Presentation on theme: "Manufacturing Metrics"— Presentation transcript:
1Manufacturing Metrics Balanced ScorecardMESA Empirical Study
2Metrics Matter You can’t improve what you can’t measure. You can’t measure what you can’t see.- Dr. W. Edwards Deming
34/13/2017MetricA metric is a verifiable measure stated in either quantitative or qualitative terms.“97 percent inventory accuracy”“According to our customer evaluations, we are providing above-average service”
4Metric A metric is a verifiable measure that 4/13/2017MetricA metric is a verifiable measure thatcaptures performance in terms of how something is being done relative to a standard,allows and encourages comparison,supports business strategy.
5Customer quality measures 4/13/2017Customer quality measuresCustomers typically relate quality to:Feature based measures; “have” or “have not” - determined by designPerformance measures - “range of values” - conformance to design or ideal value
6True vs. Substitute performance measures 4/13/2017True vs. Substitute performance measuresCustomers - use “true” performance measures.example: a true measure of a car door may be “easy to close”.true performance measures typically vary by each individual customer.Unfortunately, producers cannot measure performance as each individual customer does.Producers - use “substitute” performance measuresthese measures are quantifiable (measurable units).Substitute measure for a car door: door closing effort (foot-pounds).Other example: light bulbtrue performance measure -- brightens the roomsubstitute performance measure – wattage or lumens
74/13/2017Educating ConsumersSometimes, producers educate consumers on their substitute performance measures.What are substitute performance measures for the following customer desires:Good Gas MileagePowerful ComputerWhat is the effect of educating consumers on performance measures?
84/13/2017What is a “metric”?Another term for a substitute performance measure is a metric.Metric is a standard of measurement.In quality management, we use metrics to translate customer needs into producer performance measures.Internal quality metricsscrap and reworkprocess capability (Cp or Cpk)first time through quality (FTTQ)
9Identifying effective metrics 4/13/2017Identifying effective metricsEffective metrics satisfy the following conditions:performance is clearly defined in a measurable entity (quantifiable).a capable system exists to measure the entity (e.g., a gage).Effective metrics allow for actionable responses if the performance is unacceptable.There is little value in a metric which identifies nonperformance if nothing can or will be done to remedy it.Example: Is net sales a good metric to measure the performance of a manufacturing department?
10Use of quality metrics Quality metric data may be used to: 4/13/2017Use of quality metricsQuality metric data may be used to:spot trends in performance.compare alternatives.predict performance.However, organizations should consider the costs and benefits of collecting information for a particular quality metric.collecting data will not necessarily result in higher performance levels.higher quality companies often use fewer metrics than their competitors.
114/13/2017Acceptable rangesIn practice, identifying effective metrics is often difficult.Main reason: non-performance of a metric does not always lead to customer dissatisfaction.Consider the car door example again, if door closing effort is the metric, will a customer be dissatisfied if the actual effort is 50 foot-pounds versus 55 foot-pounds.Producers typically identify ranges of acceptable performance for a metric.(a) For services, ranges often referred to as break points.(b) In manufacturing, these ranges are known as targets, tolerances, or specifications.
124/13/2017Break pointsBreak points are levels where improved performance will likely change customer behavior.Example: waiting in lineSuppose the average customer will only wait for 5 minutesWait longer than 5 minutes -- customer is dissatisfied.1-5 minutes -- customer is satisfied.less than 1 minute -- customer is extremely satisfiedShould a company try to reduce average wait time from 4 to 2 minutes.?
13Targets, tolerances and specifications 4/13/2017Targets, tolerances and specificationsTarget (nominal) - desired value of a characteristic.A tolerance specifies an allowable deviation from a target value where a characteristic is still acceptable.Lower specificationlimit (LSL)Upper specificationlimit (USL)TARGET-1+1
14Balanced ScoreCard A Balanced ScoreCard is both a Tool and a Process: The Tool: Your ScoreCard reports all key drivers of your strategic success. It lets you know if performance in each critical area is at the level you expect, and shows you trends for each major business driver.The Process: For the Executive Team, the ScoreCard is the centerpiece of your month-end review process. It is also used with your extended management team, employees, and Board to educate them on key performance issues.
16BayMed Balanced ScoreCard FinancialMarket/CustomersThe Dashboard divides into 4 quadrants, or “perspectives”. The Financial perspective reports Revenues, Gross Margins, EBITDA, Operating Expense, Net Operating Income, Free Cash Flow, and any other Financial Data you choose.Operational ExcellencePeople & Culture
19BayMed Balanced ScoreCard FinancialMarket/CustomersThe “Market/Customers” perspective reports repeat business with existing customers, new customers, new business partners, how recent releases are performing, customer complaints and customer satisfaction.Operational ExcellencePeople & Culture
24BayMed Balanced ScoreCard FinancialMarket/CustomersOperational Excellence“Operational Excellence” reports the core competencies which you have to execute well to win customer loyalty. Core Competencies vary by company and industry. “BayMed” tracks sales execution, marketing effectiveness, product development speed, manufacturing and customer support excellence.People & Culture
27In Engineering, it’s all about meeting our milestones on major products in development. This chart shows recent and upcoming milestones, where we stand now vs. 1 mo. ago, and days early/late for each milestone.
