Lamar W Chesney - Establishing Metrics Drive Value
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Transcript of Lamar W Chesney - Establishing Metrics Drive Value
Establishing Metrics That Drive Real Value
W. Lamar ChesneyExecutive Vice President &Chief Procurement Officer
March 25, 2010
Value Metrics: Fact and Fiction
�Good Metrics incorporate both where you are and where you need t o be (current and future state)
�Good Metrics , agreed to at the onset, define “success” for all parties
�Good Metrics enhance the key objectives of a sound supply chain management (cost, quality, service and continuity)
�Good Metrics are clearly linked to business objectives that supp ort one’s business strategy
�Good Metrics are measures that have matured from cost savings fo cused fundamentals to value creation essentials (expanded margins, cost avoidance, TCO, relationshi p
agility, reliability/certainty, innovation, risk sh aring/mitigation, all leading to a true competitive advantage)
�Good Metrics exemplify the heart of defining value
Good Metrics and Their Proper Management Drive the Right Actions
Value Metrics: Fact and Fiction
�Good Metrics are difficult and time consuming to establish
�Good Metrics require extensive collaboration and deep collective thought, necessitating assessment against relevant benchmark s and incorporation of good market intelligence
�Good Metrics need to be few and focused
�Good Metrics are aspirational and attainable
�Good Metrics form the basis for systematic and productive analys is, problem solving and overall governance/management
Establishing Good Metrics at the Outset is Very Difficult, But Worthy of the Investment
Value Metrics: Fact and Fiction
�Good Metrics define one’s competitive posture (“ Should I lead or lag the market?”; “What in this arrangement provides comparative as opposed to an absolute advantage?”)
�Good Metrics provide perspective on future as well as present at tainment of goods and services provisioning (commodity expectations mature over time as does de livery expectations)
�Good Metrics reveal self-performance as well as supplier perform ance (“ Are they and we performing to meet our needs as expected? ”)
�Good Metrics provide clarity in differentiation of capabilities in supplier provisioning and supply base partnering (clarifies considerations beyond price alone)
�Good Metrics provide a common language for organizations and com pany leadership to use in discussing ongoing effectivene ss, efficiency and efficacy
Good Metrics are Built into the Total Life Cycle of One’s Commodity Strategy
Value Metrics: Fact and Fiction
�Good Metrics establish “manageable” accountability parameters rel ative to the obligation to report, explain and be answerable for results (being sensitive to the law of diminishing returns)
�Good Metrics are defined more by their quality than by their qua ntity (concept of digestibility; falsehood that “big” endeavors requir e “big” lists of metrics)
�Good Metrics are more focused on outcome than on process executi on (leading to fewer, more targeted measures)
�Good Metrics represent a foundational scorecard for reading thro ugh aggregation of metrics rather than through a solita ry measure of results
�Good Metrics incorporate a “blended” perspective provided by supply chain management and the line of business
More Metrics Mean a More Accountable and Effective Supplier
Value Metrics: Fact and Fiction
�Good Metrics create measures of success at the outset, not neces sarily midstream (incorporating “context” during performance may feel right but it digresses from what should be to what is felt can be )
�Good Metrics define performance expectations through a collabora tive effort and avoid any sense of imposition
�Good Metrics are more of an indicator of direction (trends, patterns) than they are indicators of precision
�Good Metrics encapsulated in scorecards avoid being viewed as pu nitive measures (rather they lead to indicators of opportunity, enc ouragement and achievement)
�Good Metrics concentrate as much on relationship management as they do on performance management
Creating Metrics is a Good, Quick Fix for Addressing Poor Performance
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Cost SavingsCost Savings
Value Value From Margin Expansion, Focus on From Margin Expansion, Focus on Core, Prevention of Value ErosionCore, Prevention of Value Erosion
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Time to Close DealTime to Close Deal
Best Selection of Best Selection of Supplier & TermsSupplier & Terms
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Ease of Doing Business Ease of Doing Business & Relationship Strength& Relationship Strength
Degree of Business Degree of Business Integration & WinIntegration & Win --Win Win
Creation AbilityCreation Ability
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Successful Deal Successful Deal ClosureClosure
Value Enhancement & Value Enhancement & SustainabilitySustainability
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Viability of SupplierViability of Supplier
Strong Stable of ProvidersStrong Stable of Providers
Turning the Metrics Lens to Self-Performance
Traditional Magnifying Lens Traditional Magnifying Lens Typical Measures of SuccessTypical Measures of Success
Expanded Panoramic Lens Expanded Panoramic Lens Lasting Measures of SuccessLasting Measures of Success
Initial Risk MitigationInitial Risk Mitigation
Ability to Manage Ongoing Risks Ability to Manage Ongoing Risks & Governance Effectiveness& Governance Effectiveness
The Value of Metrics
Value In Value Out
Long-Term Value
Indicators
Results Over Process
FocusedQuality Time Invested
Aspirational & Attainable Based
Solid Basis for Analysis,
Problem Solving &
Management
Concentrated Few &
Focused Quality Measures
Clear Indicator of
Competitive Posture
Easily U
ndersto
od Common
Language
Indicator of Self & Supplier Performance
Aggregate Trend Indicator
Developed from Benchmarks & Market Intelligence Encouraging, Opportunistic-Filled &
Non-Punitive Scorecards
Performance Categories Performance Metrics
COMMERCIAL
Competitiveness
Cost
Service/Supply Assurance
Commercial Agreements
Payment Process
Supplier Diversity Spend
Sustainability
OPERATIONAL
Delivery Compliance
Quality Product/Service
QA Capability
Changes Meet Success Criteria
Continous Improvement
Connectivity Tools Used
INNOVATION
Idea Pipeline
Commercialization
Intellectual Property
Seamless Teams
RELATIONSHIP
Strategic Alignment
Collaboration
Trust Level
Communication
Commitment
Issue Resolution
P&G Supplier Metrics