1.

Manufacturing and Production Indicators The sheer volume, variety and complexity of managerial issues surrounding the production process makes this area of corporate activity a particularly rich one for non-financial indicators. Performance indicators can be devised for all operational areas. non-financial indicators, depending on the exact nature of the production process, might include the following : indicators deriving from time and motion studies production line efficiency ability to change the manufacturing schedule when the marketing plan changes reliability of component parts of the production line production line repair record keeping failures of finished goods to a minimum ability to produce against the marketing plan product life cycle

indicators concerned with controlling production quality - right first time measurement of scrap tests for components, sub-assemblies and finished products fault analysis "most likely reasons" for product failures actual failure rates against target failure rates complaints received against the quality assurance testing programme annualised failures as a % of sales value failures as a % of units shipped various indicators of product / service quality various indicators of product / service reliability

indicators concerned with the purchasing department's external relationships with its suppliers inventory levels and timing of deliveries "just in time" inventory control measurements stock turnover ratio weeks stocks held suppliers delivery performance analysis of stock-outs parts delivery service record % of total requests supplied in time % supplied with faults

indicators of sales delivery and service shipments vs. first request date average no. of days shipments late response time between enquiry and first visit

2. Sales and Marketing measurements based on "staying close to the customer" complaints re manuals complaints re packaging / ease of opening quality of packaging materials customer satisfaction analysis price of products comparisons check on unsuccessful visit reports monitoring repeated lost sales by individual salesmen sales commission analysis monitoring of enquiries and orders sales per 100 customers "strike rate" - turning enquiries into orders analysis of sales by product line by geographical area by individual customer by salesmen matching sales orders against sales shipments - the trend from the mismatch backlog of orders analysis flash reports on sales publication of sales teams performance internally analysis of basic salaries and sales commissions share of the market against competitors share of new projects in the industry new product / service launch analysis time to turn round repairs delays in delivering to customers (customer goodwill) value of warranty repairs to sales over the period

3. People head count control head count by responsibility mix of staff analysis mix of business analysis vs. staff personnel needs skilled vs. non skilled management numbers vs. operations staff own labour / outside contractor analysis workload activity analysis vacancies existing and expected labour turnover labour turnover vs. local economy % of overtime worked to total hours worked absence from work staff morale cost of recruitment number of applicants per advert number of employees per advertising campaign staff evaluation techniques evaluation of staff development plans monitoring of specific departments, eg. accounting

speed of reporting to internal managers vs. HQ accuracy of reporting as measured by misallocations and mispostings queries re what reports mean monitoring of departments performance long term pay and conditions vs. competition

4. Research and Development evaluation vs. basic R&D objectives, strategic objectives and project objectives product improvement against potential market acceptance R&D against technical achievement criteria, against cost and markets R&D priority vs. other projects R&D vs. competition R&D technical milestones analysis of market needs over the proposed product / service life of R&D outcome top management audit of R&D projects major programme milestones failure rates of prototypes control by visibility - releases, eg. definition release, design release, trial release, manufacturing release, first shipment release, R&D release

5. Environment work place environment yardsticks cleanliness tidiness catering facilities vs. competition other facilities vs. competition etc.

6. Final Note Many executives will talk freely in terms of quality and standards, of "just in time" inventory control, and of other performance measurement yardsticks and may be quite knowledgeable about them, but when questioned as to the exact nature of the non-financial measurements that they actually have in place in the company will be hard-pressed to tell the researcher what the company is in fact measuring on an on-going basis. There is a lot of lip service paid to these measures, as opposed to those of a purely financial nature, which are of course to a great extent the product of regulation and company law. So, much remains to be done to broadcast the merits of non-financial performance measurement indicators.

7. How to Find Out More about Performance Measurement and Non-Financial Indicators The Foundation for Performance Measurement, which was established in 1992, is an important source of information about performance measurement and non-financial indicators and acts as a clearing house for papers and discussions on the latest thinking. The Foundation is a membership organisation dedicated to extending the scope of enterprise performance measurement beyond the conventional focus on internal, historic, financial, numeric and shortterm data. It serves not only as a source of information but also as a forum for research and

debate and a link to tools and resources for organisations interested in developing practical new ways of measuring enterprise performance. At its regular meetings the Foundation brings together: major corporations auditors and consultants business schools not-for-profit organisations institutional investors information providers professional bodies software developers

Typically the metrics for sales people involve three main areas: The quality of what they are doing. This comes down to their skill levels and understanding of what is expected of them. Have the team been adequately trained and are they putting into practice regularly what they have been taught? The efforts they put in. This is the more traditional measurement of the number of sales visits they make but should also include areas such as numbers of telephone calls, emails, and mailshots and many more Who their customers and prospects are. Measurement of the types of prospects and customers is essential so that considerable effort is not expended on the low profitability customers or those whose long term potential to the company is small. Segmenting by size of company and potential and then providing targets for sales staff will help achieve these goals.

