t2-4: enterprise performance chin-sheng chen florida international university

T2-4: Enterprise performanceT2-4: Enterprise performance

Chin-Sheng ChenChin-Sheng ChenFlorida International UniversityFlorida International University

T2-4: T2-4: Enterprise Enterprise performanceperformance

Performance measure typesPerformance measure types– CostCost– Lead timeLead time– QualityQuality– Benefit (profit)Benefit (profit)

The ESE Framework –The ESE Framework –Re-visitRe-visitEnterprise Enterprise elementelement

WorkWork DecisionDecision ResourceResource InformatioInformationn

System System facetfacet

StrategyStrategy CompetenCompetency cy (capability(capability))

Capacity Capacity StructureStructure

EngineerinEngineering activityg activity

SpecificatioSpecificationn

AnalysisAnalysis DesignDesign implementimplementationation

PerformanPerformance ce measuremeasure

QualityQuality TimeTime CostCost Benefit Benefit (profit)(profit)

Readings & ReferencesReadings & References

Readings:Readings:– HEA:HEA:

ReferenceReference– Strategy MapsStrategy Maps by Robert Kaplan and by Robert Kaplan and

David Norton, HBS Press, 2004David Norton, HBS Press, 2004

Performance measurePerformance measure

Foundation for performance Foundation for performance measuremeasure– Mission>value>vision>strategy Mission>value>vision>strategy

(game plan)>strategy map (game plan)>strategy map (implementation plan)>performance (implementation plan)>performance measuremeasure


Performance measure levelsPerformance measure levels– At corporate level (financial perspective)At corporate level (financial perspective)

Core performance indicators (CPI)Core performance indicators (CPI)– At division (profit center) level (customer At division (profit center) level (customer

perspective)perspective) Key performance indicators (KPI)Key performance indicators (KPI)

– At dept. (cost center) level (internal process At dept. (cost center) level (internal process perspective)perspective)

Department performance indicators (DPI)Department performance indicators (DPI)– At individual level (learning & growth perspective)

Personal performance indicators (PI)Personal performance indicators (PI)


CPI: From financial perspective for long-term shareholder CPI: From financial perspective for long-term shareholder valuevalue– Strategy typesStrategy types

Productivity strategyProductivity strategy– Improve cost structureImprove cost structure

Measures: cash expense reduction, defect elimination, Measures: cash expense reduction, defect elimination, yield improvementyield improvement

– Increase asset utilizationIncrease asset utilization Measures: resource utilization, bottleneck eliminationMeasures: resource utilization, bottleneck elimination

Growth strategyGrowth strategy– Expand revenue opportunitiesExpand revenue opportunities

Measures: new revenue sources (new products, markets, Measures: new revenue sources (new products, markets, partners)partners)

– Enhance customer valueEnhance customer value Measures: profitability improvement (of existing Measures: profitability improvement (of existing

customers)customers)


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, customer’s product lifetime profitability


KPI ExampleKPI Example– Cost-relatedCost-related

Meting target revenueMeting target revenue Indirect cost ratioIndirect cost ratio Labor resource utilizationLabor resource utilization Direct/indirect labor ratioDirect/indirect labor ratio Equipment resource utilizationEquipment resource utilization

– Quality relatedQuality related CDRCDR Rework countsRework counts T1 accomplishment rateT1 accomplishment rate # of Tests to delivery# of Tests to delivery Accomplishment rateAccomplishment rate

– Time relatedTime related Quotation/EC turnaround timeQuotation/EC turnaround time In-time deliveryIn-time delivery

– Benefit/goodwillBenefit/goodwill Industrial safetyIndustrial safety Customer satisfactionCustomer satisfaction


DPI, from internal process perspective (1)DPI, from internal process perspective (1)– For operations management processesFor operations management processes

SupplySupply ProductionProduction DistributionDistribution Risk managementRisk management

– For customer management processesFor customer management processes SelectionSelection AcquisitionAcquisition RetentionRetention growthgrowth


DPI, from internal process perspective (2)DPI, from internal process perspective (2)– For innovation processesFor innovation processes

