Benchmarking Best Practices and Establishing Key Performance Indicators

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Benchmarking Best Practicesand EstablishingKey
Performance Indicators

• CAUBO 2004
• June 12, 2004

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BenchmarkingThe U of C Experience

• Definitions
• Key Elements of Benchmarking
• Key Performance Indicators and Measuring the
  Results
• Outcomes
• Observations and Issues

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Benchmarking

• Benchmarking is the search for best practices.
• Benchmarking allows your organization to see what
  others are doing, what is working for them, and
  what to avoid.
• The American Productivity Quality Center
  defines benchmarking as
• "'the process of identifying, understanding, and
  adapting outstanding practices and processes from
  organizations anywhere in the world to help your
  organization improve its performance."

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Best Practice

• A best practice is a proven and documented
  strategy or tactic that delivers measurable
  improvements in economies, efficiency and/or
  effectiveness.
• They must
• Drive a measurable change in performance
• Be Proven in practice
• Apply to a broad spectrum of organizations
• Exploit proven technologies
• Ensure effective control and risk management
• Best Practices allow companies to outperform
  their
• competitors and peers in specific operational
  areas
• and deliver more value at less cost.

PeopleSoft HEUG 2004
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Key Performance Indicators (KPIs)

• Definition
• Activities, transactions and attributes of a
  supply department that are selected from accepted
  benchmarking practice measurements and from
  unique internal operations that represent the
  performance of the supply operation and which are
  used to compare and measure performance toward
  achieving the departments vision and best
  practice.
• Types
• Quantitative
• Qualitative
• Values Based
• Richard Ogilvie 2004

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Quantitative Indicators

• These are
• economies and efficiencies indicators that are
  easily quantifiable and lend themselves to
  statistical measurement and reporting.
• These may include statistics such as
• Number of purchase orders processed, dollar
  values of purchase orders etc.
• Richard Ogilvie 2004

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Qualitative Indicators

• These are
• effectiveness indicators
• not as easily identifiable as their quantitative
  counterparts.
• Identifiable attributes of your operation that
  can impact the success of your operation.
• These can include
• customer satisfaction levels, professional
  certification, defined skill sets, training,
  documented procedures, etc.
• Richard Ogilvie 2004

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Values Based Indicators

• These relate
• to areas that define the core activities, values
  and belief system of an organization and can
  represent a broad range of subject matter
  anywhere from business priorities and innovation
  through to social responsibilities and ethics.
• These can include
• values of an organization that distinguish it or
  make it stand out from other organizations
• codes of conduct, quality of work life
  statements, statements of moral responsibility
  and positions on social and environmental issues
  as well as organizational emphasis on such things
  as the value and access to education, corporate
  contribution to the community, strategic business
  direction etc.
• These are
• seen most often as guiding principles underlying
  strategic supply relationships
• Richard Ogilvie 2004

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Key Elements of Benchmarking

• Knowing what you want to be (vision)
  environmental scan and search for best practices
  external benchmarking and translate to fit your
  university
• Knowing what you want to do to get there (goals)
  - environmental scan and search for best
  practices external benchmarking and translate
  to fit your university
• Knowing where you have been and where you are now
  (past and current state assessment) internal
  scan and identify key performance indicators that
  can be tracked historically (how do you know
  where you want to be and how you want to get
  there, if you dont know where you have been and
  what you were doing and where you are today and
  how you got here)
• Measuring your performance historical to current
  and between organizations - internal and external
  to let you know how you are doing and making
  adjustments where necessary
• Continuous Improvement exercising
  Self-discipline in analyzing, interpreting,
  sharing data and information and implementing
  improvements
• Richard Ogilvie 2004

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Knowing what you want to be (vision) best
practices and external benchmarking (external
environmental scan)

• Some things to remember about university supply
  management and visioning your role
• You function in a diverse and complex
  organization atmosphere! select your supply
  management tools carefully to reflect the
  diversity and decentralization necessary (do not
  put all of your eggs in one basket)
• Whatever services you supply it is in support of
  the core mission of the university! (different
  institutions provide different supply services
  within their purchasing operations) do not
  consider these services in isolation of other
  services in the supply chain add value . dont
  download work
• There is a myriad of information available to you
  on strategically positioning purchasing and
  supply management within organizations! (NIGP,
  ISM, CAPS etc.) research it
• Adding value while reducing cost to your
  university is not just best practice! - it is the
  essence of supply chain management

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Knowing what you want to be (vision) -
Translating the environmental scan and best
practice into vision at the U of C

• Commencing in 1997
• Have utilized a facilitated strategic planning
  process
• Involves key Materials Management staff (50 of
  the total staff) and,
• Occurs annually to review, adjust and update
  mission, goals and objectives this year will be
  our 7th.
• Complete an annual environmental scan
• Identify best practice externally and question as
  well as adjust our strategic purchasing alignment
  annually (benchmark)
• Participate in external benchmarking exercises
  (e.g. U of A, CAUBO, CAPS etc) and,
• Conduct SWOT Analysis (internally).
• Examples of areas we look at include supply
  management tools and technology
• Have developed a Strategic/ Vision Statement
• Adopted a Supply Chain Management Strategy which
  sees the U of Cs Materials Management department
  as the synthesis of its customer and materiel
  requirements, its supply processes, its staff,
  the Universitys values and its supplier
  relationships - it exists to maximize the supply
  value to the organization

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Knowing what you want to do to get there (goals)
Translating vision into measurable goals at the
U of C

• Ultimately our U of C Materials Management Goals
  are to
• Reduce the amount of time spent on purchasing
  transaction processing both centrally and
  de-centrally (best practice)
• Increase the amount of time spent on introducing
  value-added supply services (best practice)
  and,
• Increase the time spent on understanding and
  acting on the performance of supply services
  (best practice) .
• We have planned to get there by
• Searching for continuous improvement in our
  operations (best practice)
• Emphasizing the importance of our staff and their
  professional development (best practice)
• Applying technology wherever we can leverage
  efficiency (best practice)
• Applying the appropriate supply management tools
  to fit the need (best practice) and,
• Demonstrating respect and professionalism in our
  business approach and ethics (best practice) .

