Lean Performance. Lean Performance Measurements

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Lean Performance Measurements Presented by Brian Maskell, President BMA Inc. Lean Performance Measurements Measurements that motivate people to lean improvement.

1 Lean Performance Measurements Presented by Brian Maskell, President BMA Inc. Lean Performance Measurements Measurements that motivate people to lean improvement. Measurements that provide excellent operational control. Measurements that reflect the business strategy of the company at every level. Measurements that are lean themselves & can be gathered and reported simply and easily. Copyright 2013 BMA Inc. All Rights reserved. Contact Page 1

2 Use Measures for Learning and Problem Solving Traditional Use Lean Use Measures the results. Top-down control. Authority Oriented. Hides the problems. One-shot image. Success or failure based on targets. Focus on control of resources, people, & results. Concerned with results and the process of getting results. Local control & responsibility Reveals the problems & leads directly to solutions. Feedback loops to drive problem-solving, measure results, & learning. Focus on process & resources, standard work, & people development Use Measures for Learning and Problem Solving Customer Value Stakeholder Needs Technology Changes STRATEGIC MEASUREMENTS VALUE STREAM MEASUREMENTS CELL & PROCESS MEASUREMENTS Business Strategy Hoshin Kanri Strategy Deployment Sales, Operations, & Financial Plan (SOFP) Value Stream Improvement Cell & Process Improvement BREAKTHROUGH IMPROVEMENT CONTINUOUS IMPROVEMENT JUST-DO-IT IMPROVEMENT Copyright 2013 BMA Inc. All Rights reserved. Contact Page 2

3 The Purpose of Performance Measurements Cell & Process Measurements Enable the cell teams to monitor and control their own production activities. Value Stream Measurements Guide the continuous improvement team in their pursuit of perfection activities. Strategic Measurements Enable senior managers of the company to monitor the achievement of strategic goals & initiate strategy changes. Starter Set of Performance Measurements for Lean Mfg. STRATEGIC ISSUES STRATEGIC MEASURES VALUE STREAM MEASURES CELL/PROCESS MEASURES Increase Cash Flow Increase sales & market share Continuous improvement culture Provide Customer value Sales Growth Cash Flow from Operations Inventory Days On-Time Delivery Customer satisfaction Sales per Person On-Time Delivery Dock-to-Dock Time First Time Through Average Cost per Unit Day-by-the-Hour Production WIP-to-SWIP First Time Through Operational Equipment Effectiveness Sales per Employee Copyright 2013 BMA Inc. All Rights reserved. Contact Page 3

Strategic Measurements Sales Growth Cash Flow from Operations Are we generating enough cash?

Direct feedback from the customers Sales per Employee Overall productivity Typical Production Value Stream Performance Measurements Sales per Person

Dock-to-Dock Days Rate of material flow through the value stream Raw material, WIP, finished goods First Time Thru Quality & standardized work for the

6 Strategic Measurements Sales Growth Cash Flow from Operations Are we generating enough cash? Inventory Days General indicator of lean improvement On-Time Delivery Measurement of control and meeting customer delivery needs Customer Satisfaction Direct feedback from the customers Sales per Employee Overall productivity Typical Production Value Stream Performance Measurements Sales per Person Productivity of everyone in the value streams On-Time Shipment Can we ship on-time? Are our processes under control? Dock-to-Dock Days Rate of material flow through the value stream Raw material, WIP, finished goods First Time Thru Quality & standardized work for the entire value stream Average Cost per Unit Are we reducing costs and making improvement? Supporting measurements Safety cross Cross training matrix Continuous improvement projects Copyright 2013 BMA Inc. All Rights reserved. Contact Page 6

Value Stream Continuous Improvement Board Productivity Process Control Quality Material Flow Cost Sales or Units per Person On-Time Shipment First Time Through Dock-to-Dock Days Average Cost

Improvement Improvement Improvement Projects Projects Projects Projects Projects Current Value Stream Map Future Value Stream Map Transition Plan BOX SCORE Value Stream Income Statement

