1. © BMA Inc. 2009. All rights reserved. Lean reporting & control Performance Measurements

2. © BMA Inc. 2009. All rights reserved. Lean Performance Measurements Measurements that motivate people to lean improvement. Measurements that provide excellent operational control. Measurements that reflect the business strategy of the company at every level. Measurements that are lean themselves & can be gathered and reported simply and easily.

3. © BMA Inc. 2009. All rights reserved. Use Measures for Learning and Problem Solving Concerned with results and the process of getting those results Responsibility oriented, derives from role Reveals problems, so that they can be fixed and kept from recurring Feedback loops to drive problem solving, measure improvement and foster learning Focus on checking the process, control of resources and development of people; results derived from adhering to process standards Results oriented Top-down control; authority oriented Hides problems One shot image of success in reaching target—no feedback Focus on control of resources, people and results Lean UseTraditional Use

4. © BMA Inc. 2009. All rights reserved. Customer Value is Deployed and Managed Continuously Customer Needs Strategy Changes Technology Changes Stakeholder Needs Value Stream Measurements Cell Level Measurements Hoshin Strategy Deployment Sales & Operations Planning

5. © BMA Inc. 2009. All rights reserved. Cell Measurements Value Stream Measurements Plant Measurements Three Levels of Performance Measurements Enable the cell teams to monitor and control their own production activities. Guide the continuous improvement team in their “pursuit of perfection” activities. Enable senior managers of the company to monitor the achievement of strategic goals & initiate strategy changes.

6. © BMA Inc. 2009. All rights reserved. “Starter Set” of Performance Measurements for Lean Mfg. Increase Cash Flow Increase sales & market share Continuous improvement culture Provide Customer value Sales Growth Cash Flow from Operations Inventory Days On-Time Delivery Customer satisfaction Sales per Employee Sales per Person On-Time Delivery Dock-to-Dock Time First Time Through Average Cost per Unit Day-by-the-Hour Production WIP-to-SWIP First Time Through Operational Equipment Effectiveness STRATEGIC ISSUES STRATEGIC MEASURES VALUE STREAM MEASURES CELL/PROCESS MEASURES

7. © BMA Inc. 2009. All rights reserved. Performance Measurement Linkage Chart Order Fulfillment Value Stream

8. © BMA Inc. 2009. All rights reserved. Performance Measurement Linkage Chart This picture shows a linkage chart developed during an actual kaizen; post-it notes are used on paper. This makes repositioning and changing chart components flexible and easy.

9. © BMA Inc. 2009. All rights reserved. Plant or Division Measurements Sales Growth Cash Flow from Operations Are we generating enough cash? Inventory Days General indicator of lean improvement On-Time Delivery Measurement of control and meeting customer delivery needs Customer Satisfaction Direct feedback from the customers Sales per Employee Overall productivity

10. © BMA Inc. 2009. All rights reserved. Typical Production Value Stream Performance Measurements Sales per Person –Productivity of everyone in the value streams On-Time Shipment –Can we ship on-time? –Are our processes under control? Dock-to-Dock Days –Rate of material flow through the value stream –Raw material, WIP, finished goods First Time Thru –Quality & standardized work for the entire value stream Average Cost per Unit –Are we reducing costs and making improvement? Supporting measurements –Safety cross –Cross training matrix –Continuous improvement projects

11. © BMA Inc. 2009. All rights reserved. Value Stream Continuous Improvement Board Sales or Units per Person On-Time Shipment First Time Through Dock-to- Dock Days Average Cost Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Productivity Process ControlQuality Material FlowCost Improvement Projects Current Value Stream Map Future Value Stream Map Value Stream Income Statement BOX SCORE Transition Plan

12. © BMA Inc. 2009. All rights reserved. Value Stream Performance Measurements Board Hoshin Kaizen Action Plan Business Opportunity Charts Value Stream Maps

13. © BMA Inc. 2009. All rights reserved. Value Stream Board “Business Opportunity Chart” Four Charts in One Performance Measurement, Pareto Chart, Data, Action Plan

14. © BMA Inc. 2009. All rights reserved. Value Stream Performance Measurements Board

15. © BMA Inc. 2009. All rights reserved. Value Stream Continuous Improvement The primary purpose of the weekly reporting is to guide the value stream manager and his/her team towards continuous improvement. Tools –Value stream performance measurement boards –Value stream income statement –Box Score –Pareto charts –Continuous improvement projects

16. © BMA Inc. 2009. All rights reserved. Typical Cell Performance Measurements Day-by-the-Hour –Focus on making to takt time –Linearity of production First Time Thru –Focus on making perfect quality without scrap or rework –Focus on standardized work WIP-to-SWIP –Work-in-process inventory compared to standard work-in- process inventory –Focus on consistency of flow –Focus on the pull process Operational Equipment Effectiveness –Focus on machines making to takt time –Bottleneck operations Supporting measures or reporting –Safety cross –5S audit –Cross-Training matrix –Daily improvement projects

17. © BMA Inc. 2009. All rights reserved. Support Measurements In addition to the primary measurements many companies also collect some supporting information at the cell. –Safety Cross –Cross-Training Chart –5S Audit or Self-Audit –Number of Continuous Improvement Projects Completed

18. © BMA Inc. 2009. All rights reserved. The Key to Effective Cell Performance Measurement Managers and support people frequently visiting the cells and solving problems. The focus must be on the value-creating processes. Making what the customers want, on-time & perfect quality.

