Know more Act Better: Launching KPI Reporting & Benchmarking Framework

Transcription

1 Know more Act Better: Launching KPI Reporting & Benchmarking Framework JANUARY 2012

2 Abstract In today s competitive scenario of commoditization of products and services, technology is no longer a differentiator. During these times of unprecedented change, the characteristic and capability that matter most is the ability to extract value from the business drivers. Revenue, flexibility, speed, efficiency and cost are these fundamental drivers that drive the enterprise and its supply chain. Capturing KPIs and benchmarking is an improvement technique that considers how others perform a similar activity, task, process or function. Continuous health check up of the enterprise supply chain through Key Performance Indicators (KPI) measurement, as well as its comparison against benchmark values can identify the specific business driver from which value can be extracted. HCL s platform-independent KPI Benchmarking Tool, TOUCHSTONE is a unique proposition for continuous measurement of supply chain KPIs, its comparison against benchmark values and identification of the areas of improvement and the business driver. In this paper, we present our point of view of the crucial KPIs in supply chain area and how these can be measured and benchmarked. For more information write to [email protected]

3 Contents Introduction...4 Solution Highlights...5 Solution Approach...5 HCL Benchmarking Methodology...5 What Information should KPI benchmarking give...7 KPI Benchmarking working...8 TOUCHSTONE Illustration...9 Solution Benefits...10 Authors...11 References...12

4 Introduction KPI benchmarking is needed for continuously measuring processes and practices against the competitors or those who are recognized as leaders of the industry with the focus on identifying areas of improvement. Organizations must perform the complex task of keeping pace with dynamic environment the constantly changing manufacturing volumes, fluctuating supply costs, stringent government compliance and quality requirement and asset utilization needs. Benchmarking is considered as continuous search for the best practices in industry. Manufacturing companies always need to know how they are performing in different functional areas. KPI measurement and benchmarking against peers / industry leaders can help them address these concerns. KPI benchmarking is needed for continuously measuring processes and practices against the competitors or those who are recognized as leaders of the industry with the focus on identifying areas of improvement. 4

5 Solution Highlights Challenges Collecting relevant data for KPI calculations as information is not available in a single application and resides across disparate enterprise systems. Identification of proper data points from multiple systems. Non-availability of single s o u r c e o f a c c u r a t e benchmarking data of these KPIs. HCL Solution A platform-independent tool has been developed that can pull relevant data for KPI calculations from multiple enterprise systems, legacy and other transactional systems into its staging tables through ETL activity. A repository of predefined data points and formula for each major SCM KPI calculation has been created. A repository of industry benchmark values (from various sources) for each KPI has been created. Actual performances and desired goal values are represented in the KPI representations along with industry benchmarks (Best in Class Average Laggards). Lack of continuous monitoring of KPI which measures the health of the enterprise level processes. Lack of Intuitive insights into process performance KPI benchmarking reports are generated for C - Level executives. By proactively monitoring and benchmarking KPIs through the tool, enterprises can take corrective actions to improve process efficiencies which help reduce the cost. KPI benchmarking tool offers drill down capability from High level KPIs to low level KPIs to help perform root cause analyses and identify areas for process improvements All KPIs suggested by SCOR, DCOR and CCOR are considered by KPI Benchmarking Tool developed by HCL. These are customer facing KPIs, process centric KPIs, financial KPIs and employee centric KPIs. Solution Approach TOUCHSTONE is a simple web-based, platform independent tool, which can capture relevant data, calculate KPIs and report them, can be useful for process managers and senior executives. These help understand the performance of the key process areas across enterprise functions and compare it with competitors or industry benchmarks. This will enable identification of potential areas of concern and initiate process improvements along with IT automation in those areas. HCL Benchmarking Methodology HCL have conceptualized a five step methodology for doing a business process assessment and improvement for customers. It consists of five main steps. Assessment of performance indicators Revisit of Strategy Issues - Impact - Action - Enablers Excercise Conceptualization of new standard operating process Analytical Hierarchy process Figure 1 : HCL s 5-step methodology for business process assessment 5