7 Value Stream Continuous Improvement Board Productivity Process Control Quality Material Flow Cost Sales or Units per Person On-Time Shipment First Time Through Dock-to-Dock Days Average Cost Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Improvement Improvement Improvement Improvement Improvement Projects Projects Projects Projects Projects Current Value Stream Map Future Value Stream Map Transition Plan BOX SCORE Value Stream Income Statement Hoshin Business Opportunity Charts Kaizen Action Plan Value Stream Maps Value Stream Performance Measurements Board Copyright 2013 BMA Inc. All Rights reserved. Contact Page 7

8 Value Stream Board Business Opportunity Chart Four Charts in One Performance Measurement, Pareto Chart, Data, Action Plan Value Stream Performance Measurements Board Copyright 2013 BMA Inc. All Rights reserved. Contact Page 8

10 Value Stream Continuous Improvement The primary purpose of the weekly reporting is to guide the value stream manager and his/her team towards continuous improvement. Tools Value stream performance measurement boards Value stream income statement Box Score Pareto charts Continuous improvement projects Copyright 2013 BMA Inc. All Rights reserved. Contact Page 10

Visual boards update by the value stream team members The Vital Few focused measurements with pareto charts showing causes of the problems.

11 WHAT IS THE VALUE STREAM BOARD FOR? Monitor the value stream performance and show the problems that need to be solved. Create continuous improvement projects to address root causes of value stream performance. Provide timely, valid data to drive continuous improvement WHAT MUST BE IN PLACE TO BE SUCCESSFUL? Visual boards update by the value stream team members The Vital Few focused measurements with pareto charts showing causes of the problems. Engaged workforce completing kaizen events continuously week-in and week-out. Typical Cell Performance Measurements Day-by-the-Hour Focus on making to takt time Linearity of production First Time Thru Focus on making perfect quality without scrap or rework Focus on standardized work WIP-to-SWIP Work-in-process inventory compared to standard work-inprocess inventory Focus on consistency of flow Focus on the pull process Operational Equipment Effectiveness Focus on machines making to takt time Bottleneck operations Supporting measures or reporting Safety cross 5S audit Cross-Training matrix Daily improvement projects Copyright 2013 BMA Inc. All Rights reserved. Contact Page 11

12 Support Measurements In addition to the primary measurements many companies also collect some supporting information at the cell. Safety Cross Cross-Training Chart 5S Audit or Self-Audit Number of Continuous Improvement Projects Completed The Key to Effective Cell Performance Measurement Managers and support people frequently visiting the cells and solving problems. The focus must be on the value-creating processes. Making what the customers want, on-time & perfect quality. Copyright 2013 BMA Inc. All Rights reserved. Contact Page 12

16 WHAT IS THE CELL OR PROCESS BOARD FOR? Control the cell process through frequent tracking of on-time and right-firsttime. Drive many small improvements (JDI s) completed by the cell team members. Provide real data about issues and problems to drive cell & value stream continuous improvement. WHAT MUST BE IN PLACE TO BE SUCCESSFUL? Standardized work. Standard, disciplined cell or process measurements Trained and engaged workforce completes JDI s each week. Cell or process people are empowered and have scheduled time for JDI s. Leaders daily gemba walks review, discuss, and authorize JDI s How Do Performance Measurements Apply in Support & Administration? We use similar measurement methods in the office & administrative processes. Administrative Process Measures Productivity of the process On-Time Delivery (to internal customers Rate of Flow of information through process First Time Thru of the process Average Cost per Unit Administrative Cell Measures Day-by-the-Hour First Time Thru WIP-to-SWIP of the cell Other specific control measurements for the process Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 16

