Company
LOGO
Lean PerformanceLean Performance
Indicators:Indicators:
Relevant Metrics that Sell Results andRelevant Metric...
2© 2008 Mike Osterling and Karen Martin
Learning Objectives
Three key performance indicators that must
be included in proc...
3© 2008 Mike Osterling and Karen Martin
Metrics vs. Measurement
Measurement – the act of collecting data
for metrics
Metri...
4© 2008 Mike Osterling and Karen Martin
What is the Purpose of Metrics?
To establish a baseline from which to
measure impr...
5© 2008 Mike Osterling and Karen Martin
Process Design Mantra
Because measurement is NVA and
resource-intensive:
Minimum e...
6© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Relevant
Balanced
Easy to collect / dynamic
Timely...
7© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Relevance
Do your
metrics
provide clear
direction?
9© 2008 Mike Osterling and Karen Martin
Relevance: Key Considerations
What are our key business issues?
What specific prob...
10© 2008 Mike Osterling and Karen Martin
The Organization Becomes What
it Measures
If your organization measures / rewards...
11© 2008 Mike Osterling and Karen Martin
Relevant Metrics for
Office/Service/Technical Processes
Quality
First Pass Yield ...
12© 2008 Mike Osterling and Karen Martin
Key Metrics: Quality
%Complete and Accurate (%C&A)
% of the time the downstream c...
13© 2008 Mike Osterling and Karen Martin
Key Metrics: Time
Process time (PT)
The time it takes to actually perform the wor...
14© 2008 Mike Osterling and Karen Martin
Time-Related Metrics:
Value Stream or Activity Level
Lead Time
Order /
Request
De...
15
Current State VSM - Order Fulfillment Loop
Customer
Enter Order
Order Entry
PT = 5 mins.
%C&A = 90%
5
Pick and ship
ord...
16© 2008 Mike Osterling and Karen Martin
Summary Metrics: Time
Total PT
Factor in determining labor requirements
Total LT
...
17© 2008 Mike Osterling and Karen Martin
Summary Metrics: Quality
Rolled First Pass Yield (RFPY) =
%C&A × %C&A × %C&A × …
...
18© 2008 Mike Osterling and Karen Martin
Common Office Findings
Low AR (PT/LT x 100)
1-5%
Low RFPY (%C&A x %C&A…)
0-20%
19
Future State VSM - Order Fulfillment Loop
Customer
Review & enter
order
Sales
PT = 20 mins.
%C&A = 99%
25
Pick and ship...
20© 2008 Mike Osterling and Karen Martin
If the numbers don’t change in
the desired direction, you’ve
implemented a change...
21© 2008 Mike Osterling and Karen Martin
50%12# IT Systems
50%24# Steps
41.0%78.4%55.6%RFPY
55.3%6.80%4.38%AR (PT/LT x 100...
22© 2008 Mike Osterling and Karen Martin
Translating the reduction of
non-value-adding activity
into bottom-line numbers
Spaghetti
Diagram-
ECN
Visualize
travel of:
People
Product
(“the thing”)
ECN Process =
12.5 miles
Spaghetti Diagram
Emergency Services
Waiting Area
Benefits
Verification
Patient
History
Vitals
Physician
Office
Imaging
Ex...
Desk
Table
Desk
Desk
Desk
Desk
Table
Desk
Table
Desk Desk
Table Table
Staging Area
6,7,8,96,7,8,9
Desk
6,7,8,96,7,8,9
6,7,...
SNAP
Main
Tech
DEPT
HEAD
C.O.
SK
DAAS
BO1
ITEM
MGR
ISEA
SUPV
CRANE
SUPPLY
PEO
IWS2
CRANE
DEPOT
STOCK
POINT
Main
Tech
C.O.
...
27© 2008 Mike Osterling and Karen Martin
The Cost of Unnecessary Motion
Distance traveled to printer
Work Group A = 92 ft....
28© 2008 Mike Osterling and Karen Martin
The Cost of Searching
1,500-employee healthcare organization
Each employee spends...
29© 2008 Mike Osterling and Karen Martin
Calculating Freed Capacity
Total PT (in hrs) X # occurrences/year# FTEs
Required ...
