Role-based business intelligence (BI), presenting information tailored to a person’s role and scope of authority, is a necessity. But it is not sufficient in today’s disparate business environment. Role-based BI is only effective if it delivers role-based information within the context of a value stream, a sequence of processes that are connected by a common customer, product or service request.

Without this perspective, it is too easy to fall into the trap of functional silos of information; and while each person will optimize their area of responsibility to meet objectives, the overall effectiveness of the organization, operation or value stream can be suboptimal.

Organizations, regardless of industry – manufacturing, metals processing, mining and even hospital management - are focused on two key objectives: delivering value to customers and profitability. More often than not, however, these objectives are disparate goals that are not aligned across departments, plants or enterprise boundaries. Disconnected, outdated methods of reporting and inconsistent metrics make it nearly impossible for today’s businesses to get a holistic view of company performance drivers. Information is often available only after the fact and lacks contextual knowledge, which leads to poor decision-making.

A new breed of operational BI solutions, or performance management platforms, is extending the benefits of traditional BI beyond the availability of massive amounts of potentially irrelevant data, role-based metrics and analytics.

New tools combine both financial and operations metrics, and deliver them to users in context. Additionally, new operational BI tools are delivered as software-as-a-service (SaaS), a Web-based model which makes it easier for decision-makers to securely combine information across traditional, functional and enterprise boundaries as well as share consistent metrics that span various value stream segments and associated roles. This, combined with intuitive, interactive visualization and analysis, empowers decision-makers, enabling them to make better decisions within the context of improving profitability and delivering value to customers.

Value Stream Management: Data in Context

One of the most effective strategies for organizations to marry operational performance with customer value and financial goals is through value stream management. Value stream management utilizes lean process methodology to link the metrics and reporting required by managers with the people and tools needed to achieve desired results. With consistent data in the context of a value stream, organizations can deliver optimized performance and efficiency, predictable customer value and accurate cost and profitability management. Within this new model, organizations can segment and prioritize key performance indicators (KPIs) into the following value stream segments:

  1. Contact to sales order: Metrics include leads (number and cost), qualification (lead conversion ratio), quote (gross margin and average discount) and closing (win/loss ratio and time to close/sales cycle).  


  2. Order fulfillment: Order-to-delivery performance data includes metrics related to customer orders (number of new or open orders and number of orders with errors), distribution center and shipments (number of orders ready to pick and number of orders shipped on time or shipped complete), transport (number of order lines shipped by air versus ground) and customer satisfaction (number of units returned due to error or reject).


  3. Invoice to cash: Metrics include number and value of invoices created, sent and disputed as well as cash received or accounts receivable days outstanding.


  4. Procurement: Includes metrics related to purchase orders (cost per unit), supplier (on-time-in-full-delivery and reject rate), transport (delivery time and freight costs) and parts warehouse (inventory value and inventory days/turns).


  5. Manufacturing: Includes metrics related to production plan (planned utilization or cost per unit), production (material handling time and changeover time), assembly overall equipment effectiveness (OEE) and distribution center (inventory value and inventory days/turns).


  6. Concept to launch: Product development metrics relate to concept (market opportunity and projected ROI), design (project unit costs), prototype (revised unit cost) and marketing (revised opportunity size, projected gross margin, revised ROI).

Looking at unrelated individual metrics in isolation or metrics based solely on a knowledge worker’s role is ineffective. Metrics within each of the previously described value stream segments have implications across different areas, making it a necessity for companies to have operational BI solutions that provide the appropriate context. Data that spans multiple value streams and delivered in context eliminates conflicts of interest across different roles and different aspects or process steps within specific value stream.

