With operational metrics, you can objectively measure how your team is doing, how your organization is doing and set goals to benchmark. It’s a crucial step to determine areas of strength and weakness for the business.
Quartz Network Executive Correspondent Britt Erler sat down with Ayall Sagi, Vice President of Operations and Supply Chain at TriMark USA to identify best practices in measuring operating performance.
Ayall shares insight into:
- What operational metrics are and how to utilize
- Selecting the best operational metrics to use
- Ways to benchmark and set targets
- Using the data operational metrics provide
Quartz Network: Please share a bit about your role and day-to-day focus?
Ayall Sagi: In my role at TriMark, and in general throughout my career in operations, I’m looking at both the strategic as well as the execution side of operations.
That means making sure that the business is running smoothly, day to day orders are getting out to customers, there are no issues in the supply chain, as well as constantly looking at how we can improve.
So that continuous improvement means looking at what we can make better. What can we make more efficient, to improve quality, to improve customer experience and to obviously reduce costs of operations to the organization.
I oversee a team of about 100 people at six distribution centers spread across the West Coast. I oversee the West Coast distribution, network and supply chain for TriMark.
Quartz Network: What is operational metrics and why should it be used?
Ayall Sagi: It’s always interesting to me when I joined an organization, even at TriMark, to realize what they don’t have. A lot of organizations just don’t have any operational metrics. So really, the first question is why? Why should you be using them?
I believe that it’s very hard to fix what you can’t measure. You don’t know what to go after. You don’t know what changes you’re making that are working and what aren’t working. So, it’s important to have something that is objective, which you can use to determine how things are going. And when you are making changes and implementing different strategies, are they working or not?
The “Why” and “What” depends variously on what you’re trying to measure. This bleeds into the why, but more of the what. Some of the big ones relate to, how are you doing in terms of cost? How are you doing in terms of productivity? How are you doing in terms of quality. How are you doing in terms of safety?
So having these different ones around large categories, and then within each category, you can break into specifics. That’s how you can really go after initiatives.
So to summarize what operational metrics are, they’re a way to objectively measure how your team is doing, how your organization is doing, and to set goals to benchmark.
The why is really to make sure you are tracking and doing things correctly. That you’re moving the direction you want to go. You can set goals, you can set targets, and you can work with your team to improve.
Quartz Network: Which metrics do you believe are the most valuable?
Ayall Sagi: Since we’re speaking predominantly around operations, let’s talk about warehouse and things like that. Part of it depends on what you’re trying to measure and what timeframe you’re trying to measure. If you oversee the entire operations organization, you’re going to want to look at something very large, like operational cost as a percent of sales. That way you can determine all the costs and your operational organizations as a percent of sales.
You can benchmark how your company is doing against the industry. Although a lot of that information is private, there are some public companies that will provide that information. The real goal here is to get a baseline and then work with your team to improve it.
If you’re at 5%, how do you get down to 4%? If you’re 1% how do you get down to half a percent? Using that to really understand where you are. If you’re more in a warehouse or more in a distribution center, maybe you’re looking at cost per order.
So again, you’re trying to identify all your costs, your fixed costs, your variable costs, and the volume going out, your orders. And then breaking it up even further, if you’re working a certain area, if you’re an inbound, if you’re an outbound, you’re looking at maybe lines per hour. So this is productivity. This really depends on the volume and the amount of hours spent working that volume.
Those are some of the high level ones, and each one can be broken up. But the real thing here is looking at them, looking at your organization. Determine what level you’re curious, and then start to dive into each one.
Now, you’re probably not going to be able to look at something like operational cost as a percent of sales on a daily basis. So that’s something that you might be looking at quarterly or monthly. Cost per order might be something that you’re looking at weekly or monthly.
Lines per hour are really great because you can break those into daily and hourly. I’ve seen some teams even break them down to every 15 minutes. And that’s a way to do more real-time analysis and change how you are doing.
Quartz Network: How do you start benchmarking and setting targets?
Ayall Sagi: A lot of times when I join organizations, I help them set up these metrics. The first question I always get from superiors and peers is, “What should it be?” That is actually not as important as having it. Because what you really want is to have a benchmark, have a starting point based on historical data.
So start measuring it. See how you’re doing for the first few months and then say, “Okay, now how do we use this to improve? How can we set goals?” That’s really the way to go.
It’s not as important to say we need to get to 1%, or we need to get to 100 lines per hour. It’s more important to say, “What are we doing right now?” Get that get that data, make sure it’s objective and make sure you’re measuring it.
Then once you have that week over week, month over month, quarter over quarter – use that to set goals. Like, this month we were 10 lines per hour. Next month, let’s try to get to 11 lines per hour. Let’s try to increase our productivity. And that doesn’t happen magically.
You use these to be able to work with your team to say, “What can we do to increase productivity? Which processes can we tweak or modify? What tools can we bring in?”
Then you bring them in and you look at your metrics. If your metrics have gone up, if your productivity has gone up, you know that the brainstorming idea that you implemented work. As opposed to trying something and it doesn’t work. That’s okay too.
I constantly tell my team this is going to be a process of two steps forward and one step backward. Not every idea is going to work. But that’s the beauty of having the metrics. You’re able to determine the metrics on an objective scale. What works versus what doesn’t work. Then you’re able to constantly strive for excellence and constantly improve.
Quartz Network: When setting these targets from the onset, are you comparing yourself to other companies? Or is it more looking at your company and where you can see it going?
Ayall Sagi: It is definitely looking at where you are and where you’re going, and as you improve and as you evolve. Then you will start to compare and better benchmark to your competitors. You’ll try to dig out that information. You’ll try to find some industry standards and achieve those.
But a big part of it is also comparing to your competitors. Different things will have different benefits. If you have a lot of automation, your productivity is going to be really high on the lines per hour. But your cost per order might be really high as well, because there’s a lot of cost and automation.
There’s a lot of ways of looking at it. I constantly push to really use these to benchmark against yourself and set that industry standard. If it doesn’t exist, set it. Make it. Become that leader in your industry.
Quartz Network: How do you effectively use this data the metrics provide and what do you use it for?
Ayall Sagi: One of the things that’s important with metrics is making sure they don’t conflict. So a big part is making sure that the metrics are objective. You don’t want them to be opinionated. You want them to be transparent and visible.
We use them a lot to share with our sales organization. For example, with cost per order there is always a cost in order. It is important to share that with the salespeople. While they may be focused on top line growth, if they’re making sales with very little margin, we’re actually losing money on those orders. A big part of that is communicating, being visible, sharing, and making sure that the operational metrics align with the overall organizational metrics.
Quartz Network: What advice do you have for other leaders in a similar position as yourself?
Ayall Sagi: The big thing I believe is you have to continuously improve. If you’re not moving forward, someone else will catch up and take over. So you have to maintain ahead. You have to continuously improve.
This helps encourage your team, gets them moving and makes the job exciting. It keeps you moving forward, it keeps you progressive and keeps you looking ahead. I would encourage leaders to constantly embrace that continuous improvement.
And again, do not worry about failures, not everything will work. But the goal here is to try. So you try something and again and the metrics do a great job of telling you what worked and what didn’t. But the key is to continue to try. Don’t get stuck in the mundane day to day role. Get some strategy, make changes, and use the metrics to improve.
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