30© 2008 Mike Osterling and Karen Martin
Freed capacity: “Hard” Benefits
Absorb additional work without increasing staff
R...
31© 2008 Mike Osterling and Karen Martin
PT reduction of 6 mins/CT scan
6 mins/scan x 250 CT scans/yr
= 1,500 mins (25 hrs...
32© 2008 Mike Osterling and Karen Martin
Better quality; better safety
Work fewer nights and weekends; more quality
time f...
33© 2008 Mike Osterling and Karen Martin
Assessing Customer or
Workforce Satisfaction
A five question 5-point Likert scale...
1. The supplies I need are available at all
times.
2. If an item is out of stock, I receive it within
the necessary timefr...
35© 2008 Mike Osterling and Karen Martin
Other Performance Metrics
On-time deliveries (customer service)
Back orders
Lead ...
36© 2008 Mike Osterling and Karen Martin
Other Performance Metrics
(continued)
Process yield
Setup / changeover time
Units...
Balanced, but Relevant?
38© 2008 Mike Osterling and Karen Martin
Break
10:20-10:30
39© 2008 Mike Osterling and Karen Martin
Group Activity
Pair up
Using the worksheets provided, calculate:
Activity Ratio f...
40© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Balanced
41© 2008 Mike Osterling and Karen Martin
Metric Attributes: Balance
Time and Quality (efficiency &
effectiveness)
Operatio...
42© 2008 Mike Osterling and Karen Martin
Metrics - Leading vs. Lagging
Leading indicators
Predicts future performance / li...
43© 2008 Mike Osterling and Karen Martin
Leading vs. Lagging Indicators
X X X X X X X
Lagging
Indicator
Leading
Indicator
...
44© 2008 Mike Osterling and Karen Martin
Leading Indicators
Building permits (in relationship to
economy)
Hours of safety ...
45© 2008 Mike Osterling and Karen Martin
Lagging Indicators
Missed time incident rate
Customer service levels (e.g. on-
ti...
46© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Easy to Collect /
Dynamic
47© 2008 Mike Osterling and Karen Martin
Metric attributes: Ease
We seek pleasure and avoid pain
Consider short term measu...
Easy and Accurate Metrics
49© 2008 Mike Osterling and Karen Martin
Collecting Metrics: Key Consideration
Accuracy vs.
Precision?
50© 2008 Mike Osterling and Karen Martin
Accuracy vs. Precision
What decision are we trying to make and
how much informati...
51© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Timely
52© 2008 Mike Osterling and Karen Martin
Metric attributes: Timely
Leading indicators allow us to alter
outcomes
Real-time...
53© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Visual
Operational Metric
Real-time tracking – Month-end Close
55© 2008 Mike Osterling and Karen Martin
Communication Boards
Visual Management - Strong Use of Color
Absenteeism as a leading indicator for…?
Administrative Metrics
Engineering Change Releases
36% 31%
51% 48%
37% 30%
45%
58%
76% 77%
61%
0%
20%
40%
60%
80%
100%
Feb...
Administrative Metrics
RFQ Defects
0
2
4
6
8
10
12
14
16
18
Information
Missing
Calculation
Error
Page Missing
Request for...
59© 2008 Mike Osterling and Karen Martin
Attributes of Effective Metrics
Designed to Drive
Action / Change
Behavior
60© 2008 Mike Osterling and Karen Martin
Metrics must drive action!
Before collecting, have a plan in mind re:
what you’re...
61© 2008 Mike Osterling and Karen Martin
Driving Action requires
Clear Accountability
Who owns the process?
Who measures?
...
62
Balanced, Visual, Clear Ownership
Metric Description Owner
FY07
Target
Apr
Total
May
Total
Status
Production
Output
Out...
63© 2008 Mike Osterling and Karen Martin
Translating improvements into
meaningful results
Selling your results
64© 2008 Mike Osterling and Karen Martin
Benefits of Reduced Lead Time
Improved customer satisfaction
Improved retention
M...
65© 2008 Mike Osterling and Karen Martin
Benefits of Reduced Process Time
Reduced lead time
Improved quality
Reduced expen...
