Dollars and Sense: Process Improvement Approach to Logistics Financial Management

By Marygail K. Brauner; Ellen M. Pint et al. | Go to book overview

Chapter Three
MEASURING THE FINANCIAL
MANAGEMENT PROCESS

Under the D-M-I methodology, after a process has been defined (as described in Chapter Two), the next step is to measure its current performance. VM calls for measurement along three dimensions: time, quality, and cost. Based on what was learned during the definition stage and data availability, the FM PIT identified three metrics: (1) the quality of price information, (2) the quality of credit information, and (3) the financial wait time (FWT), defined as the time it takes for a supply transaction to be closed out in the financial system. These are three performance metrics for which the current Army information systems provide the data needed to understand current performance and to monitor the effects of improvement efforts (which are discussed in Chapter Four). In the remainder of this chapter, we discuss these metrics and demonstrate some of the diagnostic insights they can provide.


QUALITY OF PRICE INFORMATION

A customer receives high-quality price information if he knows the price he will be charged at the time the requisition is placed.1 This is not always the case in the Army's current price policy. Perhaps the best way to understand the problems of the quality of price informa-

____________________
1
Using current Army systems, it is not technically possible to measure price changes from the ULLS/SAMS request through to actual receipt price. However, the price initially recorded in SARSS (which may be different from the ULLS/SAMS price) is carried on a STARFIARS transaction record. Using STARFIARS, it is possible to count the number of transactions on which the price changes between initial requisition and receipt. The goal for “perfect price quality” in this case is zero price changes.

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Dollars and Sense: Process Improvement Approach to Logistics Financial Management
Table of contents

Table of contents

  • Title Page *
  • Preface iii
  • Contents v
  • Figures ix
  • Tables xi
  • Summary xiii
  • Abbreviations and Acronyms xix
  • Chapter One - Introduction 1
  • Chapter Two - Defining the Unit Financial 9
  • Chapter Three - Measuring the Financial Management Process 29
  • Chapter Four - Improving the Financial Management Process 51
  • Appendix A - Velocity Management 65
  • Appendix A - The Benefits of Stock Funding 75
  • Bibliography 79
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