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Metal fabrication and metrics: Measure what matters

How good metrics drive a business

p>We have all been in the heat of the battle in our manufacturing operations: Get this order out; handle that machine breakdown. It is hard to focus on measuring processes, activities, and outputs that give us a sense of long-term operational knowledge when we are just trying to get through the day.

Performance metrics are essential to provide everyone, from top floor to shop floor, with meaningful information to make sound decisions. Nevertheless, manufacturers’ performance metrics often are deficient, drive inward-focused behavior, or have no relevance to serving the customer.

Poor Metrics

An operation with poor or nonexistent performance metrics is a magnet for lots of confusion and disruption. If you are a machine operator, area supervisor, or plant manager, you get pushed and pulled with conflicting expectations and confusing feedback. This is not a comfortable place to be. So how exactly do poor or nonexistent metrics create this undesirable situation?

People don’t know what is really needed or expected. If you do not know what is expected, how can you be held accountable? Performance metrics help define expected outcomes and results. If metrics aren’t clear, how can we hope to meet them?

Bad metrics drive the wrong behavior. It is one thing to have a good metric. It is quite another thing to have a bad metric, and one way a metric can be bad is if it drives the wrong behavior. If I am measured only on productivity, then the wrong behavior might be that I produce inventory the plant really does not need. A balanced set of metrics gives the supervisor and operator better information to make better decisions for the good of the company and customers.

Bad metrics put people with different job functions at odds. Poor metrics can perpetuate the silo mentality by causing one person to make a decision that negatively affects the larger end-to-end process. For instance, a logistics manager may be accountable for reducing logistics costs; the more he saves the company in logistics costs, the more money he earns. Still, his decisions may adversely affect the materials and production operations because of unpredictable or infrequent deliveries. He may have performed admirably to the narrow and isolated logistics cost reduction performance metric, yet the overall operation suffers.

Bad metrics focus only on outputs. Metrics that focus only on the output (did the target number of units come off the assembly line today?) do not help people understand what is happening upstream in the process and do not provide time to recover when a target is missed. Without having the balance of upstream performance metrics to support the output metrics, the system is broken.

This list is far from complete, but it provides the basis for investing the time to make sure that performance metrics add value to the whole operation.

The Power of Effective Metrics

Effective performance metrics enable and sustain a lean operation, so much so that they play a prominent role in SME’s lean certification process. Candidates are expected to describe how performance metrics are used to support both tactical and strategic operations.

Good performance metrics provide clarity to people in the process (whether at a single work center or an entire value stream) about goals and targets. The lack of clarity is one of the most counterproductive forces in manufacturing businesses. During a visit to a Toyota training facility in Gifu-ken, Japan, Mr. Tagaki (a master instructor) made this point clear to us when he said, “If rules are clear, then you do not need as many levels of organization and management.” In the fog of ambiguity, effective metrics create clarity.

The specific targets and goals associated with performance metrics help set expectations. Are we expecting to produce a certain output today? Are we balancing and running the operation at 90 percent of takt time? Are work orders two levels deep in the bill of materials starting on the right date for the job to ship on time? There are lots of directions you can go to have performance metrics create expectations.

Effective performance metrics also align the efforts from the top floor (operations strategy) to the shop floor (tactical execution) and from one function to the next, through the end-to-end process. Without alignment, the order entry function might consume excess lead time or the materials function might delay the receipt of raw materials or purchased components. The result: The production function is late even before it starts.

Developing performance metrics that align the players in the entire process (from order to cash, for example) will eliminate the potential for one function to disrupt the overall process flow. This drives process thinking and helps to break down silos.

Where to Start

We know we need to make the time to assess and adjust the performance metrics for your business. Next question is, “How?” Although there is no one cookie-cutter approach, the following ideas will provide a good start:

  • Develop a metric map. The metric map helps identify what should be measured at various points or processes in the business. Using your company’s organization chart, start near the bottom, maybe at the supervisor or department level. For each box on the organization chart, identify three to five metrics. Try to be balanced so that you consider time, quality, volume, schedule performance, or other metrics relevant to a particular operation. Once you have completed this level, go up to the next level (perhaps area manager) and repeat the exercise. Finally, you get to the top of the organization chart and repeat the exercise again. Remember to focus on a relatively few metrics that cover a range of topics, not just productivity.
  • Link the shop floor to top floor. Building on the metric map technique, evaluate the performance metrics to make sure they link the top floor and shop floor (vertical orientation) and across functions (horizontal orientation). You should see the balance between topics as you move up and down and side to side. For example, if speed is an important metric at the top floor, does it show up as a priority at the shop floor?
  • Understand the inputs/transformation/output model. Once you have identified what to measure, next determine how to measure. Here, try using the inputs/transformation/output model.

The inputs/transformation/output model provides a disciplined way to define the elements of a process—or in this case, a performance metric. You must know what the inputs are and where they come from in order to build and use the metric. The transformation step converts the inputs into the defined outputs.

The performance metric outputs convey the state of what you are measuring, such as units produced per shift, minutes of downtime on a certain press brake, or compliance with daily preventive maintenance on a specific work center. Each step of the model requires a clear and specific definition.

Using the basic structure of input/transformation/output, you can begin to define the mechanical approach to each performance metric. Starting with the input, answer the question, “Where does this data for this performance metric come from?” What is the source(s)? Is the source(s) repeatable?

Next, define the transformation. What is the calculation to convert the inputs to outputs? Is the calculation automatic or is it manually generated? Does it already exist in your information systems? Maybe it is embedded in the ERP system or can be extracted from machine control systems at the work center.

Finally, determine what the output will look like and how it will be used. You will need to be very detailed in defining the input/transformation/output to make sure the performance measure is doable.

Keep It Simple

Make it as easy as possible to gather, report, and use the performance metrics to run the business. If a performance metric requires a workaround or lots of manual intervention to gather the data or calculate the metric, people will lose confidence in it. The performance metric will be short-lived.

Good metrics help avoid disruption to smooth operations; they allow you to have a finger on the pulse of the business. Alignment and clarity provide management with confidence that results are being delivered, resources are being applied where they have impact, and opportunities for improvement are becoming visible. Whether you are starting from scratch or evaluating your current performance metrics, developing and acting upon good metrics can help you take the business to another level of performance.

So what is the state of your performance metrics? Do you have confidence in them?

About the Author
Back2Basics  LLC

Jeff Sipes

Principal

9250 Eagle Meadow Dr.

Indianapolis, IN 46234

(317) 439-7960