1209400

Performance Measurement in Supply Chain

Aj.Thunwa Kaewket
thunwa.kae@mfu.ac.th
 Learning Objectives
• What is Performance Measurement?
• Why measure performance?
What is Performance Measurement?

WHAT
23 points per game (ppg)

Question:
Good Player ?
Bad Player ?
Great Player ?
Rebound
Block shot
Steal ball
Make mistake
Foul
23 points per game (PPG)
10 rebounds (RPG)
15 assists per game (APG)
7 steals per game (SPG)

Question:
Good Player ?
Bad Player ?
Great Player ?
Point?
Minutes?
Possession?
 10 Points
30 Minutes
8 Possessions
9 Rebounds
2 Block shots
6 Steal balls
Can you make a decision?
What other types of data do you want?
 23 points per game (PPG)
10 rebounds (RPG)
15 assists per game (APG)
7 steals per game (SPG)

Tall player (25 yrs) VS worst defenders

Or
Tall player (25yrs) VS 5-year-old children
‘Not every data is efficiency of helping make a good decision’
Good system of metrics need to provide information:

Effective

adaptive Efficient
 What is Performance Measurement?

• Performance Measure: Represents a

numerical expression of how well something
(be it a process, system, individual, etc.) is or
has extent to which a desired outcome or
output is being achieved.
 What is Performance Measurement?

• Performance Measurement: The process of

measuring actual outcomes or the end goal
of performance, as well as the means of
achieving that outcome as represented by
in-process measures.
 Performance Measures
• What you measure is what you get
• Performance measures strongly affect the
behavior of managers and employees
• Tailor your performance measures to fit
company’s mission and strategy
• Over-reliance of a single measure might be
detrimental to company’s long-term
survivability
 Challenges to Performance
Measurements

• Measure only the right things

• Avoid meaningless efforts
• Use the results proactively and
productively
Why measure performance?

WHY
 Why measure performance?
• If the chief executive officer (CEO) of you
company challenged you to cut the average
cycle time of a particularly troublesome and
costly process by 50% over the next 12
month?
 Why measure performance?
• Establish the baseline cycle time of the current
process.
• Calculate your goal.
• Determine the gap or delta between the
current cycle time and targeted cycle time.
• Develop and implement a process
improvement solution.
• Throughout the year measure the current
cycle time.
 Why measure performance?

‘When you can measure what you are speaking

about and express it in numbers, you know
something about it’
Kelvin

‘You cannot manage what you cannot measure’

Anon
 Why measure performance?
• Identifying and tracking progress against
organization goals
• Identifying opportunities for improvement
• Comparing performance against both internal
and external standards
 Benefits of Measurement
• Identify whether we are meeting customer
requirement
• Help us understand our processes
• Ensure decision are based on fact, not on emotion
• Show where improvement need to be made
• Show if improvements actually happened
• Reveal problems that bias, emotion, and longevity
cover up
• Identify whether supplier are meeting our
requirements
 Why do we need to measure?
• Control: measurement help to reduce
variation
• Self-assessment: how well a process is doing
• Continuous improvement
• Management assessment
PDCA cycle
 PDCA
• To ensure customer requirements have been met
• To be able to set sensible objectives and comply
with them
• To provide standards for establishing comparison
• To provide visibility and a ‘scoreboard’ for people
to monitor their own performance level
• To highlight quality problems and determine
areas for priority attention
• To provide feedback for driving the improvement
effort
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Cost of Quality

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Performance measurement framework
Focus on the customer and measure the right things
• Meaningful, unambiguous and widely understood
• Owned and managed by the teams within the
organization
• Based on a high level of data integrity
• Such that data collection is embedded within the
normal procedures
• Able to drive improvement
• Linked to critical goals and key drivers of the
organization
Performance measurement framework in short

• The strategic objectives of the organization are

translated into performance targets
• Performance indicators are developed to
compare the desired performance with the actual
achieved performance
• Gaps are identified
• And improvement actions identified

Establish key Establish Understand Initiate

goals metrics performance improvement

Implement and review

 Step 1

Specific

Time
Measureable
Sensitive
SMART

Realistic Achievable
 S.M.A.R.T
• Specific – goals are to be specific as possible
• Measurable – goal must be measurable both
qualitative and quantitative
• Achievable – must be achievable, but should
be formulated as a challenge
• Realistic – goal has to be achievable, and must
also be realistic and result oriented
• Time Sensitive – time limit
 Step 2
• Define ‘outcome metrics’
• What has to be measured to determine if
these goals are being achieved?
• Drivers – ‘What measurable factors influence
this outcome?’
• Driver metrics – driver metrics at one level will
be outcome metrics at the next level
Step 3 – understand current
performance

Effectiveness

Efficiency

Productivity
 Resource actually used x 100%
Efficiency =
Resource planned to be used

Actual output x 100%

Effectiveness =
Expected output

Output
Productivity =
Input
 Data collection
• Set up a system for collecting data
• Write clear definitions
• Agree method for establishing current
performance
• List resources required to support the design
• Agree data formats and classifications for
aggregation and consolidation
 Design data collection
• Identify possible sources of benchmark data
• Set reporting calendar
• Establish roles and responsibilities
• Detail training requirements
• Validate with process stakeholders
 Desired performance

Gap
Between
Current performance current and
desired

Step 4
Implement the performance measurement
framework
- Plan with timescales and designated
responsibilities is needed
 Key Performance Index
• Indicators showing what needs to be done in
an internal operative perspective
• Focus on the part of organization’s
performance both present time and future
• Good KPI affect a number of critical success
factors
 7 characteristics for KPI
• Non-financial measure
• Regular measurements
• A measure that is noticed by the management
• Everyone in the organization has an
understanding for the KPI
• Responsibility connection to individuals and
teams
• Significant effect
• Positive effect