It often seems to be the case that as your manufacturing operation grows, measuring the efficiency of its performance becomes increasingly difficult. When sales orders go up, work-in-progress (WIP) goes up, when inventory builds up, turnover goes down, all to the detriment of understanding how efficient or profitable each process is. To some extent, enterprise resource planning (ERP) software has helped provide continuous health assessment through real-time data entry of all operational aspects. ERP software, for this reason, is a valuable tool for the continuous improvement necessary for the modern Lean manufacturer.
However, an assessment of financial, behavioral, and core process performance should be conducted on an ongoing basis to provide a mutually supportive testimonial of the company’s overall ERP continuous improvement efforts. For this reason, adjusted metrics They have been established to allow a company to measure, evaluate, and respond to its performance in such a way that it does not sacrifice quality to meet quantity targets, or increase inventory levels to achieve machine efficiencies. Often these metrics are a means of discovering lean performance indicators (LPIs) that tell the story of the effectiveness of the ERP implementation.
when we talk about lean manufacturing, we are describing a process improvement discipline that evolved from manufacturing problem solving and focuses heavily on the benefits found in speed of execution. Internal LPI metrics include WIP reductions and excess inventory that restricts the use of capital and has a negative impact on cash flow. It’s true that in a manufacturing environment, as backlogs and inventory build up and block workstations, floors, and storage spaces, the resulting mess and WIP tie up a company’s capital.
External LPI metrics are those related to execution speed and include faster time to market and increased customer satisfaction as work orders are completed more quickly. However, these external lean metrics are often overlooked as they are somewhat less visible in the transactional process. That is, producing faster time to market doesn’t seem to have a physical connection to the WIP flow. This is where a lot of production throughput efficiency data is lost. For example, it is a common mistake to take the difference between job completion points thinking that they represent execution times when, in fact, this data represents the cycle time. In other words, direct measurements of delay and execution times are not captured separately. The absence of these measurements, then, does not allow for a true picture of the actual speed to market.
Whether internal or external metrics, whatever measures you use to assess lean performance will only work if used within a system that establishes discipline and performs regular data reviews. It is common to see measurement systems that have been abandoned by employees or voluntary reporting tables that are consistently incomplete and out of date. In other words, once the decision to employ lean metric tools is made, the value of the information must be expressed in no uncertain terms to those responsible for its input. Only in this way can lean metrics be effective as a tool.