organization, whichon these types of metrics get more visibility? financial metrics, productivity metrics, velocity, or quality metrics? andy: so the question: which type of metricsget more visibility in your organization? if you just type your answer into thequestion chat window, we'd appreciate that. i see a couple of quality and a velocity answer, two or three folks, that looks like financial probably has the most.
paula: well i'm not surprised whatsoever. first of all, the financialperformance metrics are directly related to our financial statements in anorganization. so from that perspective it is very well understood that they'regonna have a lot of relevance, but also financial metrics are some of the easiest to build because the information is readily available because we're talkingabout money that comes in and out. so those types of transactions get very well documented within organizations. the productivity metrics are also very common in organizations. you guys are probably very familiar with metrics like lines per man hour or you know
deliveries per hour in a vehicle. what is important, and we will discuss this at length in november, is to set those metrics out properly. unfortunately we have a tendency to takea look at any number and consider it a performance metric, a kpi, when in reality, a lot of the information that we're gathering from our daily activities are not quite performance measurements, they are ratheractivity profiles. something that gives us an idea of what is going on, but that doesn't necessarily give us a judgement about something being done properlyor not, or the performance being sufficiently good
or not. what is true is that metrics likevelocity or quality are probably the most difficult and the least common of metrics because in many ways measuring them is very difficult. i mean ifyou think of the velocity metric, except for somebody will be there with a stopwatch and the beginning and end of every process you need veryautomated processes in order to be able to really capture how much time does it takeyou to do something to the point that you many of the consulting exercises thatwe've done in the last few years we usually you know go to people andask them how long would you say that
it takes you to do a or b, which is of course less than ideal, but a lot ofwhat we're going to talk about in november, you've got to crawlbefore you run, and it is preferable to have some information that may not be gathered in a perfect way than to have no information at all. so velocity metrics are not very common because they're difficult to collectdata for them. and quality even though it is an important one and people tend to look at quality metrics very closely, this is true for quality of products, quality of outputs. few companies take a close look an the quality of the processes that take place. and when we're talking
about performance management, in supply chain and logistics, it is key to talk about quality in the process of supply chain and logistics. so when we talk about quality alone, we will talk about quality innovember we're gonna talk less about the quality of the output of the productsthat we put out and worry about the quality of our supply chain andlogistics process. so once we understand well the type ofperformance metrics we will talk a little bit about how do you designperformance metrics. when you talk about designing performance metrics, theres five principals are key to follow. the first one is the balance. when you talk about financial, productivity, velocity, and
quality metrics, the reason why those four are there is because they really capture the definition of success from many different functions and many different stakeholders within an organization. soit is important that when you define performance metrics you have any balance that extends between these four types. the second principal is what we call the principle of alignment. this will be also discussed at length because i would say that if you forget everything that is to be said or has beensaid about performance metrics the word alignment is the number one word to remember. no performance of any function or any person within an organization is good in and of itself.
the performance of organizations, offunctions, and of people are good only to the extent that they support the goalsof the business. so it is key that the performance metrics that we design are aligned with the goals of the business. when we have for example an objective of improving thequality of our product because we are in a difficult, competitive environment and we are trying to take customers froma competitor. so we've decided to use the quality. probably performance metricsassociated with productivity will not be as strict. they won't be asdifficult to achieve because we want people to focus on quality. so that means your processes are done with a
little bit more of time or if there is a certain redundancy for example in the processes, that would beokay because that would be aligned with the objective of the rest.the third principal is the principal of control. there's few things more frustrating foran employee than to be measured for something that they cannot control. perhaps the only exception to this general rule is performance metrics that are associated with the general performance of the business. but of course i mean you need to have somebody who understands what is the role that they play in the general performance of the business so they havesome scheme in the game of the business
performing well as a whole. i unfortunately have encountered a number of organizations in which the businessis losing millions of dollars for the last five years andsomehow all the employees in the organization get their bonuses. because they did what the business needed them to do, or what people thought they needed to do. clearly, the results did not support that. so it is important that people have control over the metrics that areapplied to them, but there is also something to be said for having so muchfaith in the general performance of the business. the fourth principal for designingindicators is what is called lateral coherence.
