Purchasing Performance Measurements: A Roadmap for Excellence (Purchasing Excellence Series) - Softcover

Pilachowski, Mel

Softcover

ISBN 10: 0945456212 ISBN 13: 9780945456216

Publisher: P. T. Publications, 1996

Synopsis

Purchasing Performance Measurements is the first in a series of comprehensive guides to critical areas in Purchasing. Read this book to learn how to maintain your competitive edge and to use measurements to continuously improve. Just the facts.

Purchasing Performance Measurements covers the following: How to implement and why.
Traditional accounting practices fail to pinpoint troubles which are eating away at profit margins and providing an opportunity for the competition to capture market share.
Traditional accounting practices fail to identify recovery opportunities in a company. They also overlook the real (root) causes of waste as well as cost reduction through the elimination of non-value-added activities or the improvement of value-added activities.
Traditional accounting practices favor quick fixes to reduce costs either by reducing labor or by forcing suppliers to cut costs. These actions not only avoid internal issues of waste, continuous improvement, and the identification of true cost drivers and misallocated costs, but can create even more intractable problems via the neglect.

Avoidance is a big issue here and it reminds us of weeds in our lawns. Cutting them off at the surface only temporarily hides the problem. To eliminate weeds, you need to get at the roots and pull them out of the ground. Only then can you produce a healthier lawn. The same thing applies to our businesses. We need the tools to get at the roots and we need a cost management system that lets us use these tools to their full advantage.

Just-In-Time, Total Quality Management, Statistical Process Control, Set-Up Reduction, Bar Coding, Team Building and Supplier Certification are a few of these new tools. In our consulting work, we have seen them help put companies back on their feet and on their way to prosperity. But, we have also noticed that the greatest success comes when these tools are used in the context of a total cost system which looks to continuously improve performance by eliminating waste and reducing costs. The principal method whereby this happens is to assign each product its true share of activity costs and not to lump all costs which are not directly traceable into overhead which is then inaccurately allocated to products based on direct labor costs. This is the way we used to do product costing, but it is no longer a viable method. Let's take a look at some manufacturing history to see why.

The History of Costs in Manufacturing: Business Performance Grid.
How to understand the relationship between measurements and Just-In- Time/Total Quality Control
A Total Cost Approach.
How to gain management's commitment and support.

Use this book to gain the competitive edge you need to stay ahead of the competition.

About this title

About the Author

Mel Pilachowski was formerly a Vice President with Professionals for Technology Associates, Inc. Pro-Tech consultants specialize in Management Consulting and Education. His client assignments were with such companies as: Ricoh, Sterling Engineering Products, J.I. Case, Rexnord Automation, General Foods, NCA Corporation, Scotts Pool and other high-tech companies. Mel has held positions as Management Consultant, Corporate Controller Regional Training Director, and MRP II Systems Manager. His experience includes consulting in the Automotive, Repetitive, Electronics, Textile, Software and Financial Environments. He is the developer of the current Total Cost program being conducted at over twenty universities and colleges both domestically and abroad.

Mr. Pilachowski attended the University of Baltimore, with a major in Accounting and Business Administration. He received a commission with the Maryland Army National Guard. He has taught and lectured at numerous universities on Just-In-Time/Total Quality Control, Manufacturing and Financial applications. He founded the Adopt-A-School program that developed industry volunteers to instruct with the City of Baltimore Public Schools in computer education. He has developed, authored, and taught courses on Manufacturing and Financial applications.

From the Back Cover

The metrics used in traditional purchasing are often just a variation of monitoring receipts. Traditional metrics concentrate on labor productivity and ignore true cost drivers such as product design complexity, process complexity, excessive lead time (time-based competition), quality problems, space utilization, manufacturing flexibility and set-ups. But metrics must be closely tied to the modern-day virtues of agility and leanness. The aim of the new metrics is to begin and continue the process of reducing both cost and cycle times. There are a number of lessons to be learned from this shift. Purchasing Performance Measurements shows you these lessons. Read this book to learn how to: Maintain your competitive edge.
Use measurement to continuously improve.
Just the facts. That's what you want and that's what we give you. Purchasing Performance Measurements covers the following: How to implement and why.
What to measure and why.
How to use the Business Performance Grid.
How to understand the relationship between measurement and Just-In-Time/Total Quality Control - A Total Cost Approach.
How to gain management commitment and support.

