1. Manufacturing and Service Operations
Learning Block 5 Performance Metrics

2. 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

3. Learning Block Agenda Understanding Metrics
Performance Metrics and Categories

4. 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)

5. 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)

6. 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

7. 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.

8. 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

9. 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

10. 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.

11. 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

12. 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

13. 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

14. 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

15. 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