Jakarta, 16 October Dr. Sonny Irawan

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1 How to Manage KPI to become Effective Enterprise Jakarta, 16 October 2012 Dr. Sonny Irawan

2 ENTERPRISE EFFECTIVENESS Definition where every business process is working at peak efficiency and perfectly aligned to company s strategic goals Effective Enterprise 2/22

3 BUSINESS STRATEGY AND STRATEGIC GOALS Most of companies has formulated their Business Strategy Business Strategy consists of several Strategic Goals Business Strategy Strategic Goal 1 Strategic Goal 2 Strategic Goal 3 Strategic Goal 4 Strategic Goal 5 - Effective Enterprise 3/22

4 WHY ORGANIZATIONS NEED A BUSINESS STRATEGY Positioning the organization externally Organizations need to allocate and adjust their resources and capabilities with their business environment in order to win the competition Aligning the organization internally To mobilize every part and every member of the organization to make decision, change and improvements in accordance with the strategy to achieve and sustain the competitive advantage Effective Enterprise 4/22

5 MANUFACTURING CHALLENGES Level Quality Speed Cost Quantity (Lot Size) Price Time Effective Enterprise 5/22

6 3 STEPS IN STRATEGY MANANAGEMENT Effective Enterprise 6/22

7 MANUFACTURING STRATEGY Example Low-Total Cost Strategy Driving the organization s total costs down below the total costs of rivals. Manufacturing at lower costs by reducing scrap, machine down time, inventory level. Lower costs than competition means that the low cost producer can sell for less and still be profitable or. even more profitable Effective Enterprise 7/22

8 STRATEGIC GOALS Examples 1. Improve Customer Satisfaction 2. Reducing Cost of Good Sold 3. Improve Delivery Performance 4. Optimize Machine Utilization 5. Reduce Inventory Level 6. Decrease Machine Downtime 7. Increase Supplier Performance Effective Enterprise 8/22

9 PLANNING TO ACHIEVE STRATEGIC GOALS Strategic Goals: What the strategy is trying to achieve Measures: How success or failure (performance) against objectives is monitored Targets: The level of performance or rate of improvement needed Strategic Initiatives: Key action programs required to achieve targets Strategic Goals Measures Targets Strategic Initiatives Reducing Inventory Level significantly Inventory Turns Inventory Accuracy 10.> 95% Lean Manufacturing Cycle Counting Metrics (KPI) Best Practice Related Modules Effective Enterprise 9/22

10 QAD KPI Framework Inventory Effectiveness Metrics Expedited Orders Inventory Turns Inventory Accuracy Safety Stock Stockouts Obsolete Inventory Best Practices Sales & Operations Planning Forecasting Techniques Cycle Counting Dynamic Location Assignment Wave Picking Container Management Bar Coding / RF Lean Manufacturing MRO Management Postponement Spares Management Vendor Managed Inventory Related Modules QAD Manufacturing QAD Warehousing QAD Supply Chain Portal QAD Demand Management QAD Distribution Rqmts Plan QAD Enterprise Asset Mgmt Data Collection 10

11 ON BECOMING EFFECTIVE ENTERPRISE GENERIC MANUFACTURING STRATEGIES COMPETING BASED ON Quality E F F E C T I V E Engaging Leadership People Engagement Process Improvement Speed Cost E N T E R P R I S E Effective Enterprise 11/22

12 HOW IS THE COMPANY STRATEGY SHARED WITHIN THE ORGANIZATION? is it like this? or... like this? Effective Enterprise 12/22

13 GOAL ALIGNMENT Effective Enterprise 13/22

14 GOAL ALIGNMENT Corporate QCD Department QCD Department QCD Department QCD Line/Area QCD Effective Enterprise Line/Area QCD Line/Area QCD 14/22 13

15 CASCADED/DEPLOYED KPI Example from Food Manufacturer Level QUALITY COST DELIVERY Factory First Time Quality Customer Complaint Compliance Material Losses Capacity Utilization Customer Claim Master Schedule Attainment Output Department First Time Quality On Time Release Rework Over Filling Machine Downtime Schedule Achievement Output OE Line/Area Blocked Pallets Leak Sachet Rejected FG on X-Ray Rework Waste Over Filling Machine Downtime Bulk Output FG Output Effective Enterprise 15/22

16 COMPETING BASED ON QUALITY Example of KPI Top Mgmt Customer Complaint Customer Claim Supply Chain Supplier Quality Performance Total Scrap Total Waste Material RM Warehouse RM Reject Line Line Scrap per Line Waste Material per Line Effective Enterprise 16/22

17 COMPETING BASED ON SPEED/CUSTOMER SERVICE/DELIVERY Example of KPI Top Mgmt Delivery in Full On Time (DIFOT) Supply Chain Transportation Efficiency Schedule Achievement Warehouse Line Line Unplanned Downtime Inventory Accuracy Effective Enterprise 17/22

18 COMPETING BASED ON COST Example of KPI Top Mgmt COGS Cost Variance Supply Chain PPIC Purchase Price Variance Procurement Cost Line Line Cost per unit Capacity Utilization BOM Accuracy Effective Enterprise 18/22

19 MANAGING KPI TO ACHIEVE STRATEGIC GOALS Review Frequency Top Mgmt COGS Cost Variance Monthly Supply Chain Purchase Price Variance Procurement Cost Cost per unit Weekly PPIC Line Line Capacity Utilization Daily BOM Accuracy Effective Enterprise 19/22

20 DAILY REVIEW Example 800 Daily KPI : Scrap [ppm] Action Corrective Preventive > 300 < Effective Enterprise 20/22

21 HOW QAD CAN SUPPORT THIS? COGS Cost Variance Cost per unit Line Utilization BI Translate into Information Needed in-time to each Level QAD Provide Raw Data Effective Enterprise 21/22

22 SUSTAINABLE ADVANTAGE The ability to learn [and continuously improve] faster than your competitors may be the only truly sustainable competitive advantage. Effective Enterprise 22/22

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