Design and Analysis of an Enterprise Metrics System

Keywords Design and Analysis of an Enterprise Metrics System Enterprise metrics systems
Standards groups

In order to address this problem we needed to find a way to generate
an analytical function for cash flow in terms of the other enterprise variables,
such as: cash flow = f(critical path lead time, productivity, customer satisfaction,
yield, etc.). This function could then be maximized to find which variables most
affect cash flow and the total cash flow uncertainty could also be calculated in
terms of the uncertainty of the other variables. The tools selected to address the
problem are system dynamics, balanced scorecard, and engineering uncertainty
analysis. The development of a method to apply these tools to understanding a
production process and developing a complementary metrics system is the
primary novel contribution of this thesis.

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Enterprise metrics systems are intended to align the behavior and incentives of the organization with management’s strategic goals. In designing such a system, it is critical that the cause and effect relationships between performance drivers and outcome
measurements be well understood. This understanding is difficult to achieve due to the complex nature of modern manufacturing enterprises, which can exhibit non-linear behavior that is exceedingly difficult to predict and control by standard management methods based on linear models.

This thesis examines the manufacturing process for an air-to-air missile from initial order receipt to final product delivery, and develops a general methodology based on this case to understand and manage complex manufacturing processes. The methodology is based on the integration of balanced scorecard metrics principles with the analytical tools for complex systems found in system dynamics. The methodology is iterative, where an initial computer based model of the manufacturing process is developed,
checked against reality, and any differences are then corrected in the model. Based on the understanding from the model, metrics can be designed to improve operational control of the system and identify metrics that would best align individual and organizational incentives.

The thesis provides general recommendations for the development of an enterprise wide process modeling and metrics development program designed to improve management control and business process understanding. Specific recommendations are also
provided for the air-to-air missile program to improve its financial and operational performance by reducing variability in key areas. Cash flow is the specific focus of the program recommendations and the tools developed by applying the methodology are used to improve the financial process capability of the manufacturing system.

Robert A. Nicol
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