This book is brief. To the point. Because we know your time is too valuable to waste

Excerpt. © Reprinted by permission. All rights reserved.

From Chapter One: Introduction. In today's highly competitive marketplace, companies must explore every opportunity to improve their competitive advantage. Continuous improvement is the key to success in this environment. In order to make substantial progress on the road to improvement, we must first measure and take stock of where we are. Purchasing Performance Measurements provide us with this information by establishing: a benchmark,
a baseline,
a current status, and
a starting point.

We can then identify both the strong and weak points of the business and develop action plans for improvement. With clearly defined goals/objectives in mind, we can use Purchasing Performance Measurements to track improvement and to identify areas requiring corrective action. Measurements allow us to focus all areas of the business on the "action plan."

Why Measure Performance? The answer to that question is simple. We measure performance in order to:

Maintain the Competitive Edge.

Maintain our progress toward institutionalizing the Continuous Improvement Process (CIP).

Achieve World Class purchasing performance.

Based upon your business experience, review the major reasons for the development and utilization of Performance Measurements.

Why Do Initiatives Stall? Or Fail? There are a number of reasons why Performance Measurement initiatives stall and/or fail. But the number one reason is:

Management:

All too often, management does not do the job they are supposed to do. That job is to:

Determine the objectives of an organization and then guide the people and other resources in the successful achievement of those objectives.

You can keep on track with your initiative by keeping the following performance questions in mind:

What is performance?
What is performing?
What is not performing?
What is the action required?
What is the follow-up action?
What is the benchmark?
When will it be done?
Who is responsible?

Management of Resources: Measuring Operational Efficiency - Performance Management

We have learned from our Far Eastern competitors that all resources are critical to peak operating efficiency. Waste in any form will make us less competitive. Thus, the measurement of efficiency is critical to the viability of the business.

Establishing the Baseline: The move to performance measurement begins with establishing a baseline. If we don't establish an initial baseline of measurement data, it becomes increasingly difficult to measure/identify "real" progress. We have no starting line or basis for developing an improvement program. Improve what? Better than what? etc.

Capturing, Summarizing and Evaluating Data: Who should be responsible? Do we need a specialized audit team for measuring performance? In order to be meaningful and provide a catalyst for positive change, data should be collected, summarized and evaluated by the people responsible for the activity being measured. Management reports are a useful means of communication and a good progress monitoring tool. However, corrective action should take place at the source. For example, by an operator at a machine or data entry operator at the source.

Identifying Opportunities: What should you correct or improve? Where should you improve? These are the two basic questions which must be answered by an effective Performance Measurement program. More about this later.

"Cloning" Success: "Clone" your success stories. Successful operations should be modeled and implemented in other areas of the business. Use our Management Cycle on the next page to provide you with a visual reminder of what is necessary. In the next chapter, we will begin our discussion of implementation.

The gathering analyzing of purchasing performance data is essential. And it is also essential that both should be based upon the scientific method, that is, the unbiased evaluation of actual capabilities and capacities. In many companies, we find that the problem is not collecting data. Most organizations gather a wealth of data, but the bulk of it is never used in a scientific way. It is never used for problem identification and the development of corrective actions which continuously improve the process or product. Most of the data just sits on the shelf gathering dust. In our process, this performance data is used to identify the root causes of problems and then to identify the most cost-effective approach which will resolve the issue. That is the secret of continuous improvement and it relies on the collection of accurate data.

The gathering of accurate data requires a lot of hard work. The acquisition of data, its evaluation and the launching of the corrective action cycle is typically an eight- to twelve-month cycle. It has to be this long in order to ensure that you will be able to provide 100% quality, 100% count accuracy and 100% on-time delivery. The 100% level is only obtainable when all the required processes are under control and you will know that only if you are measuring performance on a continuous basis.

Edition details

• Publisher: P. T. Publications
• Publication date: 1996
• Language: English
• ISBN 10: 0945456212
• ISBN 13: 9780945456216
• Binding: Paperback
• Edition number: 1
• Number of pages: 100