Performance Measurement Training
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PART III. Cost The cost measurements assess the ongoing effort to reduce or eliminate non value-added activities. Reduction of these costs is a confirmation of quality improvements, cycle time reduction, reduced inventory levels and space utilized. 1. Percent increase in inventory turnover
2. Percent reduction in data transactions Data transactions are considered one of the key wastes in the business process and should be minimized. The measurement should be by product line and measure transactions such as labor and inventory movement. The measurement should be against a baseline of business activity such as total units produced. This measurement is monthly for the product line and is displayed on a trend line. 3. Percent increase in materials shipped to point of use by supplier Companies need to shorten the time to process incoming materials. Activities such as incoming inspection, material movement and taking material out of shipping container to be in another container suitable to the manufacturing process are cost-added. The measurement tracks by supplier the percent of materials that are able to be shipped directly to work-in-process. A trend line is used on a monthly basis to display the information. 4. Percent increase in dollars of product output per employee This is a measure of productivity. It determines how effectively people and resources are being used in the production of the product. The calculation would be annualized sales divided by total number of employees. This should be measured monthly and displayed using trend lines. 5. Percent reduction in floor space utilized The reduction in floor space utilized is measured by product line. This is typically accomplished by mapping the process and measuring the physical distance the product travels from first step to last step in the production process. Measure monthly and display trend by product line. STAY CONNECTED To stay current on bullet-proofed manufacturing solutions, subscribe to our free ezine, "The Business Basics and Best Practices Bulletin." Simply fill in the below form and click on the subscribe button. We'll also send you our free Special Report, "Five Change Initiatives for Personal and Company Success." Your
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