Opportunity IDOpportunity ID R&D portfolioR&D portfolio Design and developmentDesign and development LaunchLaunch

– For regulatory and social processesFor regulatory and social processes EnvironmentEnvironment Safety and healthSafety and health EmploymentEmployment communitycommunity


DPI, from learning and growth perspectiveDPI, from learning and growth perspective– For human resourceFor human resource

SkillsSkills TrainingTraining KnowledgeKnowledge

– For informationFor information SystemsSystems DatabaseDatabase NetworkNetwork

– For organization structureFor organization structure CultureCulture AlignmentAlignment LeadershipLeadership TeamworkTeamwork


DPI, a generic exampleDPI, a generic example– Cost-relatedCost-related

Sales, overhead, gross profit, average revenue Sales, overhead, gross profit, average revenue per head count, worker & machine utilizationper head count, worker & machine utilization

– Quality-relatedQuality-related Number of try-outs, rework, IPQC, first article Number of try-outs, rework, IPQC, first article

quality, product quality at shipping. quality, product quality at shipping. – Time-relatedTime-related

Turnaround timeTurnaround time– Benefit relatedBenefit related

Customer satisfactionCustomer satisfaction


DPI, specific example – production DPI, specific example – production engineeringengineering– Department overall performance Department overall performance

From sub-departments and/or From sub-departments and/or From all workers in the dept.From all workers in the dept.

– OrganizationOrganization Resources readiness (counts)Resources readiness (counts) Resources readiness (competence)Resources readiness (competence)

– Individual (head)Individual (head) Planning capability (% of work planned)Planning capability (% of work planned) TQM/6-sigma projectTQM/6-sigma project Patent applicationPatent application Employee trainingEmployee training Industrial safetyIndustrial safety


PI, varying by individual’s functionality (& personal PI, varying by individual’s functionality (& personal objectives)objectives)– Cost-relatedCost-related

Resources uptimeResources uptime Resources utilizationResources utilization Expense and overheadExpense and overhead

– Quality-relatedQuality-related Work qualityWork quality Re-work rateRe-work rate

– Time-relatedTime-related In-time work completionIn-time work completion Response timeResponse time

– Benefit relatedBenefit related Customer satisfactionCustomer satisfaction


PI, an ExamplePI, an Example– For a machining workerFor a machining worker

Equipment uptimeEquipment uptime In-time work completionIn-time work completion Work qualityWork quality Tooling consumption rateTooling consumption rate Equipment utilizationEquipment utilization

– CAD/CAM workerCAD/CAM worker Program errorProgram error In-time work completionIn-time work completion Tooling consumption rateTooling consumption rate Equipment utilizationEquipment utilization

– For a design workerFor a design worker In-time work completionIn-time work completion Design change rateDesign change rate Design for manufacturabilityDesign for manufacturability


Specific PI example – production Specific PI example – production engineerengineer– MPI accomplishment countsMPI accomplishment counts– EC accomplishment rateEC accomplishment rate– Test accomplishment rateTest accomplishment rate– Test counts to deliveryTest counts to delivery– Work loadWork load– 6 sigma6 sigma– TrainingTraining– Industrial safetyIndustrial safety

T7: ExerciseT7: Exercise

Design a DPI and PI and justify your Design a DPI and PI and justify your design for:design for:– A machining department, or A machining department, or – An FIU academic department (say, ISE)An FIU academic department (say, ISE)

The design should include, for each The design should include, for each indicatorindicator– its name, formula, target value, data its name, formula, target value, data

source, frequency, and weight.source, frequency, and weight. Due: Next WeekDue: Next Week

Comments on T7 HWComments on T7 HW

Each performance measure is a Each performance measure is a formula or model. It should be formula or model. It should be quantitative and thus objective.quantitative and thus objective.

A target value can be a number, A target value can be a number, or a range.or a range.

The measured value and target The measured value and target value of each performance value of each performance measure forms the basis for its measure forms the basis for its performance (rating). performance (rating).

t2-4: enterprise performance chin-sheng chen florida international university

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