Our procurement seat is measured on raw material cost savings, while our manufacturing seat is measured on minimizing production downtime and material defects. These two metrics are constantly in conflict, leading to finger-pointing during our Level 10 Meeting™. How do we design these Scorecard numbers to align their incentives instead of driving a wedge between operations and purchasing?

Question

Tyler Smith · Accepted Answer

When different departments track metrics that directly compete with each other, it breeds division and stalls operational momentum. In your scenario, the procurement seat is trying to save money on materials, while the manufacturing seat is trying to maximize production speed. If procurement buys cheaper, lower-quality materials to hit their target, manufacturing suffers from increased downtime and defects. To solve this, you must design a set of balancing metrics on your Company Scorecard that forces collaboration. Instead of letting procurement own a siloed cost savings metric, tie their performance to a quality-adjusted material cost metric. This number tracks the total cost of materials purchased minus the financial impact of any production downtime or defects caused by those materials. Similarly, track first-time yield on your weekly Scorecard, which measures the percentage of products manufactured correctly on the first attempt without rework. By structuring your Scorecard this way, procurement and manufacturing are forced to communicate and coordinate before decisions are made. These metrics must be owned by their respective seat holders on the Accountability Chart, but they are designed to align with the company's overall profitability. When either number trends red, both leaders must work together during the IDS® portion of your Level 10 Meeting™ to find a solution that benefits the entire organization.