you will create, when you designperformance metrics, metrics for different functions of the organization. as youknow, many functions in the organization have conflicting goals. but if you think about the goals of a commercial department for example of some sales people and thegoal of an inventory manager, their goals are conflicting. the sales person wants as many sku's available as possible, they want to be in inventory so they can promise theircustomers minutes in leadtime but even talk to the inventory manager, they want few sku's, little stock, no
safety stock, they want the customers to wait as long as they need hopefully to be made to order. soit is really important than when you have multiple functions with different goalsthat there is a coherence between when you are acting on one and when you are acting on the other. in my little example about the salesperson and the inventory manager,you cannot have the sales person to grow sales 20% and at the same time ask the inventory manager to reduce inventory costs by 20% because these are conflicting goals and you need your metricsto be coherent laterally. and finally, the metric of aggregability, which is the ability to agregate the
performance metrics from lower levels ofthe organization all the way up to their ceo or the president. and this is key because this is going to allow you to communicate higher within the organization providing them the information that they want. no ceo is interested in how many lines per hour the guy from the from the plans are accomplishing. he cares about the productivity metrics that will aggregate all the plans of the sales personnel or the inventory or the warehouses so he can talk about output per full-time employee, for example. so the concept of aggregability really what is going to make it possiblefor you guys to communicate your
performance to higher functions in theorganization. once we have discussed the principals of performance metrics we will also talk about some of the characteristics thatperformance metrics need to have to be expected to measure and to manageperformance in an organization. you probably are familiar to a certainextent with the acronym "smart". if you are not it is an easy way to remembersome of the characteristics of successful performance metrics. "smart" stands for "specific", "measurable", "attainable", "realistic", and "timely". they don't require a whole lot of explanationthey're pretty self explanatory but what
you can see is that these characteristics align pretty well with the principals to design performance metrics and we'retalking about specific and measurable measurable is the part that sometimes get complicated in certain in certain types of performance indicators like that the loss of quality attainanble, because again we sometimes have atendency to ask a lot from people and hope we are only going to get aportion of that performance but you know the more studiesthat are being made regarding managing performance more people realize that only to theextent that people feel that they expected performance is attainable forthem they actually put their efforts
into doing it otherwise when they knowthats never going to happen they just let go of that, they don't they don't put asmuch effort as they would. realistic and timely means that its something that can be measured in actual terms in real terms andin the appropriate time to really demonstratewhat the performance is. so those are the three things that will be discused when wetalk about the performance metrics themselves type, principal. once we've covered, in november, these three aspects of performance metrics we'regoing to talk a little bit about dashboards some of you may call them score cards
some call them performace boards. but in general what a dashboard is, is a tool i've seen them in their mostsophisticated of erps and i've seen them on excelspreadsheet but the thing is, it is a tool that allows you to agregate and tounderstand how the performance of function supports theperformance of the business in general i'd like to ask you hear how many of youhave a single dashboard and i'm not talking about financial statements but atool that captures different types of metrics for the whole organization. andy: ok so if you could type into the chat question window anybody out there if you have asingle dashboard where you can evaluate
or visualizes general performance let usknow. or if you have any other comments you can type youtype them in there as well. i see anybody saying that they have asingle dashboard. ok there's some people it lookslike some people have multiple dashboards and then some people havesingle dashboard but just for specific areas which are generated by different teams. somebody had made a comment that iso9001 compliant like they obviously have that as an initiative. somebodymentioned they have dashboard reports via excel files.