Effective metrics on sales performance are highly sought after by those of us trying to produce dashboards helpful to managing the sales cycle. Some metrics would be ideal, but are too costly to measure or just plain impossible to gather data for. Others are too artificially manipulated. We all know how crafty sales people are (oops, sorry! Some of my best friends are account execs) Here is a quick look at 4 elements of sales performance and the sales metrics that correlate to those categories.

Sales performance can be broken down into the four elements of : 1. 2. 3. 4. Readiness (how ready is your sales org to close sales leads?) Productivity (what is the level of productivity of your sales resources?) Efficiency (how well do these resources spend their time?) Effectiveness (how well do they close sales?)

By category, here are some typically good sales metrics: Readiness: Turnover Training Sales Capacity Employee Satisfaction Headcount

Productivity: Revenue per Sales Representative Margin per Sales Representative Revenue / Expense Average Deal Size

Efficiency: Time Utilization Sales Cycle Duration Expense

Effectiveness: Win/Loss Ratio Customer Satisfaction

Most Critical Sales Metric Metric #1 : Total Sales Spend to Total Revenue o o o Reflects overall efficiency of Sales Division Includes all types of Sales expenses Audience: Sales and Finance leadership

Metric #2 : Incentive Spend to Total Quota Achieved o o o Total Incentive should match total quota Uncovers problems with quota setting or incentive plan design Audience: Sales leaders and Comp Design professionals

Metric #3 : Individual Incentive Earnings to Individual Quota Achieved o o o o Shows how well incentives pay for sales Distribution of earnings to quota should make sense Identifies poor incentive design (ramp-up) Audience: Sales leaders and Comp Design professionals

Metric #4 : % of Quota Achieved by Region o o o o o o o strategy Audience: Sales and Marketing leaders Shows regional differences against quota Highlights problems with quota setting, sellers performance, or marketing

Metric #5 : % of Quota Achieved by Market Segment o o o o o o Indicates market segment response to product design, pricing, promotion, etc. Highlights misappropriation of quota Audience: Sales, Marketing and Product Management leaders Shows how effectively a rep is producing revenue Indicates poor territory design, poor decisions on discretionary spend Audience: Sales leaders and Financial Analysts

Metric #6 : Sales Rep Expenses to Territory Revenue

Profit (and Product Mix): The Rest of the Profitable Sales Growth Equation Revenue and costs are only 2/3 of the story Profit is largely determined by product margins and product mix Metric # 7 : Profit as Percent of Revenue by Product o o o o Measures overall profit margins by product Highlights pricing decisions, discounting and price realization in the marketplace Monitors profit margins against plan Audience: Sales, Finance & Product Management Executives

Metric #8 : % of List Price Achieved by Product o Highlights problem with product pricing

o o o

Identifies excessive discounting by sale reps Must balance competitive pricing to discounting to achieve quota Audience: Sales and Product leaders

Metric #9 : % of List Price Achieved by Sales Rep o o o Shows profit margins by territory Identifies sales reps who discount excessively Audience: Sales Managers

Metric #10 : Product Mix Compared to Sales Plan o o o o Margins vary by product Product mix critical to overall profit Identifies product mix variations from plan Audience: Sales, Finance, Product and Comp Design leaders

Metric #11 : Product Mix Achieved by Sales Rep o o Identifies which reps are selling a product mix different from plan Territory differences or bad quotas may be to blame

o Audience: Sales Managers Examples of Sales Metrics Nick Kirby, who oversees the sales effort for more than 40 sales professionals affiliated with Occupational Health + Rehabilitation, cited a variety of metrics that he relies on to monitor the performance of the companys sales force: 1. Quality telephone calls - A sales professional might be expected to make, say, 40 telephone calls per week (or eight per day) with a decision maker or influencer. Calls to gatekeepers or to qualify a potential account are not considered quality calls. Note that total calls should never be used as a stand-alone measure, per se, but rather in conjunction with other metrics such as appointments and generated revenue. 2. Face to face sales appointments - Similarly, face-to-face appointments provide another vital sales metric, but only if defined as quality appointments. A quality appointment must involve new sales and likewise involve only a decision-maker or influencer. Mr. Kirby feels that 15 quality appointments per week is reasonable. 3. Conversion rates - Rates and ratios constitute a useful application of performance metrics. A salespersons conversion ratio (e.g., closes divided by face-to-face appointments) provides some measure of the sales professionals performance. Note, however, that the two dilemmas (What constitutes a close and is the sales person calling on the best prospects?) are not covered by conversion rates. 4. New revenue per sales professional - Numerous variables impact the level of desired new revenue per sales professional. Clearly, the larger the market, the greater the opportunity for a sales professional to find new sources of revenue. Further, a states fee schedule can have a significant impact on this measurement. Salesperson A and Salesperson B can sell exactly the same volume and mix of services in adjoining states yet generate markedly different revenue. The term new revenue requires review. It is generally defined as a combination of new accounts and incremental revenue from existing accounts.

Invest in Design.

At a time when we are losing manufacturing jobs in this country, we should be doing everything we can to help our manufacturers stay competitive. They are the backbone of our economy. Amateurs work until they get it right. Professionals work until they can't get it wrong. Time waste differs from material waste in that there can be no salvage. The easiest of all wastes and the hardest to correct is the waste of time, because wasted time does not litter the floor like wasted material. The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency. Provide service to improve value to customers, employees and shareholders.

