What gets measured gets delivered. This is more true of Operations than any other function because running a great process is a matter of constantly getting feedback and fine-tuning your process.
This is why, getting the core metrics right is crucial for running successful operations. In this post, we will have a look at how to arrive at the right metrics for your process and the reasons behind it.
Disclaimer: No two processes are the same. So, these metrics will just provide you a direction. I recommend you do this exercise on your own for your business.
At Zorp, our fundamental belief is that every process is unique and the uniqueness will keep evolving as the business grows. So, given such variation in the way we execute, how do we arrive at a standard metric? The answer is to do this by providing a framework to structure these metrics. I'll also share examples from different industries to compare how the variations of these metrics are derived for different industries.
The Key Metrics
The key metrics of any process in Operations are
You might know these by different terms, more clarity will evolve as you read through.
Volume is simply the number of items/orders/tasks/records that need to be processed by the team. It is also called inflow (Sometimes output metrics act as volume).
Volume will essentially
- Tell you how much work you have ahead
- Help you plan your capacity of people depending on the changes in volume
Let's have a look at what different variations Volume can take in different industries.
Food Delivery - Order volume
Manufacturing - Quantity to be produced
Audit - Items to be audited
Field Sales - Customers to visit
Variety is the variations that occur in your process. Typically all processes start with a single variation but they quickly evolve into different variations because you would want to tweak your process depending on the edge cases you face.
- You handle deliveries during the day different than the deliveries in the night
- Offer cash on delivery for low value items whereas not for high value
- Go to office location for customer visits in the afternoon whereas home location in the morning or evening
How many varieties you have and how these varieties are handled is a core part of measuring your process. Here are some industry specific examples. As mentioned above, think about the different varieties for your own business.
Food Delivery - Night vs Day delivery, Payment on delivery vs online payment, Scheduled delivery vs on-demand
Manufacturing - Color, size variants, small batches vs large, single use packs vs family packs.
Audit - Recurring vs one time, compliance vs internal quality, approval needed vs not
Field Sales - Home location vs office location, low value vs high value customer, first visit vs closing
Time directly falls into the efficiency part of the process flow. How long a single process execution takes is Time or frequently known as Turn Around Time (TAT). Improvement in turn around time directly reduces the overall cost incurred (in most cases). This is because, some of the major costs incurred in operations are fixed costs - labour, overheads, vehicles etc. So, when the TAT reduces, the efficiency improves, the number of units of work done in the same time increases and the cost per unit of work goes down.
A simple example is below. For an Operations personnel earning 3500$ per month, working for 8 hours in a day for 25 days in a month,
- Executing 15 tasks a day, results in $9 per task
- Executing 20 tasks a day, results in $7 per task
So, TAT is considered the key unit of measurement to reduce the overall operations cost.
Some industry examples here,
Food Delivery - TAT per delivery
Manufacturing - Manufacturing time per batch
Audit - Tike taken per audit
Field Sales - Time spent per customer
This is a very obvious one. The question is not about how fast you run your process but also how fast can you run at a given quality. This quality metric is not simply binary. Quality is on a gradient depending on what is the final customer experience.
Eg., a customer support agent completing a ticket could be successful completion of a process. But the quality of work is dependent on what is the final impact on the relationship with the customer.
Quality of a process is very sensitive to small things and that is where designing a strong SOP is important. And the definition of quality varies more than most other metrics we define here from company to company.
A good practice is to have a target number for the quality metric and design your process around it. The reason is that while achieving 100% quality is amazing, it might result in you incurring too much cost. Most companies aim for 99% to 99.9% quality in the process they perform.
Industry examples here.
Food Delivery - Delivery Rating
Manufacturing - No of items that fail the quality check
Audit - No of False Positives & False negatives
Field Sales - Conversion Rate
Quality and cost may seem orthogonal in some ways. Actually they are not. A well designed SOP and execution platform make it easy to deliver high quality service at the lowest possible cost.
Take Amazon for example, they try to provide a very fast delivery at some of the low costs possible. To a large extent their ability to run low cost with quality are interrelated.
Cost in this case is defined as the money spent to execute a single unit of your process. It is good practice to add the fixed costs also at a task level. This will help you understand at what scale you can expect your costs to come down and match your targets.
Food Delivery - Cost per delivery
Manufacturing - Cost per batch production
Audit - Cost per audit
Field Sales - Cost per visit
The metrics defined here will provide you the right direction to analyze your process. But to really make a difference, breakdown each of these metrics into sub metrics and start analyzing them closely. If you have questions on what kind of metrics apply for your company, feel free to reach us directly.
When you design your process, it is essential to have a clear understanding of what your metrics are. This will help you set the SOP in the right way or choose the right platform to support your execution. Make sure the platform you choose will be able to provide you the right metrics out of the box to help you learn fast.
We have written another blog post on choosing the right product to run Operations. You can check it out here.
We have designed Zorp with the basic principle that Operations teams should be able to get the right metric to make decisions faster and better. If you are interested in talking to us, reach out to me at bala at zorp.one or DM me on linkedIn or Twitter.