Executive Briefings

Align Shop Floor Metrics to Your Corporate Strategy

Analyst Insight: The Warehousing Education and Research Council's latest benchmarking study shows that the performance gap between best-in-class and "Major Opportunity" warehouses remains large. In order to close the performance gap, Major Opportunity warehouses need to understand how to find their process weeds and pull them up by the roots. By aligning shop floor metrics to corporate strategy, companies link accountability to where the work gets done and will begin to close the gap. - Joe Tillman, senior researcher, Supply Chain Visions

Showing workers how their performance affects the overall business and working with them to facilitate the selection and implementation of the measures is key.  We suggest a simple five-step process Validating the Value-Add or VVA for short. VVA establishes shop floor or department metrics that support overall company objectives and goals. This is accomplished by linking accountability to achieve goals to where the work gets done. When used properly, VVA can create an environment where people use the metrics to drive positive change in the business.

Step 1: Clearly define the company's objectives.

Companies need to determine their desired outcomes and strategy. Then articulate the desired outcomes and strategy, such as "I want to achieve a 10-percent improvement in shipping accurate orders." Make sure to link operational and functional tactics back to the overall strategy. Follow up with your people to make sure they understand the strategy and what their role is in helping to achieve that strategy.

Step 2:  Develop the validating the value-add statement.

Create value-add statements that are under your team's or department's control. Essentially, how does the team or department add value in achieving the company's desired outcomes. Be sure to have a measurable performance goal. For example, "Our team adds value by maintaining 99.4 percent or better accuracy on order picking."

Step 3: Measure the progress against VVA.

Once clear expectations have been set, measure the team's or department's progress against their goal. Make it easy to see that goals are indeed being met by summarizing data so that the results are obvious. Also, be sure to include historical data to track trends. Step 3's focus is for employees to easily understand and track their performance against the company's desired outcome.

Step 4: Build a Pareto of reasons for not meeting the goal.

Create a process for root cause analysis and development of corrective action plans. For example, create a Pareto chart (80/20) to show where to focus your efforts. The obvious problem is usually not the root cause, and in order to keep the problem from recurring, the team must drill down to find the underlying reasons for the problem. A good technique is to ask "Why?" five times.

Step 5: Take action - Fix the problem.

This is where results begin. By outlining the steps you are taking to correct problems that have been identified in Step 4 you mitigate emotions and finger pointing. Plus taking action will help drive change to improve your performance. However, if you are not willing to do something about it all of the work to this point means nothing.

                                      The Outlook

The performance gap between the best and the rest will not close without a conscious effort to drive performance at the lowest levels in the operations. The best-in-class performers did not attain their status serendipitously; they look behind the numbers to understand how their level of performance was reached by identifying the unique processes, tools and methods required to achieve best-in-class performance.


Keywords: Warehouse Management, All Technology, HR & Labor Management, Business Strategy Alignment, Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Validating the Value-Add

Showing workers how their performance affects the overall business and working with them to facilitate the selection and implementation of the measures is key.  We suggest a simple five-step process Validating the Value-Add or VVA for short. VVA establishes shop floor or department metrics that support overall company objectives and goals. This is accomplished by linking accountability to achieve goals to where the work gets done. When used properly, VVA can create an environment where people use the metrics to drive positive change in the business.

Step 1: Clearly define the company's objectives.

Companies need to determine their desired outcomes and strategy. Then articulate the desired outcomes and strategy, such as "I want to achieve a 10-percent improvement in shipping accurate orders." Make sure to link operational and functional tactics back to the overall strategy. Follow up with your people to make sure they understand the strategy and what their role is in helping to achieve that strategy.

Step 2:  Develop the validating the value-add statement.

Create value-add statements that are under your team's or department's control. Essentially, how does the team or department add value in achieving the company's desired outcomes. Be sure to have a measurable performance goal. For example, "Our team adds value by maintaining 99.4 percent or better accuracy on order picking."

Step 3: Measure the progress against VVA.

Once clear expectations have been set, measure the team's or department's progress against their goal. Make it easy to see that goals are indeed being met by summarizing data so that the results are obvious. Also, be sure to include historical data to track trends. Step 3's focus is for employees to easily understand and track their performance against the company's desired outcome.

Step 4: Build a Pareto of reasons for not meeting the goal.

Create a process for root cause analysis and development of corrective action plans. For example, create a Pareto chart (80/20) to show where to focus your efforts. The obvious problem is usually not the root cause, and in order to keep the problem from recurring, the team must drill down to find the underlying reasons for the problem. A good technique is to ask "Why?" five times.

Step 5: Take action - Fix the problem.

This is where results begin. By outlining the steps you are taking to correct problems that have been identified in Step 4 you mitigate emotions and finger pointing. Plus taking action will help drive change to improve your performance. However, if you are not willing to do something about it all of the work to this point means nothing.

                                      The Outlook

The performance gap between the best and the rest will not close without a conscious effort to drive performance at the lowest levels in the operations. The best-in-class performers did not attain their status serendipitously; they look behind the numbers to understand how their level of performance was reached by identifying the unique processes, tools and methods required to achieve best-in-class performance.


Keywords: Warehouse Management, All Technology, HR & Labor Management, Business Strategy Alignment, Quality & Metrics, Supply Chain Analysis & Consulting, Global Supply Chain Management, Validating the Value-Add