6 Know more Act Better: Launching KPI Reporting & Benchmarking Framework In the beginning, the performance indicators are measured. Few examples of such performance indicators are cash-to-cash cycle time, inventory turn, order fulfillment cycle time, upside supply chain adaptability, downside supply chain adaptability and flexibility, return on supply chain asset, supply chain cost etc.? Capture data from disparate enterprise systems? Perform calculations and determine KPI values for various value chain functions? Benchmark the KPI values against the repository prepared by HCL HCL s proprietary tool -- TOUCHSTONE -- can help capture the values of existing performance indicators in the organization. Once the values are collected, they are compared against the benchmark performance indicator values. HCL has created a repository of industry benchmark values for best-in-class, average and laggards for such KPIs. The entire business process improvement activity starts with assessment of the performance indicators. SCOR provides a proven model to measure and benchmark supply chain performance. DCOR and CCOR provide suitable metrics for product design area and customer-related area. SCOR (Supply Chain Operations Reference) provides a proven model to measure and benchmark supply chain performance. DCOR and CCOR provide suitable metrics for product design area and customer related area. Fig 2 : Value Chain Scorecard (Source: Supply Chain Council, 2010) 1 SCOR (Supply Chain Operations Reference), DCOR (Design Chain Operations Reference), and CCOR (Customer Chain Operations Reference) models are trademarks of The Supply Chain Council, 6

7 What Information should KPI benchmarking give Key Performance Indicators mentioned by all three value chain performance measurement techniques namely SCOR, DCOR, and CCOR have been mentioned in the below list. Process Model Metric & Benchmark Source Level1 Value Chain Metrics SCOR APQC - PMG Perfect Order Fulfillment CCOR PMG Warranty Fulfillment CCOR PMG Service Order Fulfillment DCOR MPI APQC Product Quality SCOR APQC PMG Order Fulfillment Cycle Time DCOR APQC New Product Develop Cycle Time CCOR GAP Selling Process Cycle Time CCOR APQC Return Process Cycle Time SCOR PMG Upside Supply Chain Flexibility DCOR PMG Engineering Change Order Flexibility Balance Scorecard Categories Customer Facing Process Financial Employee Reliability Responsiveness DCOR PMG Design Reuse Flexibility CCOR APQC Total Returns Management Cost CCOR GAP Total Customer Chain Management Cost CCOR ALL Days Sales Outstanding SCOR PMG, APQC Total Supply Chain Management Costs SCOR ALL Inventory Days of Supply DCOR APQC, PMG Total Design Chain Management Cost DCOR APQC Total Warranty Cost DCOR APQC, PMG New Product Revenue SCOR ALL Cost of Goods Sold ALL APQC, PMG, Hoovers Sales, General, and Administrative Cost Flexibility Supply Chain Design Chain Customer Chain SCOR ALL Cash-to-Cash Cycle Time ALL PMG, Asset Turns Hoovers ALL Hoovers Return on Assets ALL ALL Gross Profit Margin ALL ALL Operating Margin ALL Hoovers Net Profit Margin ALL Hoovers Revenue Growth ALL Hoovers Gross Profit Growth ALL Hoovers Operating Margin Growth Aggregat Profit Growth Performance Development Table 1 : KPI related to SCM area 7

8 KPI Benchmarking working User selects input criteria (E.g. parent KPI, product, customer, display interval, and period) and submits the information. SQL query gets fired on submission to create dataset from transactional database and this is stored in the staging area. KPI logic is executed on the dataset to calculate KPI values. Also goal value and benchmark values get retrieved for the particular KPI. KPI value is displayed along with the best-in class value, average value and the laggards through Microsoft silver light and this is published in the web interface. Parent KPIs leads the way for displaying the value of child KPI. Client Users Microsoft Silverlight Enabled Web Browsers or Hand Held Devices KPI Dashboards SQL Query Visualization Services Business Logic Services Data Staging Services ETL Services Database for Transactional Systems Enterprise Systems rd Legacy or 3 Party Systems ERP CRM SRM Sys 1 Sys 2 Sys N Figure 3 : Tool Components 8

9 Know more Act Better: Launching KPI Reporting & Benchmarking Framework TOUCHSTONE Illustration In this section illustration of the tool is given. This illustration will show how drilling down of KPI analysis is taking place from main KPI dashboard to parent and child KPI. SCM KPI Dashboard - Example Figure 4 : The SCM KPI Dashboard KPI Measurement for Perfect Order Rate (Parent KPI) - Example Figure 5 : KPI Measurement for Perfect Order Rate 9