19. © BMA Inc. 2009. All rights reserved. Cell Measurement Board

20. © BMA Inc. 2009. All rights reserved. Cell Measurement Cube

21. © BMA Inc. 2009. All rights reserved. Cell Measurement Board

22. © BMA Inc. 2009. All rights reserved. Example Day-by-the-Hour Board

23. © BMA Inc. 2009. All rights reserved. How Do Performance Measurements Apply in Support & Administration? Administrative Process Measures Productivity of the process On-Time Delivery (to internal customers Rate of Flow of information through process First Time Thru of the process Average Cost per Unit We use similar measurement methods in the office & administrative processes. Administrative Cell Measures Day-by-the-Hour First Time Thru WIP-to-SWIP of the cell Operational Equipment Effectiveness of machines in the cell

24. Sales/Marketing Value Streams Measurements Increase Sales & Market Share Increase Cash Flow & Reduce Debt Create Culture of Continuous Improvement Maintain Stable & Educated Workforce STRATEGIES Sales Growth STRATEGIC MEASUREMENTS Increase Sales & Profitability VALUE STREAM GOALS VALUE STREAM MEASUREMENTS Sales Growth Cash from Operations Inventory Days or Turns Customer Satisfaction Sales per Employee Suggestions per Person % People Engaged in Improvement Annual Employee Survey Increase Number of Customer Match Sales to Value Stream Capabilities Improve Productivity Collect Cash Quickly Increase CI Project Participation Provide Advancement for Employees Eliminate Accidents & Injuries Customer Satisfaction Order to Cash Days Profitability of Order Fulfillment Value Streams Value Stream Cost per Sales $ Accounts Receivable Days # People on Improvement Teams Cross Training per Person Number of Accidents & Injuries

25. Sales/Marketing Value Stream: Quote Process VALUE STREAM MEASUREMENTS Sales Growth Customer Satisfaction Order to Cash Days Profitability of Order Fulfillment Value Streams Value Stream Cost per Sales $ Accounts Receivable Days # People on Improvement Teams Cross Training per Person Quote Success Rate % Financial Contribution of the Orders First Time Through% Average Quote Response Time PROCESS MEASUREMENTS CELL GOALS CELL CRITICAL SUCCESS FACTORS Understand Customer Value Meet or Exceed Customer Expectations Fast & Effective Processes Obtain orders matching capacity & mix Eliminate waste Increase quote success by understanding needs Maximum market price based on value Provide quotes quickly & to customer format Effective visual management Standardized work for quote processes Eliminate variability Linearity of Sales Orders Track Improvement Projects 5S Audit Cross Training Chart Widespread Cross Training Increase CI Project Involvement Increase Training & Cross Training Empowered continuous improvement

26. Strategic and NPD Value Streams Measurements Increase Sales & Market Share Increase Cash Flow & Reduce Debt Create Culture of Continuous Improvement Maintain Stable & Educated Workforce STRATEGIES Sales Growth STRATEGIC MEASUREMENTS Introduce High Value Products VALUE STREAM GOALS VALUE STREAM MEASUREMENTS Sales from New Products Cash from Operations Inventory Days or Turns Customer Satisfaction Sales per Employee Suggestions per Person % People Engaged in Improvement Annual Employee Survey Short & Reliable Product Design Processes Match Products to Value Stream Capabilities Improve Productivity Create Unique & Innovative Products Increase CI Project Participation Provide Advancement for Employees Eliminate Accidents & Injuries On-Time Design Projects Customer Satisfaction with New Products Profitability of Order Fulfillment Value Streams Value Stream Cost per New Product Sales $ Number of Patents & Innovations # People on Improvement Teams Cross Training per Person Number of Accidents & Injuries

27. © BMA Inc. 2009. All rights reserved. Watlow Controls, Winona MN Doug Kuchta, Value Stream Manager Value Stream Measurement Boards

28. © BMA Inc. 2009. All rights reserved. Wrap up: the lean performance measurements “challenge:” Replace the traditional cost accounting measurements with performance measurements that are designed to motivate and monitor lean behavior. Develop a set of measurements throughout the organization that thoroughly reflect the company’s strategy and goals. As people work to improve the measurement results, they will be actively working to achieve the company’s strategic goals.