66© 2008 Mike Osterling and Karen Martin
Benefits of Improved Quality
Reduced expenses
Labor, material, utilities, etc.
Im...
67© 2008 Mike Osterling and Karen Martin
Selling Your Results:
Considerations
People focus on their own work.
Leaders don’...
68© 2008 Mike Osterling and Karen Martin
Summary
Minimum necessary measurements & metrics
Choose your sample size wisely
B...
69© 2008 Mike Osterling and Karen Martin
Learning Objectives
Three key performance indicators that must
be included in pro...
70
Resources by Mike Osterling & Karen Martin
Available through Productivity Press
October 2007 Summer 2008
Auto-Calculates Process Metrics
72© 2008 Mike Osterling and Karen Martin
Karen Martin, Principal
7770 Regents Road #635
San Diego, CA 92122
(858) 677-6799...
Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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Lean performance indicatores

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Lean performance indicatores

  1. 1. Company LOGO Lean PerformanceLean Performance Indicators:Indicators: Relevant Metrics that Sell Results andRelevant Metrics that Sell Results and Drive Ongoing ImprovementDrive Ongoing Improvement IIE Annual Conference Vancouver, BC May 20, 2008
  2. 2. 2© 2008 Mike Osterling and Karen Martin Learning Objectives Three key performance indicators that must be included in process measurements. How to calculate staffing requirements. How to translate lean improvements into numbers with bottom-line impact. The difference between lagging and leading indicators, and the need for both operational and financial metrics. How to speak the language of executives and decision makers.
  3. 3. 3© 2008 Mike Osterling and Karen Martin Metrics vs. Measurement Measurement – the act of collecting data for metrics Metric – a system of related measures that facilitates the quantification of some particular characteristic
  4. 4. 4© 2008 Mike Osterling and Karen Martin What is the Purpose of Metrics? To establish a baseline from which to measure improvement To monitor process performance Assess progress Determine negative trends so proactive, corrective action can be taken To shape behavior To drive decisions / action To sell improvement across the organization
  5. 5. 5© 2008 Mike Osterling and Karen Martin Process Design Mantra Because measurement is NVA and resource-intensive: Minimum effort to achieve optimal outcomes. Efficient – time and resources Effective – quality
  6. 6. 6© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Relevant Balanced Easy to collect / dynamic Timely Visible Designed to drive action / change behavior
  7. 7. 7© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Relevance
  8. 8. Do your metrics provide clear direction?
  9. 9. 9© 2008 Mike Osterling and Karen Martin Relevance: Key Considerations What are our key business issues? What specific problems are we trying to solve/prevent? How will the data be used? What behavior change do we want to see?
  10. 10. 10© 2008 Mike Osterling and Karen Martin The Organization Becomes What it Measures If your organization measures / rewards: Managers and workforce pay more attention to a, b, & c
  11. 11. 11© 2008 Mike Osterling and Karen Martin Relevant Metrics for Office/Service/Technical Processes Quality First Pass Yield = % Complete and Accurate (%C&A) Cost Process Time (PT) - touch time / productivity Delivery / Service Lead Time (LT ) – throughput / turnaround time
