T2-4: Enterprise performance

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T2-4 Enterprise performance

• Fall 2013
• Chin-Sheng Chen
• Florida International University

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T2-4 Enterprise performance

• Performance measure types
• Cost
• Lead time
• Quality
• Benefit (profit)

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The ESE Framework Re-visit
Enterprise element Work Decision Resource Information
System facet Strategy Competency (capability) Capacity Structure
Engineering activity Specification Analysis Design implementation
Performance measure Quality Time Cost Benefit (profit)
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Readings References

• Readings
• HEA
• Reference
• Strategy Maps by Robert Kaplan and David Norton,
  HBS Press, 2004

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Performance measure

• Foundation for performance measure
• Missiongtvaluegtvisiongtstrategy (game
  plan)gtstrategy map (implementation
  plan)gtperformance measure

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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)

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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)

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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, customers product lifetime
  profitability

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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

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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

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Performance measure

• DPI, from internal process perspective (2)
• For innovation processes
• Opportunity ID
• RD portfolio
• Design and development
• Launch
• For regulatory and social processes
• Environment
• Safety and health
• Employment
• community

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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

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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

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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

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Performance measure

• PI, varying by individuals 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

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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

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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

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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

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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).