EX 23-23 nonfinancial performance measures

Diamond Inc. is an Internet retailer of woodworking equipment. Customers order  woodworking equipment from the company, using an online catalog. The company  processes these orders and delivers the requested product from its warehouse. The company wants to provide customers with an excellent purchase experience in order to expand the business through favorable word-of-mouth advertising and to drive repeat business. To help monitor performance, the company developed a set of performance measures for its order placement and delivery process:

Average computer response time to customer “clicks”

Dollar amount of returned goods

Elapsed time between customer order and product delivery

Maintenance dollars divided by hardware investment

Number of customer complaints divided by the number of orders

Number of misfilled orders divided by the number of orders

Number of orders per warehouse employee

Number of page faults or errors due to software programming errors

Number of software fixes per week

Server (computer) downtime

Training dollars per programmer

a. For each performance measure, identify it as either an input or output measure related to the “order placement and delivery” process.

b. Provide an explanation for each performance measure.

Answer:

a. and b.

Input 

Measure 

Output 

Measure 

 

Explanation 

 X A measure of the speed of the 

ordering process. If the speed is 

too slow, we may lose customers. 

 X An important measure of customer 

satisfaction with the final product 

that was ordered. 

 X An important overall measure of 

process responsiveness. If the 

company is too slow in providing 

product, we may lose customers. 

X  A driver of the ordering system’s 

reliability and downtime. The 

maintenance dollars should be 

divided by the amount of hardware 

in order to facilitate comparison 

across time. 

 X An extreme measure of customer 

dissatisfaction with the ordering 

process. 

 X Incorrectly filled orders reduce the 

customer’s satisfaction with the 

order process. A measure of output 

quality of the process. 

X  This measure is related to the 

capacity of the warehouse relative 

to the demands placed upon it. 

This relationship will impact the 

delivery cycle time. 

 X The page errors will negatively 

impact the customer’s ordering 

experience. It’s a measure of 

process output quality. 

X  Software bugs reduce the 

effectiveness of the order 

fulfillment system; thus, fixes are 

an input that will improve the 

performance of the order fulfillment 

system. 

Server (computer) downtime X  A measure of computer system 

reliability. 

Training dollars per programmer X  Trained programmers should 

enhance the software’s 

responsiveness and reliability.