Value Stream Intersection Points

Typically, each employee or department will have its own set of goals, depending on how they’re incented. When it comes to role-based BI within a value stream context, it is critical to look at the intersection points of different segments of the value stream and ensure that multiple people aren’t managing to conflicting KPIs. If you’re a distribution center manager, your focus may be on hitting your ship-on-time targets, which may result in building up inventory holdings. This has an adverse impact, however, on the manufacturing organization, which may be tasked by the CFO to decrease inventory value and increase turns, keeping as little money tied up in inventory as possible. In this case, the KPIs for lean manufacturing are at odds with the distribution center’s on-time-in-full shipment objective. Even if the KPIs for both manufacturing and the distribution center are aligned, other conflicts - such as the sales team goals - can still arise.

The distribution center manager may be incented by in-time-in-full shipments, optimizing inventory holdings and reducing the amount of expedited freight charges. However, in order to increase their numbers, sales may not always stay within the agreed standards for promised delivery dates. This can result in increased backorders and delivery surcharges as the distribution center attempts to meet promised delivery dates. Again, the result is conflicting KPI objectives across functional areas.

In the case of a distribution center manager, the important metrics are KPI objectives relating to on-time- in-full-shipments, inventory holdings and turns, customer return rates due to incorrect shipments and expenses related to expedited shipping charges. In order to better align the intertwined metrics across multiple value streams, organizations need to assign targets and link metrics across functional areas, roles and value stream segments. This will address the challenge of managing according to silos of KPIs and ultimately increase efficiencies and profits.

Contextual KPIs for Improved Business Performance

Role-based BI isn’t sufficient. In order to gain a complete picture of business and positively affect revenue performance improvement metrics need to be provided within the context of a value stream. While it is helpful to break out the different value stream segments to simplify the identification of KPIs and goals, it is critical to also look at the different areas as a cohesive whole.

The following is a checklist that can help organizations better align individual KPIs across value streams:

  • Identify and map the complete customer value stream.
  • Simplify the metrics map by identifying the various segments of the overall value stream that are related to a specific customer process, product or internal business process.
  • Determine the most appropriate KPIs for each major step within the value stream segments.
  • Look across the value stream to identify potential conflicts and synergies between KPIs, and group KPIs so they can be reviewed in combination.
  • Assign KPIs to individual roles using the KPI groupings mentioned.
  • Where possible, link the KPI objectives across individual roles to ensure alignment.
  • Continuously monitor and analyze KPIs on a right-time basis to ensure effective operational decisions.
  • Review the appropriateness of KPI objectives looking for cause-and-effect relationships.
  • Modify KPIs, objectives and their assignment to roles based on this review and actual results achieved.
  • During the regular corporate planning exercise start at the beginning of this checklist with a review of the overall customer value stream.

In order to deliver value to the customer with the most quality and at the lowest cost, organizations need to extend operational BI beyond role-based information, marry operations and financial data and set KPI objectives within the context of the complete customer value stream.

An Example of Metrics in Action: Invoice to Cash and Order Fulfillment

While seemingly two different segments of the value stream, order fulfillment and invoice to cash are actually closely related. Within the financial function of invoice to cash, organizations are focused on driving down the number of days outstanding on an invoice. However, even before invoices are sent, there are several factors outside of the control of the finance employee that will impact how quickly invoices get paid.

Example: Faulty goods are shipped, or the order isn’t shipped on time.

Effect: The invoice won’t reflect the change, but customer satisfaction will be negatively impacted, likely delaying invoice payment.

Similarly, order fulfillment metrics in isolation do not provide a complete view of overall value stream performance.

Example: Too many orders partially shipped or placed on back-order.

Effect: Negative impact on revenue, due to revenue recognition issues; also, negatively impacts customer satisfaction and repeat business.

The combination of invoice to cash and order fulfillment metrics – namely the ability to ship on time, in full, with the correct order, quality and quantity – influences other parts of the value stream (e.g., collections and sales) and hinders the organization’s ability to recognize and generate revenue.

With an operational BI solution focused on KPIs relevant to multiple, interdependent areas of the value stream, decision-makers can positively impact customer satisfaction and profitability.

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