January 5, 2016 / best practices, continuous improvement, Cost Management, industry news, KPIs, operations metrics, performance metrics, predictive management, preventative maintenance, productivity, quality, strategic planning, workflow process
The economic uncertainty from 2015 is unfortunately spilling over into 2016. As reported in a recent IndustryWeek article, the head of the International Monetary Fund Christine Lagarde said “global growth in 2016 will be disappointing and patchy” due to rising interest rates in the U.S. and a slowdown in China, among other reasons.
The most recent metal service center shipments confirm the gloomy forecast. According to data from the Metal Service Center Institute, service center shipments of both steel and aluminum were down—albeit at slower rates—in November compared to both the previous month and year prior.
Given current economic conditions, it’s not surprising that metal service centers are using metrics and data to improve their operations—the only aspects of their businesses they can control. As reported in a white paper from LENOX Institute of Technology, market leaders know that proactive—not reactive—improvement is the key to being successful in today’s market.
When it comes to metrics, more and more companies believe key performance indicators (KPIs) are the best means for gathering quantifiable and traceable measurements because they are tied directly to business strategy. In fact, KPIs are so popular that the University of Tennessee’s Reliability and Maintainability Center (RMC) started an initiative called “Six Metric Areas to Best Practices” to help companies focus on the right metrics and align them to their organization.
As reported by Plant Services, Tennessee’s RMC initiative focuses on three guidelines:
- Work on what matters. There can be hundreds of KPIs, but only a few of them can dramatically improve an initiative. Make sure these KPIs are aligned with the company’s business goals and strategy. Tasks should be explicit and all actions should support a larger goal.
- Data should be industry specific. While using an average is a good place to start when determining improvement goals, it is important to look at industry specific data to ensure those goals remain realistic. Averages provide a guideline, but specific data provides meaning and context as to what is attainable or not, depending on market, costs and other industry related factors.
- Use benchmarks. Other data, according to industry, should act as a guideline and provide focus for ongoing improvements. RMC plans to publish competitive gaps and summarize results for participating companies.
As part of its initiative, RMC has also identified six universal KPIs that all companies, regardless of industry, should consider adopting. These include the following:
- Percent Reactive Maintenance, including data on predictive, preventive, and capital projects
- Maintenance Cost/Replacement Asset Value, expressed as a percent
- Overall Equipment Effectiveness (OEE), including availability, performance, and quality
- Inventory Turns for both overall product and maintenance, repairs and operations (MRO) spare parts
- Mean Time Between Failure (MTBF)
If your service center isn’t already using some of the above KPIs, now is the time to consider identifying at least a few, if not all, of them. If the process feels overwhelming, do some research, ask for help, and start measuring. In today’s uncertain economy, manufacturers can’t afford to ignore the operational areas that need improvement. As they say, you can’t improve what you can’t measure.
Are you using KPIs to optimize your operations? What metrics have resulted in the most improvement for your metal service center?