10 Child KPI Measurement for Perfect Order Rate - Example Figure 6 : Child KPI Measurement for Perfect Order Rate Solution Benefits Strategic and operational views New strategies can be developed and existing strategies can be revisited through KPI Benchmarking exercise. KPIs can be measured and benchmarked in the area of Sales, Costs, Working Capital, manufacturing and Supply Chain. Proactively monitoring key performance indicators companies can take corrective action to improve process efficiencies In general an effective SCM KPI monitoring and benchmarking can enhance the organizational profitability by 5%-7% Increase the cash flow up to 7% and Reduce the operating cost by 5% -8%. Standardization of terminologies across enterprise For benchmarking against the best or the average, organizations can standardize their processes and have adherence to industry standard frameworks; this standardization will help organizations achieve good result mainly in the area of operational metrics and financial metrics. 10

11 Authors Arindam Sen, General Manager, HCL Technologies Ltd. Arindam Sen heads Manufacturing SCM Practice at HCL Technologies Ltd. Arindam s primary role in HCL is to devise solutions, IPs & frameworks to address business problems of customers. He can contacted at [email protected] Alok Joshi, Deputy Manager, HCL Technologies Ltd. Alok Joshi is part of the Manufacturing Solutions team at HCL technologies Ltd working on value chain analysis, process redesign and business research. He can contacted at [email protected] Sudipta Mukherjee, Manager, HCL Technologies Ltd. Sudipta Mukherjee brings over 7 years experience in across Manufacturing & IT Industry spanning across procurement, material requirement planning, supply chain planning, Production Planning, Logistics for Manufacturing Industry. He can be contacted at [email protected] Arjun Krishnan, HCL Technologies Ltd. Arjun Krishnan part of Manufacturing Vertical team spearheading market research, campaign, customer requirement and solution launch. 11

12 References Carlos Bremer (Oct 2010), The Use of a Value Chain Scorecard to Strategically Manage Business Tradeoffs, SCC Joe Francis (Mar 2006), Supply-Chain Benchmarking with SCOR and SCORmark, SCC Peter Bolstorff (Mar 2007), Supply Chain Performance: Competitive Advantages of Best- In-Class Supply Chains, PMG Peter Bolstorff (Sep 2006), Balancing Your Value Chain Metrics, Supply Chain Excellence Peter Bolstorff (Mar 2002), How Does SCOR Measure up?, Supply Chain Excellence Peter Bolstorff (Dec 2003), Measuring The Implact of Supply Chain Performance, Supply Chain Excellence Chris Gardner, Cheryl Harrity, and Kate Vitasek (April 2005), A Better Way to Supply Chain Benchmarking, Supply Chain Management Review 12

13 CUSTOM APPLICATION SERVICES ENGINEERING AND R&D SERVICES ENTERPRISE APPLICATION SERVICES ENTERPRISE TRANSFORMATION SERVICES IT INFRASTRUCTURE MANAGEMENT BUSINESS PROCESS OUTSOURCING ABOUT HCL About HCL Technologies HCL Technologies is a leading global IT services company, working with clients in the areas that impact and redefine the core of their businesses. Since its inception into the global landscape after its IPO in 1999, HCL focuses on transformational outsourcing, underlined by innovation and value creation, and offers an integrated portfolio of services including software led IT solutions, remote infrastructure management, engineering and R&D services and BPO. HCL leverages its extensive global offshore infrastructure and network of offices in 26 countries to provide holistic, multi-service delivery in key industry verticals including Financial Services, Manufacturing, Consumer Services, Public Services and Healthcare. HCL takes pride in its philosophy of Employees First which empowers our 80,520 transformers to create real value for customers. HCL Technologies, along with its subsidiaries, had consolidated revenues of US$ 3.7 billion (Rs. 16,977 crores), as on 30 September 2011 (on LTM basis). For more information, please visit About HCL Enterprise HCL is a $6 billion leading global technology and IT enterprise comprising two companies listed in India - HCL Technologies and HCL Infosystems. Founded in 1976, HCL is one of India's original IT garage start-ups. A pioneer of modern computing, HCL is a global transformational enterprise today. Its range of offerings includes product engineering, custom & package applications, BPO, IT infrastructure services, IT hardware, systems integration, and distribution of information and communications technology (ICT) products across a wide range of focused industry verticals. The HCL team consists of over 88,000 professionals of diverse nationalities, who operate from 31 countries including over 500 points of presence in India. HCL has partnerships with several leading Global 1000 firms, including leading IT and Technology firms. For more information, please visit