paula: and that's perfectly fine, the level ofsophistication of the tools used for the dashboard have absolutely nothing to do with the quality i'm glad to hear that there's some ofyou that have, if not a single tool, a variety of tools that capture all the performance some of you were mentioning somethingthat is key which is a lot of these dashboards are configured by different functions, by different organizations within a company that isabsolutely key. we tend to have a difficult time sharing tools or sharingthe way in which we measure or are capturing information and that is a problem in itself. when we discuss
how it'll be the concept of alignment in the dashboard we are definitely going to look in to that. and the otherthing that we're gonna talk about when we talk about alignment in the dashboard is that alignment has to be achieved not only across the organization but also upwards. when wetalk about alignment we are talking about the achievement of goals that support the objectives of the field we need to create tools that have these five performance metric because these are newmetrics that are important to your bosses bosses boss. so when you talk toa ceo they get paid to achieve growth, profitability, liquidity, efficiency, andto create value for all the stakeholders
not only the shareholders but all the stakeholders. you need to designed in a way in whichthey can become aligned with the ceo performance metrics that respond todecide. so alignment becomes the initial and most important aspect of dashboards. one of the ways achieving this is another componentof our discussion about dashboard that is going to be the three-dimensional aspect of dashboards you have probable see dashboards that have one dimension. maybe two. what do i mean by that, what is being measured. lets say we have lines per man hour and the perspective, or the contextin which it is being measured, meaning
lines per hour in the atlanta warehouse, lines in the oklahoma warehouse, so it is usually a two dimensional dashboard. today we are talking about three dimensional performance dashboards in which i not only have the object which is what is it that i'm measuring, and the context which is per line of product, per product, per warehouse, that i also have the perspective. because it turns out that what the shareholdersof the company wanted to know is not the same thing that ceo wants to know,is not the same thing that the author of the plans wants to know. so you need to create dashboards
you know will or i'll teach you and showyou how to build these that allow you to have not only aperspective of what to measure but also in whichcontext to be presented to who one thing that i would like to stress that will join that during art class innovember yuniesky that he would bring you your dashboard or your scorecard doyou want to feed and evaluate and analyze what he'd been through nationthat you're capturing and make the necessary adjustments during sure thatyou will you know take home a product that has been influenced bydifferentiation in the class so you know
we'll wait we expect you in atlantareading your words and their you're on to really work on then i make thembetter because of your fortification so that is for the ashford and i woke up iwas mentioned earlier the third on sexual block in november what do we dowith the performance metrics that we find and i really sign with theperformance i mean so i love you can imagine gets worse things than we dowith performance management fees to me first for what you don't measure you canyou not improve because well and you don't know what then they don'tbother you don't understand what components of that general notion of youknow what patient you quotes good
performance are new ones that need to beexpected to improve your performance so the first thing that you do when youmanage performances of course trying to improve that before the second one youchoose key for supply chain and logistics managers and directors florida justification i am sure that iam not alone in the feeling that you know the supply chain and logistics andprocurement function sometimes tend to be seen as carpenters you knowoperational activities that don't necessarily provide a lot of value tothe organization the only way in which you can really you know change thatfirst citation perceptions are you feel
a lot of organization used to justifybeing desmond the decisions that you make we've won in the end you butnothing will happen the general performance of the company and that canonly be achieved if you have a very close time there's time being how doyour activities in the general 448 a unique your performance measuredmeasures are aligned with beginner old company we do feel performance measuresso when you start thinking like he's going to be endangering a laid-offreturn of a project that i will put together why do you return them topic tell what do you mean that breastand bowel you if you really want to you
know provide comprehensive belief or or picture of being done any of yourproject which you know in supply chain and logistics for this thing to be anexpensive we we don't like little things that don't cost anything we wonmultimillion-dollar plan or you know that you have a mendota distributioncenter that cost three million dollars you really want to be able to go to aboard i'm say he's kind of money i need to tell them not necessarily how manymaintenance work talk like improving trends of the utilization of theopposite but i need to be able to tell them this is a very high in growth newvein but in terms of church music you
