Manufacturing and Service Operations Learning Block 5 Performance Metrics

Course Agenda Manufacturing and Service Operations Overview Strategic Decisions in Manufacturing Manufacturing Planning and Control Operational Improvement Performance Metrics Systems and Technology Maintenance and Quality

Learning Block Agenda Understanding Metrics Performance Metrics and Categories

Description Performance metrics provide evidence that demonstrates which processes are successful and which ones need improvement. Without performance metrics, it is difficult to understand past and current performance. (Page 19)

Learning Objectives Recognize the important role that measurement plays in supporting the attainment of manufacturing and supply chain objectives Explain the reasons for measuring performance Understand the four components of performance measurement Apply the characteristics of an effective measurement system Differentiate various manufacturing and supply chain measurement categories and measures (Page 19)

Unit 1: Understanding Metrics Performance metrics are quantifiable measures used to measure, track, and assess processes. Most organization use a five-step process: Identify processes to be measured Define lower and upper limits of acceptability for each measurement Set up a data collection process Updating graphs and reports Take action if a process fails to meet acceptable limits

Performance Measurement Measurement can motivate behaviors that support organizational goals. Insights into past performance helps management predict future performance. Managers can base their decisions on objective, data-driven information rather than subjective feelings. Employees are often evaluated and compensated based on performance metrics.

Performance Measurement Characteristics of effective performance metrics: Performance objectives are reviewed regularly and adjusted by management Metrics link to and support higher-level functional and company-wide strategies and objectives Metrics link to and support performance strategies and objectives of other functions Individuals or groups are held accountable for achieving performance results Metrics promote teamwork, continuous improvement, and cross-functional cooperation Metrics form the basis for reporting results to executives Metrics include triggers that indicate when process control tasks are necessary Metrics include well-defined plans regarding how to achieve each measure

Unit 2: Performance Metrics and Categories Delivery Performance Customer orders completed and shipped on time to a commitment Customer response and resolution times Completion and ready for next workstation Quality Performance Part-per-million (PPM) quality defect levels First-time yield Scrap and rework Customer and survey feedback Service incidents resolved Warranty returns Cycle Time Performance Elapsed time to produce a product Machine changeover time Machine setup time Equipment readiness Safety Performance Number and severity of overall accidents and incidents Environmental accidents and incidents Regulatory non-compliance incidents Cost Performance Total costs expended to make a product Labor hours expended per x dollars Non-productive labor hours (resulting from material shortages, equipment downtime, etc.) Revenue per employee Training hours per employee

Summary Performance measurement is an important enabler of organizational success. Measurement is key to effective quality management. Objective vs. subjective decision-making A challenge is to develop metrics that do not conflict with measurements used by other functional groups.

Practice Questions 1. Past and current performance metrics can be used as an enabler to: Make individuals accountable for errors Justify poor quality production Predict and plan for future performance limits for new metrics Discontinue continuous improvement 2. What is the best definition of performance metrics? Theory used in setting safety stock levels Quantifiable measures to track and assess performance Measures used only in manufacturing Relying solely on the ability of barcode systems to scan inventory

Practice Questions 3. Management decisions for improvements should be based primarily on which type of data? Short-term Subjective Sporadic Objective 4. Which of the following is a good example of a quality performance metric for a manufacturing operation? Procurement overhead New sales Parts per million (PPM) defect level Average total cost per unit

Practice Questions 5. Which performance metric category provides an indication of performance for accidents, incidents, and environmental issues? Safety Finance Support Suppliers  6. Which of the following is a good example of a manufacturing cost performance metric? Non-productive labor hours Machine readiness On-time delivery Safety infractions

Practice Questions 7. In addition to providing an indication of performance, metrics can also indicate what other attribute about a company? Earnings Trust Profitability Behavior 8. Multiple metrics at a summary level are often displayed or collected in a document referred to as a: White paper Dashboard Display board Accelerator

Practice Questions 9. What is a standardized delivery metric that is used in many industries? Customer orders completed and delivered to a commitment Non-conformance charges First-pass yield Warranty return rates 10. Which of the following is NOT a manufacturing-related measure? Overall equipment effectiveness First-time yield Changeover or setup times Transportation vehicle demurrage and detention charges