January 10, 2015 / benchmarking, best practices, continuous improvement, Cost Management, customer satisfaction metrics, KPIs, LIT, operations metrics, performance metrics, predictive management, quality, strategic planning
As most manufacturing experts will attest, measurement is the only way fabricators can truly optimize their operations. By choosing the right metrics, today’s managers are able to quantify their successes, identify areas for improvement, and anticipate possible failures.
Unfortunately, knowing what to measure is the hardest part. When it comes to metrics, more is not always better. In fact, the goal should always be quality, not quantity. As this blog post from MESA International says, if you find your shop measuring things like parking space vacancy and food trucks, it’s probably time to re-evaluate.
Choosing the right metrics for your shop needs to be a strategic decision, which means there isn’t a sure-fire formula. However, there are some basic guidelines that can help you gauge if you are at least headed in the right direction. Below are a few tips that may help:
- Know the key categories. While metrics will vary depending on the size and type of manufacturing operation, there are few key categories that are a good starting point. According to a research project conducted by LNS Research and MESA International, there are four key operational metrics most manufacturers should consider. Based on results from a survey, the project found that Inventory, Efficiency, Quality and Responsiveness have biggest impact on average annual improvements in financial/business performance. The project also found that successful new product introductions (NPIs) and overall equipment effectiveness (OEE) were among the top individual metrics that contributed to positive financial/business performance. The detailed numbers behind all of these can be found in the eBook report, which can be downloaded here. A summary report of the project findings can be downloaded here.
- Size doesn’t matter. Don’t think that metrics are only for high-volume, low-mix shops. Jett Cutting Service, Inc., a metal-cutting service center featured in a white paper from the LENOX Institute of Technology, knows this is certainly not the case. Orders are constantly changing at the Bedford Park, IL-based company, which runs 10 precision circular saws and 8 band saws and averages about 700,000 cuts a month. Because of this, Mike Baron, vice president, says he can’t rely on accurate forecasting to provide a buffer when bottlenecks occur. To combat this, Baron relies on daily measurement to not only monitor production, but to keep tabs on his operators and costs. Operators are required to track how many pieces they cut on their shifts, and if their totals are lower or higher than the goal set by Baron, it is addressed immediately.
- Don’t fool yourself. The old adage that “numbers don’t lie” is typically true, but as this article from Forging magazine points out, people can manipulate them. Decision makers need to be sure they are not allowing themselves to be persuaded by selective use of data. “I often wonder if we have arrived at a moment in time when there is so much information available, and available so easily, and so cheaply, that we succumb to the temptation to select the most congenial facts, and ignore the rest that might make our immediate task more difficult,” the author asks. Optimization requires managers to closely choose and analyze their metrics, even if it means opening up a can of worms. Be selective, be fair, and when in doubt, re-check those numbers.
- Benchmark. Knowing what your peers are doing is critical to staying competitive. One way to do this is to benchmark. According to management consultancy McGladery, the use of benchmarking is on the rise as companies look to offset the effects of the uncertain economy by reducing costs and improving effectiveness. “Benchmarking provides an objective analysis of existing business processes and insight into improving those practices, identifying gaps or inefficiencies,” the consultant firm says in a white paper. “It presents a measurement to make informed business decisions against, as well as develop strategies and create initiatives to provide a road map for growth, if not survival.” Interested to know how you measure up to your peers? Check out our exclusive study, Benchmark Survey of Industrial Metal Cutting Organizations, or the Financial Ratios and Operational Benchmarking Survey from Fabricators & Manufacturers Association, Intl.