Profile picture for user Dave Brooks

I come from the Semiconductor industry.  Talk about a group that needs to measure nearly *everything*… Every time I talk with high tech companies, I’m amazed at their ability to come up with meaningful metrics to explain and track all parts of their business, from Moore’s Law to the trends monitored in Tashiro Charts.  Which makes this corollary to Matt Green’s post on February 14th all the more puzzling.

I was just north of the US-Canadian border visiting a high tech manufacturing customer, and we were discussing techniques to improve their Order-to-Cash process.  The company had recently received some low marks in customer satisfaction and I was keen to zero in on the company’s key metrics for this process to see where they could improve.  We all know “you can’t manage what you can’t measure”, so introducing real-time visibility into these KPIs could really bring value.  But at the end of the day, how did this high tech company measure up in its Process Intelligence Quotient (PIQ)?

In dissecting the Order-to-Cash process, we were not surprised that product delivery was a critical factor that impacted customer satisfaction.  What was surprising, however, were the metrics this company used – or more precisely didn’t use – to evaluate its delivery performance.

The primary measure used by the company was On-time Ship to Commit… basically, did the Company ship the order on the day they promised the customer the order would ship.  Ship to Commit is not a bad metric per se, it’s important to get your product out the door.  And it’s important to understand that there's a common practice for customers in this industry to choose the mode of freight (air, maritime, rail, road) as well as specifying the specific carrier.  The committed ship date was something the Company felt it had control over.  Something they could impact.  Something they could measure. 

The problem was this was not how the Customer judged success.  The Customer’s supplier scorecard rated the Company on On-time Delivery to Request… Can you deliver the order to me when I want it?  But because the delivery mode was the Customer’s decision, the metric was not tracked.  End of story.

Now… How intelligent is this Company about its processes?  I’d vote “Not Very”.  Anytime an organization willingly ignores a metric that is important to its customers, it’s hard to be sympathetic.  But this Company also missed out on an opportunity to bring additional value to its customers.  By measuring and communicating both On-time Ship to Commit and On-Time Delivery to Request metrics, bottlenecks and trends could be identified.  Add to the mix some Process Mining techniques that can help uncover root cause, and now you’re providing value!  Because for all of us engineers out there, once we know the problem, fixing it is the easy part…

So what’s your PIQ?  Leave a comment with your favorite metrics, measurements & KPIs so we can share best practices.

by Ursula Porth
Posted on Wed, 03/23/2011 - 09:46

Hi Dave,

this is excellent! We always have to hear the "Voice of the Customer" first!  A Six Sigma  approach could help here tremendeously since the customer's need is the formalized starting point for all further measurements, analytics and improvements.

Best, Ursula

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