  12. 12. 12© 2008 Mike Osterling and Karen Martin Key Metrics: Quality %Complete and Accurate (%C&A) % of the time the downstream customer(s) can perform their work without having to “CAC”: Correct information or material that was supplied Add missing information that should have been supplied Clarify information provided that should have been clear
  13. 13. 13© 2008 Mike Osterling and Karen Martin Key Metrics: Time Process time (PT) The time it takes to actually perform the work, if one could work on it uninterrupted Includes “think” time if process is analytical in nature aka “touch time,” work time, cycle time Lead time (LT) The elapsed time from the time work is made available until it’s completed and made available to the next person or department in the chain aka throughput time, turnaround time, elapsed time
  14. 14. 14© 2008 Mike Osterling and Karen Martin Time-Related Metrics: Value Stream or Activity Level Lead Time Order / Request Delivery / Receipt Process Time LT = PT + Waiting Available to work on Available to next process
  15. 15. 15 Current State VSM - Order Fulfillment Loop Customer Enter Order Order Entry PT = 5 mins. %C&A = 90% 5 Pick and ship order Warehouse PT = 15 mins. %C&A = 99% 5 2 hrs. 15 mins. 4 hrs. 5 mins. 2 hrs. 20 mins. 2 hrs. 15 mins. 10 hrs. Total LT = 20.9 hrs. Total PT = 55 mins. AR = 4.38% Run Credit Check Finance PT = 20 mins. %C&A = 99% 1 PO On-time delivery = 55% 10 hrs.2 hrs.2 hrs.4 hrs. SAP System 2 hrs. Review & approve PO Sales PT = 15 mins. %C&A = 90% 25 PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield Value Stream Loop: Domestic Order Fulfillment Current State Value Stream Map Customer Demand: 150 orders / day RFPY = 55.6% Excel Account data Sales Order ShipperApproval 2 x weekly %C&A = 70%
  16. 16. 16© 2008 Mike Osterling and Karen Martin Summary Metrics: Time Total PT Factor in determining labor requirements Total LT Indicates speed of delivery to customer & cash flow Activity Ratio (AR) The percentage of time work is being done to the patient/item/data passing through the process AR = (∑PT ÷ ∑LT) × 100 100 – AR = Idle time
  17. 17. 17© 2008 Mike Osterling and Karen Martin Summary Metrics: Quality Rolled First Pass Yield (RFPY) = %C&A × %C&A × %C&A × … Out of 100 occurrences, the number of times the data/material/people pass through the entire process with no rework required (expressed as a percentage).
  18. 18. 18© 2008 Mike Osterling and Karen Martin Common Office Findings Low AR (PT/LT x 100) 1-5% Low RFPY (%C&A x %C&A…) 0-20%
  19. 19. 19 Future State VSM - Order Fulfillment Loop Customer Review & enter order Sales PT = 20 mins. %C&A = 99% 25 Pick and ship order Warehouse PT = 15 mins. %C&A = 99% 5 4 hrs. 20 mins. 2 hrs. 15 mins. 2 hrs. Total LT = 8.58 hrs. Total PT = 35 mins. AR = 6.8% PO On-time Delivery >90% 2 hrs. 2 hrs. SAP System 4 hrs. PT = Process Time LT = Lead Time C&A = % Complete & Accurate AR = Activity Ratio (PT/LT x 100) RFPY = Rolled First Pass Yield Value Stream Loop: Domestic Order Fulfillment Future State Value Stream Map Customer Demand: 150 orders / day RFPY= 78.4% Sales Order Shipper Daily SAP access for sales Cross train sales on OE Streamline OE process Rationalize freight carriers Daily shipments Standard work @ OE New customer OE format 1 2 3 %C&A = 80% Auto credit check Redefine credit check criteria
  20. 20. 20© 2008 Mike Osterling and Karen Martin If the numbers don’t change in the desired direction, you’ve implemented a change, not an improvement.