28This slide looks at order fulfillment timeliness: do we meet our delivery commitments? We track both Product Orders as well as Service Contract milestones.
29This slide looks at Inventory Turn rates in each of our three “value-add” levels.
30This manufacturing slide looks at the cost of poor quality in Total, and by each of 5 key drivers. Note that quality cost is expressed as a % of COGS – we want NOT to exceed 10%. Note the problem areas of Sustaining Engineering and Inventory Accuracy.
31resolve the customer’s issue on their first call resolve the customer’s issue on their first call. We also measure answering speed, abandonment rate and average talk times
32BayMed Balanced ScoreCard FinancialMarket/CustomersOperational ExcellencePeople & Culture“People & Culture” looks at the workforce, reporting workforce growth, internal mobility and competency development, strategically vital employees, hiring quality, and employee engagement.
39Metrics that Matter: Empirical Study Study BackgroundMetrics Matter to PerformanceFast, Effective MetricsManufacturing Enterprise Solutions UseMetrics Framework Success
40Industry Council MESA Guided Project Scott Daugherty, Plant Manager, Cormetech Inc.John Plassenthal, Project Manager, Strategic Integration, Enterprise Applications IT, International Truck and EngineJohn Moore, Quality Program Manager, KLA TencorNeil Crew, Group IT Director, Princes LimitedBrian Leinbach, MES Deployment Team Lead, Wyeth Pharmaceuticals
41Response Demographics On-line: 135 different manufacturersRepresenting 20 industriesRange of Products Counts & Mix in plantsNearly evenly divided by size:over $2B, $500M-$2B, under $500MTelephone: 16 “Industry Leaders”
42Every Production TypeSource: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
43Three Major Respondent Groups by Role Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
44Metrics Justify Improvement Industry struggles with the financial hurdlesDisconnect between operations, IT and financeBridging gap justifies projects
45Common Business & Financial Metrics Net Operating Profit (78%)EBITDA (71%)Labor cost per unit (68%)Customer Fill Rate / On-time Delivery (64%)ROA / RONA (62%)Economic Value / Economic Profit (60%)Market Share (54%)Top Productivity MetricsRevenue per employeeRevenue per square footCash-to-cash cycle timeStudy also asked about productivity by 3 perspectives – revenue & value added per employee and revenue per square foot and also about cash-to-cash cycle time. For 11 metrics totalEBITDA: Earnings before interest, taxes, depreciation, and amortizationSource: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
46Business Movers: Operations Improvement to Financial Metrics This is what the business and finance folks know they want – to be in that Business Movers group and improve against key business and financial metrics.Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
47Business Movers Improved Operations Areas Also It’s doubtful that this is a coincidence.We did a similar split of those who improved against the 19 operations KPIs and found that over 80% of the Business Movers were also in this group.Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
48Some Operations KPIs Are Common Across Segments the other 8 metrics included in the survey are:Scrap/rework as % of salesOEECpK – process capabilityWarranty costsToxic waste reductionsPercentage planned vs. emergency maintenance workEnergy consumption per unit of productionUpside production flexibility – on the primary constraintSource: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
49Business Movers: More Effective Links Between Business & Ops Metrics Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
5024 Hours or Faster Feedback to Operators So They Can Take Action Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
51Latency between Business Metrics and Operations that Cause Them Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
52Most Common Applications in Investment Plans for Next 12 Months Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
53Gaining Benefits from Manufacturing Software Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
54Those with MES & Dashboards Perform Better Teal bars are those who use MES (darker) and dashboards (lighter) while gold are those who do not.Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements
55MESA Metrics Framework Source: Metrics that Matter Guidebook & Framework
56Graphical Representation of Metrics Framework Corporate Strategy: Increase Brand Margin & ValueNet margin per brandFinancial Metrics# of Profitable BrandExtensionsReduceStock-outsLowerProductionCostsOperationalMetricsPlantMetricsChangeoverSpeedNPI Ramp-up TimeUpsideProductionFlexibilityPlanned vs. Emergency MaintenanceFirst Pass YieldEnergy ConsumptionPer UnitOEESource: Metrics that Matter Guidebook & Framework
57References Charlie Gifford, Lean Production, MESA International. Michael Selby, Scorecard Partners.Kaplan &Norton: The Balanced Scorecard.