17 Sales/Marketing Value Streams Measurements STRATEGIC VALUE STREAM VALUE STREAM STRATEGIES MEASUREMENTS GOALS MEASUREMENTS Increase Sales & Market Share Increase Cash Flow & Reduce Debt Create Culture of Continuous Improvement Maintain Stable & Educated Workforce Sales Growth Cash from Operations Increase Sales & Profitability Increase Number of Customer Customer Match Sales to Satisfaction Value Stream Capabilities Inventory Days or Turns Sales per Employee Suggestions per Person % People Engaged in Improvement Annual Employee Survey Improve Productivity Collect Cash Quickly Increase CI Project Participation Provide Advancement for Employees Eliminate Accidents & Injuries Sales Growth Customer Satisfaction Order to Cash Days Profitability of Order Fulfillment Value Streams Value Stream Cost per Sales $ Accounts Receivable Days # People on Improvement Teams Cross Training per Person Number of Accidents & Injuries Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 17

18 Sales/Marketing Value Stream: Quote Process PROCESS MEASUREMENTS CELL GOALS CELL CRITICAL SUCCESS FACTORS VALUE STREAM MEASUREMENTS Quote Success Rate % Increase quote success by understanding needs Understand Customer Value Sales Growth Financial Maximum m market price based on value Meet or Exceed Contribution of the Orders Customer Expectations Customer Satisfaction Provide quotes quickly & to Linearity of Sales Od Orders customer format Fast & Effective Processes Order to Cash Days Effective visual management First Time Through% Obtain orders matching capacity & mix Profitability of Order Fulfillment Value Streams Standardized work for quote processes Average Quote Response Time Eliminate waste Value Stream Cost per Sales $ Eliminate variability Track Improvement Projects Accounts Receivable Days 5S Audit Empowered continuous Increase CI Project # People on Improvement Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 18 improvement Involvement Teams Cross Training Chart Widespread Cross Training Increase Training & Cross Training Cross Training per Person

19 Q D Q D C Q D C Lean Accounting Summit 2013 VALUE STREAM MEASURES Safety Cross Quality First Time Through Level Production & On-Time Average Unit Costs Units per Employee Dock to Dock Material Flow CRITICAL SUCCESS FACTORS High Quality Parts Lowest Overall VS Material Costs Reliable Suppliers ACTIONS NEEDED Certified Suppliers Delivery Quality Reliability SUPPLY CHAIN MEASURES Supplier First Time Through More Use of Common Parts Work with suppliers to reduce costs. Long term Agreements On Time Delivery % parts on Pull, Certified Supplier, & Long Term Contract Q Cross Training Employees Engaged in CI Selected Suppliers with Long Term Relationship Pull Delivery Systems # kaizens between ATK & supplies S Q D C C Q D C E E Simple Receiving & Quality Transactions # Material Receipt, Quality & AP Transactions D C E Versatile Buyers Cross Training Buyers Cross Training Chart Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 19

20 Strategic and NPD Value Streams Measurements STRATEGIES STRATEGIC MEASUREMENTS VALUE STREAM VALUE STREAM GOALS MEASUREMENTS Increase Sales & Market Share Increase Cash Flow & Reduce Debt Create Culture of fc Continuous Improvement Maintain Stable & Educated Workforce Sales Growth Cash from Operations Introduce High Value Products Short & Reliable Product Design Processes C h f Short & Reliable Customer Match Products Satisfaction to Value Stream Capabilities Inventory Days or Turns Sales per Employee Suggestions per Person % People Engaged in Improvement Annual Employee Survey Improve Productivity Create Unique & Innovative Products Increase CI Project Participation Provide Advancement for Employees Eliminate Accidents & Injuries Sales from New Products On-Time Design Projects Customer Satisfaction with New Products Profitability of Order Fulfillment Value Streams Value Stream Cost per New Product Sales $ Number of Patents & Innovations #P People on Improvement Teams Cross Training per Person Number of Accidents & Injuries Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 20

21 Wrap up: Take the lean performance measurements challenge: Replace the traditional cost accounting measurements with performance measurements that are designed to motivate and monitor lean behavior. Develop a set of measurements throughout the organization that thoroughly reflect the company s strategy and goals. As people work to improve the measurement results, they will be actively working to achieve the company s strategic goals. Copyright 2013 BMA Inc. All Rights reserved. Contact bmaskell@maskell.com Page 21