  21. 21. 21© 2008 Mike Osterling and Karen Martin 50%12# IT Systems 50%24# Steps 41.0%78.4%55.6%RFPY 55.3%6.80%4.38%AR (PT/LT x 100) 36.4%35 mins55 minsPT 59.0%8.58 hrs20.9 hrsLT Projected % Improvement Projected Future State Current StateMetric Projected freed capacity = 12,500 hrs = 6.01 FTEs Value Stream Performance Targets
  22. 22. 22© 2008 Mike Osterling and Karen Martin Translating the reduction of non-value-adding activity into bottom-line numbers
  23. 23. Spaghetti Diagram- ECN Visualize travel of: People Product (“the thing”) ECN Process = 12.5 miles
  24. 24. Spaghetti Diagram Emergency Services Waiting Area Benefits Verification Patient History Vitals Physician Office Imaging Exam Room Laboratory Check-out / Billing ORDER CASH
  25. 25. Desk Table Desk Desk Desk Desk Table Desk Table Desk Desk Table Table Staging Area 6,7,8,96,7,8,9 Desk 6,7,8,96,7,8,9 6,7,8,96,7,8,9 DeskDesk Table Table Start Table Table 1 12 4c 4a 3 2 11 10 cart 4b Spaghetti Diagram – Mail Room (Shows people or product travel)
  26. 26. SNAP Main Tech DEPT HEAD C.O. SK DAAS BO1 ITEM MGR ISEA SUPV CRANE SUPPLY PEO IWS2 CRANE DEPOT STOCK POINT Main Tech C.O. ISEA SUPV PEO IWS2 STOCK POINT SNAP DEPT HEAD SK DAAS BO1 CRANE SUPPLY DOCKSIDE Current State FutureFuture State Circle Diagram Current vs. Future State Handoffs= 47 Lead Time = 486 hrs (60.7 days) Process Time = 108 hrs (13.5 days) Handoffs= 10 (78% improvement) Lead Time = 90 hrs (11.3 days) Process Time = 58 hrs (7.3 days)
  27. 27. 27© 2008 Mike Osterling and Karen Martin The Cost of Unnecessary Motion Distance traveled to printer Work Group A = 92 ft. per occurrence Work Group B = 696 ft. per occurrence 120 occurrences / day = 4,656 miles/year Walk pace = 1 mile per hour = 582 days/year of unproductive, non-value-adding time = 2.2 FTEs
  28. 28. 28© 2008 Mike Osterling and Karen Martin The Cost of Searching 1,500-employee healthcare organization Each employee spends 10 minutes per day looking for “stuff” Average pay = $22 per hour 41.7 hours wasted time per year per employee! = 30 FTEs = $1.4 million in non-value-adding expense
  29. 29. 29© 2008 Mike Osterling and Karen Martin Calculating Freed Capacity Total PT (in hrs) X # occurrences/year# FTEs Required Available work hrs/year = Freed Capacity = CS FTEs - FS FTEs FTE = Full-time Equivalent 2 half-time employees = 1 FTE
  30. 30. 30© 2008 Mike Osterling and Karen Martin Freed capacity: “Hard” Benefits Absorb additional work without increasing staff Reduce overtime / temp expenses Reduce payroll through natural attrition Time to innovate Conduct ongoing continuous improvement activities / perform root cause analysis Generate additional revenue
  31. 31. 31© 2008 Mike Osterling and Karen Martin PT reduction of 6 mins/CT scan 6 mins/scan x 250 CT scans/yr = 1,500 mins (25 hrs) in freed tech capacity /year 1,500 / 12 mins tech time per scan = 125 additional scans possible per year 125 additional scans = $437,500 ($3,500/scan) in additional revenue potential without adding additional staff Freed Capacity to Increase Revenue
  32. 32. 32© 2008 Mike Osterling and Karen Martin Better quality; better safety Work fewer nights and weekends; more quality time for self, family, friends and communities Get/stay caught up Talk and work with your customers and suppliers Mentor staff to create career growth opportunities Provide additional job-specific training Cross-train Freed capacity: “Collateral” Benefits
  33. 33. 33© 2008 Mike Osterling and Karen Martin Assessing Customer or Workforce Satisfaction A five question 5-point Likert scale questionnaire is better than nothing. Anecdotal feedback is valuable. BUT statistically sound sample of a validated survey is ideal. Make sure surveys ask the right questions!
  34. 34. 1. The supplies I need are available at all times. 2. If an item is out of stock, I receive it within the necessary timeframe. 3. The supplies I use are located close to where I need them. 4. Overall, I’m pleased with supplies availability, location, and organization. 5. How often do you obtain supplies from your dept’s “official” stock locations? 6. How often is an item you need out of stock? 7. What improvements would you like to see related to the supplies/materials you use? Strongly Strongly Agree Agree Disagree Disagree Supplies Management Survey – Staff Name (optional):___________________________________ Date: _____________________ Title/Role (optional): _______________________________ Area/Dept: _________________ __________ times per day __________ times per week
  35. 35. 35© 2008 Mike Osterling and Karen Martin Other Performance Metrics On-time deliveries (customer service) Back orders Lead time / WIP Queue Longest time in queue % time service standards are met Complaints or phone calls per “order” Customer retention Workforce satisfaction / turnover Inventory turns, days on hand
  36. 36. 36© 2008 Mike Osterling and Karen Martin Other Performance Metrics (continued) Process yield Setup / changeover time Units produced per total hours worked Accounts Receivable (days) Cost of Product Sold (COPS) Expenses (materials, shipping, overtime) Process time at bottleneck step OEE (Overall Equipment Effectiveness)
  37. 37. Balanced, but Relevant?
