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PERFORMANCE MEASUREMENT

 

Measurement is a very fundamental element of life and yet is often avoided or overlooked in its application to business. It seems that in some situations truth is bet­ter left unknown. "To know it" would require action and creating change, which makes people uncomfort­able. On the other hand, measurement can also be over­done to the point where a great deal of effort is expended in the measurement of activities at the cost of not tak­ing time to improve them.

 

Our recommended approach to measurement is in the spirit of the Deming philosophy of "plan, do, check, and act." Measurement of performance is the "check" part. The "plan" part is the element of process thinking that sets goals and develops action steps to achieve them. Performing the process embodies the "do" part. Lastly, codifying and analyzing comprise the "act" part.

 

We have developed sets of measurements that reflect the fundamental business process models essential in your struggle toward business excellence. They are a foundation set, but yet, when taken as a whole, provide insight on che total business with relatively few mea­sures. In reality, these measures are the test of whether business excellence, in the context of your company, has been achieved:

      Business plan

      Demand plan

      Supply plan

      Master production schedule

      Materials plan

      Capacity plan

      Product definition accuracy

      Inventory record accuracy

      Process definition accuracy

      Manufacturing schedule

      Purchasing

      Customer service

      Quality.

Here are four sample definitions from the above list:

Demand plan—The objective of the demand plan is to develop a plan of orders received (booked) and/or shipments of the company's products. (Shipments are only valid if customers are served in a very short time from order to shipment.) Minimally, the demand plan should be stated in dollars and units by product family by month. The key measurement of the demand plan is actual unit sales as a percentage of planned unit sales by product family.

Master schedule—The master schedule translates the monthly supply plan into weekly production schedules and into the detailed mix of products within a family. The key measurement of the master schedule is actual orders produced complete as a percentage of orders planned to be completed in the week. Weekly perfor­mance is then averaged to obtain a monthly indicator for the master schedule.

Inventory accuracy—Inventory control is maintain­ing accurate and timely records of each item by loca­tion as it moves through the company. Inventory accuracy is the number of items, by location, where the physical inventory equals the inventory record as a per­centage of the total number of items counted. The count is considered correct if the difference between the record and the physical count falls within the agreed tolerance of that item and the physical location is in agreement with the computer record. Counts are usually performed daily and performance accumulated month-to-date.

Purchasing—The objective of the purchasing function is to deliver purchased material on the date needed with the required quality, quantity and best total cost. The purchasing plan states what purchased items are sched­uled for delivery each day, in order to achieve the mas­ter schedule. The key measurement for purchasing is the number of quality purchased items delivered on time in the right quantity as a percentage of the purchased items delivered each day.

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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