know delivery of the service promise toour customers so really i'm not there were you thinking of the performancemetrics if i've told that will be used to achieve our goals in terms of gainingmore resources for our supply chain and logistics and the third and perhaps themost important thing you know i'm so she added we disrupting you use ofperformance measurement thanks much better marking is the art ofcomparing yourself to get best in the business we are going to spend a goodamount of time discussing how to define banks warned that make sense that arelogical by forgetting about me sight beyond that i will if i should haveexpected things i'd expressly disclaim
geography exactly the same market i cannot concur with anybody but we have a tendency to do that can be ideal to sayokay needs company that is mary absolutely identical twins if performingin b minor and therefore that should be a benchmark for me but you know thereality of the world he said that he's very aware so you need to put together charging exercises by full-bodied youinsight about the opportunities for improvement then you will have in yourbusiness but died not necessarily 100% i lines there we know you'll need it sothose are the three lines of you know exploration that will have it during ourcurrency november will talk about how i
principles and quality of performancemetrics we will talk about best for you talk about the strategic use of theperformance metric and you know we will and i can send me that no word on theincluding an evaluation and i was ok 43004 car baltimore or dashboard so wecan really send you out of there which song thing that you can bring home andplay ok because of the last few days i was called for instance type of thingyou know they hold that i've been able to give you a good understanding of whatwe'll be doing in november and right now i would like to open it to to the parkpc penn central be to tell us what kind of questions you may hot ok thanks paula
if you have any questions please typethem into the question or chat window and we'll get to them i know we had somelook at my notes during the explosive performance metrics wide ass appearasking how do you apply lateral coherence with departments that haveconflicting goals i don't you mentioned a little bit about the sales andwarehousing example but maybe you could talk a little bit more to thatabsolutely you know that he's niece true of most within a company that's been buried befine of the organizational chart for manycompanies is driven by having violence
between you know that they'll be finegold because he might do if you let people run the company then you wouldhave the chief there's a full kind you would have a year contract withsuppliers you know tom so while you but you may be in trouble in terms of thequality of the home phone and you may be in trouble in turn you know yourinventory holding costs because of course volume that we are we are weeating too much salt does carrying it is very expensive so it is very sad that hewas seized and that we performing metrix 4g friend functions are not a hundredpercent you know i need a time you fucked up those forms of you can get andthe problem with that is that by
everybody doing their best performanceof the company gets worse so you end up with you know put your man trying tosave as much as possible that production people trying to utilize the plan'sassets as much of sports they meant three people trying to reduce inventorycarrying costs as much charcoal fuel and you make all that go there putting alltheir function so it is important to be working conditions with creatingperformance dashboards that tale a production manager et's ok for the nextyear to utilize assets i just sixty percent it's ok that's where i want you to bebecause we hear you need my world either
so i'm gonna be introducing 20% morris kyou may need you to run short production budgets for example tell the actualcomputer into one of the heart it brings people to achieve but you know companiesare complex system i'm by definition a complex system file a legal adult do iwhen you saw a few my its component so i mean if you find difficult one but youcertainly are very relevant one we had a comment earlier it's justin directlyrelate to conflicting goals but they made a comment that they don't have itdashboard but they're looking to develop some for supply chain and logisticsmetrics like an on-time delivery if they mention the challenges doing it in amanner that departments which have
nothing to do with supply chain andlogistics like how to do it for those groups that don't have a greatunderstanding of supply chain and logistics like a very very relevantquestion and the short answer is your take on the performance of those youknow when they're on their result from dole's performance metrics letting methink about a foot your angle for example that say you'll need to achieve30% savings through the use of alternate source that is something that we see allfriends i worked a lot in the aerospace industry and this is something that youfeel i'm because we're talking about to that are extremely expensive to maintainthat helped a bit follow me that for you
to be able to you during the source saysyou need the support of people like engineering quality the governor we havea lot of knowledge in terms of you know what you represent to have serioussaving in the first two important so i'm thebeginning those people move very well tell you about you know i don't care howmuch you need to say i have risked managing concerns and those are the onesthat i'm gonna be the only when you go to engineering and quality and say okengineering and quality people 5% or liberties of your bonus for example thisyear will be driven by the number off for example or no growth alternate jurorsays media so there are ways of making
