Up to now Finance has its own language. Finance language is revolving around gross margin, cash, revenue, costs, etc. And Operations has its own language. Operations language is revolving around customer satisfaction, product quality, just-in-time, lean, flexible, lot size 1, etc. There is no common language. No surprise that people cannot talk to each other.
But they have to talk to each other. They need to talk to each other when it comes to managing the performance of a company. Finance has certain demands on gross margin and free cash for example (actually the company has those demands but they are expressed via Finance). And Operations needs to understand how to meet these requirements. So far this sync process between Finance and Operations is trial-and-error. Nothing less nothing more.
There was a similar problem in the communication between doctors and patients. Doctors wanted to convince patients of a certain diet. And patients wanted to understand the rationale for those recommendations. This was the reason for the introduction of the so-called Body-Mass-Index / BMI. Meanwhile the BMI is so widely accepted that nobody thinks about it as a common language between doctors and patients anymore.
We have applied the same principle on enterprise performance. Our Trufa Performance Index (TPI) translates Finance language into Operations language. The TPI shows e.g. that improving perfect fulfillment by 2% yields 5% more cash respectively 0.5% more profitability. Our TPI shows e.g. that you need to increase your customer satisfaction by 2.5% in order to achieve the required 5% cash improvement. Our TPI shows that increasing your electronic orders by 10% saves you 3% free cash. etc.
Meanwhile the Trufa performance management machine processed 15,000,000,000 business documents (“Belege”) and calculated 12.500,000,000 TPIs. And continues to run – day by day.
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