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Traditional Purchasing ModelU of C 1996

• Purchasing Cycle as a Function of Time

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Strategic Supply Chain ManagementDesired State
(Materiel Management)1996

• Supply Chain Management Cycle as a Function of
  Time

Coordinating Supply Programs (Transaction
Processing) Reduce Labour and Costs
Time
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Knowing where you have been and where you are now
(past and current state assessment) Gathering
data and reporting on key performance indicators

• Data Gathering
• 1997 - Identified data that we wanted to start
  capturing that would allow U of C to measure
  ourselves next to our vision (best practices) and
  have continued to add data as we find ways to
  capture it
• Report raw data and summarized information
  (selected key performance indicators) no less
  than annually and the majority of the data
  monthly, quarterly and annually
• Benchmarking
• Data is available to respond to best practice
  comparisons (e.g. external comparisons such as
  CAPS, CAUBO etc.)
• Data is available to measure progress toward best
  practice

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Measuring Performance - Quantitative Data
Gathering

• Sample data gathered each month and compared to
  the previous four years (Purchasing Services
  Samples Only)
• Number of purchase orders processed by type,
  Buyer, zone assignment, dollar value
• Direct labour cost of producing a purchase order
  by type, Buyer, auto-distribution
• Purchasing card transactions by individual and
  type
• Competitive bids by type, Buyer, zone
  assignment, dollar value
• Hours worked versus hours available
• Workloads by activity, Buyer, zone assignment
  and cost centre
• Supplier transactions, dollar volumes, fill
  rates, delivery time etc.

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Quantitative Performance Indicators for Measuring
Economies andEfficiencies Best Practice

• Samples
• Cost per Buyer Processed Order versus
  Electronically Processed Order measures labour
  cost reduction and impact of utilizing electronic
  business tools (best practice)
• Number of Orders Processed Electronically versus
  Manually measures progress in moving from labour
  intensive transaction processing to electronic
  transaction processing (best practice)
• Buyer Workload Purchase Order Processing
  Workload versus Competitive Bidding, Negotiation
  etc. Workload measures progress toward value add
  activities versus clerical activities (best
  practice)

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Example - Individual YTD Direct Variable Purchase
Order and Competitive Bid/Contracts Processing
Costs per Activity Type
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Example Quantitative IndicatorMeasuring
Progress toward Value-Add Purchasing
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Measuring Performance - Qualitative Data Gathering

• Sample data gathered (Purchasing Services Only)
• Monthly contracted supplier sample audits
  includes product/price check, delivery check,
  method of requisitioning and customer
  satisfaction check with follow-up on issues
• Staff training by staff member, by course, by
  budget (annually)
• Professional and university designations by
  staff group (annually)
• Types of purchasing programs/tools implemented
  and usage
• Absenteeism rates
• Documentation and procedural reviews about every
  three to four years

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Qualitative Performance Indicators for Measuring
Effectiveness Best Practice

• Samples
• Professional Standards measures the level of
  staff training to address the changing
  complexities of the job in moving from
  transaction processing to value add (best
  practice)
• Accreditation Standards measures whether the key
  components of a Materials Management operation
  are present and the appropriate purchasing tools
  are being used (best practice)
• Customer Satisfaction measures whether the right
  product was ordered using the right purchasing
  tools and it was received at the right cost at
  the right time (best practice)

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Example Monthly Quality Assurance and Internal
Control Audit
Catalyst Systems Contract W/O Catalogue Audit
Supplier Accurate Stamp April 2004
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Measuring Performance Values Based Data
Gathering and Indicators

• Under Construction
• Best practice
• strategic supplier relationships established
  through an alignment of organizational values
  (e.g. the Balanced Score Card)
• U of C Actions to date
• Created the Academic Plan the driver for all U
  of C activities
• Created a Business Development Office to
  establish and manage strategic relationships
• Formed draft policy for establishing strategic
  business relationships
• Some value based purchasing policies in place
  e.g. environmental purchasing policy

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OutcomeU of C Supply Chain Management2004

• Supply Chain Management Cycle as a Function of
  Time

Coordinating Supply Programs (Transaction
Processing) Reduce Labour and Costs
Time
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Benchmarking as Best Practice

• The U of C Materials Management Experience
• benchmarking is in itself a best practice
• benchmarking is all about continuous business
  improvement it cannot be a one hit wonder it
  has to be integrated into your business
  philosophy and business practice
• benchmarking is about change management giving
  staff and administration an understanding of what
  you want to achieve, reporting your progress and
  rewarding outcomes
• benchmarking is about ensuring that you are
  selecting the best tools (best practices) to get
  the job done
• . we would not have achieved our significant
  business advancements and improvements without it
  ..

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University Supply Management BenchmarkingSome
Challenges and Issues

• Lack of qualitative standards e.g. accreditation
  standards are non-existent that define, if not
  best practice, accepted practice
• Lack of external reviews focusing on best and
  accepted practice
• The One Hit Wonder i.e. no sustained
  benchmarking activity, that would benchmark
  institutions on a periodic but regular basis e.g.
  every 3 to 4 years
• Institutions not geared for service evaluation
  e.g. treading water syndrome
• Institutions not identifying the values and
  guiding principles that should drive business
  relationships with suppliers e.g. not only
  missing out on a best practice but how do you
  measure the effectiveness of these business
  relationships if you do not understand the basis
  on which they are built