  38. 38. 38© 2008 Mike Osterling and Karen Martin Break 10:20-10:30
  39. 39. 39© 2008 Mike Osterling and Karen Martin Group Activity Pair up Using the worksheets provided, calculate: Activity Ratio for the current and future states Rolled First Pass Yield for the current and future states The projected Freed Capacity for the future state due to: Motion reduction Reduction in handoffs Efficiency gains due to technology 10 minutes to work; 5 minutes to discuss
  40. 40. 40© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Balanced
  41. 41. 41© 2008 Mike Osterling and Karen Martin Metric Attributes: Balance Time and Quality (efficiency & effectiveness) Operational and Financial Individual and Team Departmental and Value Stream Internal and External Leading and Lagging
  42. 42. 42© 2008 Mike Osterling and Karen Martin Metrics - Leading vs. Lagging Leading indicators Predicts future performance / likely outcomes Provides opportunity to take corrective action that alters the eventual outcome Lagging indicators Reflect things that have already happened “Historical record” – what happened in the past No ability to alter the outcome
  43. 43. 43© 2008 Mike Osterling and Karen Martin Leading vs. Lagging Indicators X X X X X X X Lagging Indicator Leading Indicator Outcome
  44. 44. 44© 2008 Mike Osterling and Karen Martin Leading Indicators Building permits (in relationship to economy) Hours of safety training (in relationship to accident rate) Hourly output (in relationship to hitting daily goal, or customer service level) Weekly progress on two-month project Time, budget, etc. Internal quality level (customer complaints)
  45. 45. 45© 2008 Mike Osterling and Karen Martin Lagging Indicators Missed time incident rate Customer service levels (e.g. on- time delivery) Quarterly sales (communicated at the beginning of the next quarter) Machine downtime Customer complaints A metric can be both leading and lagging
  46. 46. 46© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Easy to Collect / Dynamic
  47. 47. 47© 2008 Mike Osterling and Karen Martin Metric attributes: Ease We seek pleasure and avoid pain Consider short term measurement Only until sufficient data is obtained Metrics should be dynamic based on need, not a static program Consider who measures, what they measure, how often they measure and modify as needed
  48. 48. Easy and Accurate Metrics
  49. 49. 49© 2008 Mike Osterling and Karen Martin Collecting Metrics: Key Consideration Accuracy vs. Precision?
  50. 50. 50© 2008 Mike Osterling and Karen Martin Accuracy vs. Precision What decision are we trying to make and how much information do we need to make it? Do we need to collect precise quality data for three months or is it “accurate enough” to accept what the customer anecdotally tells us is their experience? If work sits for 8 hours before it’s touched, do we need to do a time study to determine the process time when we’re determining where to focus our efforts to reduce lead time?
  51. 51. 51© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Timely
  52. 52. 52© 2008 Mike Osterling and Karen Martin Metric attributes: Timely Leading indicators allow us to alter outcomes Real-time feedback More accurate recall Delayed feedback lessens learning Problem solving is most effective while the “trail is still warm”
  53. 53. 53© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Visual
  54. 54. Operational Metric Real-time tracking – Month-end Close
  55. 55. 55© 2008 Mike Osterling and Karen Martin Communication Boards
  56. 56. Visual Management - Strong Use of Color Absenteeism as a leading indicator for…?
  57. 57. Administrative Metrics Engineering Change Releases 36% 31% 51% 48% 37% 30% 45% 58% 76% 77% 61% 0% 20% 40% 60% 80% 100% Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 On-TimeRelease 48 39 32 39 33 36 29 19 16 11 17 0 10 20 30 40 50 60 Feb-06 Mar-06 Apr-06 May-06 Jun-06 Jul-06 Aug-06 Sep-06 Oct-06 Nov-06 Dec-06 J Avg.DaystoRel.