Design for manufacture

Evaluate, recommend, and support technology resources that improve the effectiveness and efficiency of those who use them. Analyze managerial and operational procedures, identify best practices and assist with implementation of new procedures. Facilitate special projects.

Organizational productivity is often measured by using this equation:

Productivity = goods and services produced (outputs) / labor + capital + energy + technology + materials (inputs) This approach considers all the inputs involved in producing outputs are sometimes referred to as total-factor productivity. Managers also use partial-factor productivity, an approach that considers the total output to a specific input, such as labour. For example: Productivity = goods and services produced (output) / labour hours (labour input)

Two Operational Strategy - Low cost Producer and Innovative Producer

Production Measures
There are three categories of control standards and measures: * Precontrol (of inputs) focuses on predetermining standards and measures for the quantity and quality of resources inputs (labour resources, capital resources and materials). * Concurrent control relates to how much and when outputs will be produced and is typically termed production scheduling. Popular tools for production scheduling include various network models such as the Program Evaluation and Review Technique (Pert) and linear programming models. * Postcontrol focuses on actually analyzing the output. Two techniques are widely used postcontrol. First, standard cost analysis involves estimating and combining the direct

labour, direct materials, and overhead costs to find actual per unity costs. Second, statistical quality control focus on detecting low-quality or defective output.

Managers use periodic statistical reports to monitor and evaluate nonfinancial performance. Such items a the number of new customer contract, delinquent accounts, sales volume received, number of employees, and other statistic reports vital to the department or business units are included. Statistical reports can be issued weekly, monthly, or quarterly and provide feedback about departmental or business unit's results. Management by objective is a method whereby managers and employees define objectives for every department, project, and person and use them to control subsequent performance. a control principle which suggests that managers should be informed of situation only if control data show a significant deviation from standards.

Group POM incorporates many tasks that are interdependent, but which can be grouped under five main headings: PRODUCT Marketers in a business must ensure that a business sells products that meet customer needs and wants. The role of Production and Operations is to ensure that the business actually makes the required products in accordance with the plan. The role of PRODUCT in POM therefore concerns areas such as: - Performance - Aesthetics - Quality - Reliability - Quantity - Production costs - Delivery dates PLANT To make PRODUCT, PLANT of some kind is needed. This will comprise the bulk of the fixed assets of the business. In determining which PLANT to use, management must consider areas such as:

- Future demand (volume, timing) - Design and layout of factory, equipment, offices - Productivity and reliability of equipment - Need for (and costs of) maintenance - Heath and safety (particularly the operation of equipment) - Environmental issues (e.g. creation of waste products) PROCESSES There are many different ways of producing a product. Management must choose the best process, or series of processes. They will consider: - Available capacity - Available skills - Type of production - Layout of plant and equipment - Safety - Production costs - Maintenance requirements PROGRAMMES The production PROGRAMME concerns the dates and times of the products that are to be produced and supplied to customers. The decisions made about programme will be influenced by factors such as: - Purchasing patterns (e.g. lead time) - Cash flow - Need for / availability of storage - Transportation PEOPLE Production depends on PEOPLE, whose skills, experience and motivation vary. Key people-related decisions will consider the following areas: - Wages and salaries - Safety and training - Work conditions - Leadership and motivation - Unionisation - Communication

Main Principles of TQM

The main principles that underlie TQM are summarised below:

Prevention Zero defects Getting things right first time Prevention is better than cure. In the long run, it is cheaper to stop products defects than trying to find them The ultimate aim is no (zero) defects - or exceptionally low defect levels if a product or service is complicated Better not to produce at all than produce something defective

Quality involves everyone Quality is not just the concern of the production or operations department - it involves everyone, including marketing, finance and human resources Continuous improvement Businesses should always be looking for ways to improve processes to help quality Employee involvement Those involved in production and operations have a vital role to play in spotting improvement opportunities for quality and in identifying quality problems

Conclusion: Control of Operations Before commencing implementation of control systems there are always five beneficial things to do which will make any method of control easier to implement and make the system work better operationally (Generally world class manufacturing businesses have done these things)

Reduce time wasted in setting and reduce set up times Form Natural Groups (cells) Conclusion: Control of Operations Before commencing implementation of control systems there are always five beneficial things to do which will make any method of control easier to implement and make the system work better operationally (Generally world class manufacturing businesses have done these things) Reduce time wasted in setting and reduce set up times Form Natural Groups (cells) Reduce throughput times Postpone product mutation Remove the trivial many, to focus on vital few

CONWIP stands for Constant Work-InProcess, and designates a control strategy that limits the total number of parts allowed into the system at the same time CONWIP control. Movement of parts Once the parts are released, they are processed as quickly as possible until they wind up in the last buffer as finished goods. One way to view this is that the system is enveloped in a single

Kanban cell: Once the consumer removes a part from the finished goods inventory, the first machine