Here we have a case about a company that makes boxes. This is a case that highlights the main pitfalls and workflows in an organization not using key performance indicators (KPIs) and strategic goals. Reading this, might make you aware of some pitfalls that you fall into and make it easy to find the solution. The main point is that had The Box Company been more agile, they might have stayed alive as a company.
We start out at a board meeting for The Box Company. The board are all agreeing that it would be beneficial for them to measure monthly sales and average delivery time for their boxes, as they decide this is an indicator for the growth and wealth of the company.
The board decides a way to get and treat these number. They get the raw data from the Enterprise Resource Planning (ERP) system by pulling out data as Excel sheets. As the board themselves neither have the knowledge of Excel to treat it themselves or the time to do so, they decide to delegate it to the employee with most experience in working with Excel, Egon. He works in the economy department, so he is used to dealing with numbers in Excel. You could even call him an expert in Excel and he loves handling data.
For a long time this set-up seems to work and the numbers indicate that everything is going according to plan. In just a few months, it seems that the average delivery time increases, which makes everyone concerned. The board asks the CEO, Bjarne, to find the reason for this. Bjarne knows that Egon usually handles the data, so he then asks Egon to go through the numbers and find the root of the issue. What products are affected and why has the delivery time increased on this product?
Egon starts the task, but he finds himself defeated and not able to complete the task, since the ERP system only contains information about which products have been delivered off time but no information about the specific parts of the manufacturing process that are causing the delay.
Increasing the granularity
Egon reports back to Bjarne, telling him that he cannot find the cause of the delay. Bjarne gets frustrated at first, but asks his head of departments to come up with suitable KPIs for their departments to measure the delivery time of each order in their department. Bjarne regains his feeling of control since he feels his overview and insights will get much more detailed by this new initiative.
The three departments of The Box Company come of with a KPI each which shows the delivery time in each of the departments. In production Peter measures the average production time of a product, Simon in sales measures the average processing time of each order, and Berit in the purchase department measures the average delivery time of the supplies (cardboard, glue or scissors etc.).
Having agreed on KPIs for each department they feel relieved. The only problem seems to be that non of the head of departments are able to do the calculations needed and to get all the data from the different systems in use. Egon again offers to do the calculations since he loves Excel. Everybody seems happy with the new improved overview in place and they agree on having the data ready by the next board meeting in three months.
Three months later Bjarne gets the results from Egon, but the data reveals some devastating news. There has been an increase in the delivery time and production time in both the supply and the production departments. The board tells Bjarne to take action immediately and since the situation is very critical they arrange an additional board meeting in a month. The situation needs to be under control by then otherwise the board will have no other option, but to close the company.
The price of a continuous overview
Bjarne briefs Simon, Berit and Peter about the situation and the urgency of getting things under control. He asks them to deliver reports on a daily basis since the development of each of the KPIs need to be watched continuously to prevent the negative trend from escalating.
Bjarne asks Berit and Peter to go into even greater detail in an attempt to find the root cause of the issues. Peter decides to measure the outcome from each of the production stations and Berit settles on measuring the average delivery time on each of the specific supplies.
As no one else in the company has the necessary skills, Egon ends up helping everyone with the calculations and all of a sudden he finds himself overwhelmed and calculating all day in order to deliver on time.
Egon struggles to deliver the calculations on time and one day illness strikes because of the stress level. Simon, Peter and Berit are in great trouble since they now have to do the calculations themselves with no knowledge on what has been happening before, leaving very little room for managing the employees.
They seem to fall behind with all of their tasks and Bjarne is worried.
Weeks have passed since the last board meeting, but finally Bjarne has gotten the answer he was looking for. After weeks and months of investigation he finally concludes that that the problem seems to be that the supplier is outfacing the cardboard used in all of The Box Companies boxes.
Finally finding the root of the problem makes Bjarne relieved, but he soon realizes that the board meeting is coming up and nothing has changed in the bottom line since the last meeting. Knowing the problems the company is in and being hard pressed, makes the employees stressed and production time has grown a lot, so the board has no choice but to close the company.