  58. 58. Administrative Metrics RFQ Defects 0 2 4 6 8 10 12 14 16 18 Information Missing Calculation Error Page Missing Request for Quote Top 3 Quality Issues Total for Month
  59. 59. 59© 2008 Mike Osterling and Karen Martin Attributes of Effective Metrics Designed to Drive Action / Change Behavior
  60. 60. 60© 2008 Mike Osterling and Karen Martin Metrics must drive action! Before collecting, have a plan in mind re: what you’re going to do with the data. If you’re not going to do anything with or about the data, STOP MEASURING!
  61. 61. 61© 2008 Mike Osterling and Karen Martin Driving Action requires Clear Accountability Who owns the process? Who measures? Who analyzes? Who drives improvements? Who monitors results?
  62. 62. 62 Balanced, Visual, Clear Ownership Metric Description Owner FY07 Target Apr Total May Total Status Production Output Output in Units VS Mgr 75,000 81500 110300 Batch Deviations % Batches are Right the First time VS Mgr 80.0% 81.8% 80.5% Quoting Leadtime Days from receipt of RFQ until sent to customer Dave 5.4 6.6 6.9 Promise Date Accuracy % On time for Promise Date Dave 96.0% 85.0% 89.0% Engineering Release Time Days from receipt of PO until documentation released Vicky 4.7 5.6 4.7 Problem Resolution Number of calls to resolve customer issues Dave 2.1 2.4 2.3 Quality Quality Release Backlog # of lots waiting for release by quality engineers VS Mgr 80 99 77 ProductionCustomerService
  63. 63. 63© 2008 Mike Osterling and Karen Martin Translating improvements into meaningful results Selling your results
  64. 64. 64© 2008 Mike Osterling and Karen Martin Benefits of Reduced Lead Time Improved customer satisfaction Improved retention Market share gains Business expansion (new products) Improved quality Fewer handoffs Faster feedback Improved workforce morale Reduced turnover Recruiting advantage (“employer of choice”) Improved cash flow (time value of money)
  65. 65. 65© 2008 Mike Osterling and Karen Martin Benefits of Reduced Process Time Reduced lead time Improved quality Reduced expenses Improved workforce morale Freed capacity
  66. 66. 66© 2008 Mike Osterling and Karen Martin Benefits of Improved Quality Reduced expenses Labor, material, utilities, etc. Improved customer satisfaction Retention, market share gains Improved workforce morale Motivated, innovative Employer of choice Reduced expenses associated with turnover
  67. 67. 67© 2008 Mike Osterling and Karen Martin Selling Your Results: Considerations People focus on their own work. Leaders don’t always understand the importance of metrics Nor the bottom line impact of your improvements Must speak their language Improvement teams must understand the results they’ve achieved and sell them to peers Will generate momentum among the workforce
  68. 68. 68© 2008 Mike Osterling and Karen Martin Summary Minimum necessary measurements & metrics Choose your sample size wisely Balanced, timely, visible Avoid analysis paralysis – metrics must drive action! Involve the workforce Leadership sets strategy; workforce determines tactics Have them participate in tracking, posting and communicating results Let them lead corrective action discussions Convert results into dollars Cost reductions, cost avoidance, revenue enhancement
  69. 69. 69© 2008 Mike Osterling and Karen Martin Learning Objectives Three key performance indicators that must be included in process measurements. How to calculate staffing requirements. How to translate lean improvements into numbers with bottom-line impact. The difference between lagging and leading indicators, and the need for both operational and financial metrics. How to speak the language of executives and decision makers.
  70. 70. 70 Resources by Mike Osterling & Karen Martin Available through Productivity Press October 2007 Summer 2008
  71. 71. Auto-Calculates Process Metrics
  72. 72. 72© 2008 Mike Osterling and Karen Martin Karen Martin, Principal 7770 Regents Road #635 San Diego, CA 92122 (858) 677-6799 ksm@ksmartin.com Additional Questions Mike Osterling, President 4320 Woodland Drive La Mesa, CA 91941 (619) 572-3632 mike@mosterling.com
  73. 73. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.
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