the accomplishment of metrics somethingimportant for everybody there something i guess i should be included on alltheir principal of creating performance metrics which you people do whatever youpaid them to do so think about whatever it is if you need somebody they sent todrunken fish something they will accomplish just meet you ensure thatboth incentives are aligned with what the company wants otherwise you may verywell be paying them to you know driving to see but it is true that you're gonnahave organizations not only that don't care about how you perform but thatbecause of the nature of they work on their work don't want you to perform aswell as you'd like to perform you need
to make it important for death or buildgoals to be accurate on the subject of metrics we had aquestion can you speak to the dangers of metric dilution i'm not sure exactly what they needdilutions so i don't know if the person who made the question kind of lottery alittle talk a little bit hopefully tonight who fought in which is dilutionby the number of metrics then you end up in general you know there's so much thathe liked you have a few metric that's close to all that capture theperformance of the organization but as usual down the organ failure keep youwill equal sometimes one enormous as
much as i thought you all abouteverything for you to call me flight you know when you have too many metrics youknow there's none are important to get gas would i i guess right about the thewhat she meant by tyler sure you're absolutely correct these have very realrisk i'm very real danger it happens we did a lot of frequency data you'll haveno i hundred page report that don't really tell you i think about how theirperformance off john and peter and sean and their worst house is contributing tothe accomplishments of the goals of the business get there i'm sure to die easy to createmetric that haha alignment but you can
tell that by utilization of bees machinein the plan you are in 15 they you know the us that the return on investment soyou can only and you know me i love them being metric colbert will not cost a lotof metrics you'll end up realizing that they called it may be nice to knownothing but a lot of them don't pass the test can i kill zombies metric indiesfunctionaries contributing to the call of the business or not about me the number 12 is that i wouldput all these metrics slide we talked about performancedashboard alignment with you know growth profitability liquidity efficiency valuecreation there was a question what about
objectives recording the environmentaland social impact ok well in general when we talk about profitability wespeak to mr dunn money there is i'm sure you're a lot of york and you know whathe called the triple baseline three-piece people planet and profit sowhen we talk about and value creation for the stakeholders number futility weare really talking about yr dole money this performance doingthis they called herself a company that the shareholders include me environmentyou can be employees and the communities in which a company has an invite cuddle the fried relating to try but try tomention or performance dashboards when
you are you are trusting object contextand perspective of that yes people somebody was asking like how many kpidashboard have okay and you know a little bit to the point you were makingtheir we're young series and the answer to imagine 5% of the questions youliking management's beliefs said that i'm gonna give my students t-shirts thatsay independent that is not a final answer to that question it depends onyou know was how many objects you have to measure how many contacts do you haveand how many perspective the need to address you know in the end of the dayit depends on how many as 60 for form and you need to capture to make sure godthe dvd for fetal on the day-to-day
on their day-to-day job i reallycontributing to that company's performance of hope radar though the city but if anybodyhave any more questions please feel free to type them into the question chatwindow of what we look for those it will help everybody thought this wasinteresting if you have to if you're interested in coming to or coerce meplease take a look at the course page at the url that's noted on the list lastwide if you have any questions that you think of about the subject matter whatthe course of after we hang up today which led them to a webinar at seldachau technology you will get back to
you as soon as we can also wanted tomention we have different accounts with us social media outlets with facebookpage if you just go to do research on georgia tech is here you'll find we havea twitter account so if you follow was you'll get updates on courses of thatsomething we post tweet about interesting articles related supplychain logistics on a daily basis we have a couple of linkedin groups if you do asort search on georgia tech supply chain those powerful we have one just forgeneral community of we have one specific to arlene alumni utley group ofalso what you look at the georgia tech we have a new initiative supply chainnetwork you can read a little bit more
about that on that linkedin group pagealso we have a youtube channel youtube.com / gts yell where you'll findyou'll find this archive when it's available other archives of previous sessions ifyou're interested some other chain areas like warehousing demand planningsourcing those types of those types of areas i guess other than that we don'thave any immediate question so you know i want to thank everybody fortaking the time i i know the truth there's people out there different timezone through its morning afternoon or evening sexy and other than that paulathank you so much for your time we
appreciate it was you know people willhave your back seat thanks thank you
