Performance Measurements

Under the sponsorship of executive management and co-chaired by two vice presidents, a committee was chartered to identify the specific kinds of Production Operations measures that would fill these challenging needs. The members assumed an external as well as an internal customer perspective, and reflected on their own consumer instincts and manufacturing experiences to synthesize the principles that they believed were key to achieving customer satisfaction. After a number of ses­sions, a consensus evolved that customer satisfaction would best be achieved by simultaneously making products faster, better and less expensive. The comparative form of these three modifiers was selected because it demonstrates an anticipation of the ever increasing expectations of customers, and it further suggests that a continuous improvement philosophy will be employed to satisfy them. The connective word "and" (rather than "or") was used to join the modifiers together in a manner that asserts that none of the traditional trade-offs will be necessary if the approach is characterized by the elimination of waste.

When this approach was applied to each of the three principles, it was possible to specify the desired behavior and identify the associated metric. Therefore, "faster" encouraged the economy of time and the avoidance of queues, and is measured by the Cycle time from the first to the last assembly operation. The principle of "better" generated two separate behaviors and measures, one that addresses giving the customer what is needed by doing it right the first time (Quality), and the other that aims at getting it when it is needed (Delivery). Similarly, "less expensive" yielded two behaviors and indicators: build only what is needed (Inventory) and build it at the lowest possible cost by eliminating non-value-added activities (Total Cost) (see Figure 1).

The committee concluded that this set of measures—Cycle, Quality, Delivery, Inventory and Total Cost—would not only serve to foster customer satisfaction but would also support the strategy of growth, by promoting the types of changes that lead to competitive advantage and the associated acquisition of greater market share. The committee's final recommendation was to have a cross functional team formed to develop and implement the various measurement systems.

To be Continued

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