Basic Steps  —  The IPC is involved throughout  

1. Identify operations to be measured.  Might start with a pilot department or division. . . or tackle a company-  or plant-wide view at the start.  Scope can evolve.
2. Identify an implementation project team — key players needed to:
   • Determine measures and customize concepts to pilot-location circumstances
   • Gather current and historical operating data to inform developmental efforts
   • Continually question assumptions and prior ways of measuring and reporting results to discover fresh possibilities.
   • Gradually assume responsibility for measurement maintenance and support.
   • Learn lots about process improvement.
3. Agree on measures of day-to-day performance that hold the greatest potential for improving organizational profitability.  (Labor efficiencies, primary and secondary materials usage, packaging use, utilities consumption, transportation and storage, quality, safety, etc.)
4. Determine how the company is currently (regularly) performing to those measures.  This usually involves gathering historical data and averaging results.
   • If readily available, 12 to 18 months of data is helpful to review.  If more history is easily accessed, that can be helpful.
   • The IPC will centralize the numbers, craft charts, and facilitate the analysis.
5. Set long-range, ambitious targets.  How COULD the company be performing to those measures if everything was accomplished exceptionally well?
6. Quantify the dollar savings potential of achieving long-range targets.
7. Using potential savings — and group insights — weight the importance of all measures.
8. Design an excel workbook and a charting workbook to maintain the system.  (The IPC is doing this as the project evolves).
9. Introduce the measurement system to those who can drive and accomplish improvements. Certainly all managers and supervisors.  Eventually and ideally, leads and line employees, thereby sharing priorities and opportunities with all who can effect outcomes.  
10. Invite ideas, provide regular feedback on progress ... 
deploy problem solving, lean, six-sigma, or other tools and teams as circumstances and opportunities suggest.
11. Recognize and celebrate accomplishments ...
12. Challenge the possibilities even more.

Introduction to Measurements

This article presents a collection of commonly asked materials for measurements and matrix creation.

HIGH-PERFORMANCE MANUFACTURING

Begins With Clear Descriptions of Success — Performance Metrics That Are:

by Roland Bosshard, Mettler Toledo

A CERTAIN DEGREE OF VARIABILITY IS AN UNAVOIDABLE PART OF ANY FILLING PROCESS. BUT TO KEEP FLUCTUATIONS IN, FOR EXAMPLE, THE NET WEIGHT ON A TOLERABLE LEVEL, ADEQUATE CONTROL SYSTEMS MUST BE IN PLACE.

Each day, manufacturers worldwide produce millions of packages for consumer goods, ranging from chocolate bars to shampoos to prescription medicines. The packaging designs are as varied as the products themselves and may consist of paper, foil, or some sort of plastic or glass container. However, there is one characteristic that all these products share: the net weight or volume or number of items that is displayed for the consumer to see. And, for this figure to be accurate, it is crucial to have adequate control systems.

By Glenn Felix, IPC

Continuing our ascent up the high performance pyramid, this article touches on the basics of performance measurement — the surest path toward mission accomplishment.

Part 4 of a five-part series on performance measurement.
by Glenn Felix

With several core measures in an organization’s sights, the task of focusing attention on the greatest opportunities amongst those key indicators is best driven by savings potential.  Which measure has the potential to return the MOST value by improving it ... which is the second most worth going after, the third most ... and so forth.

Three factors determine savings priority — VQR:

• Value — The unit cost of the resource being consumed . . . or the increased sales value that would be realized through higher-priced output.
• Quantity — The volume of activity underlying the measure.
• Reach — The distance from baseline performance to what we’ve identified as possible . . . to targeted performance.

In the measurement platform described two articles ago seven measures were identified.  Those seven, with baselines and targets noted are:

• Pounds Produced Per Labor Hour    300            400
• Percent Overtime Worked                 15%            5%
• Raw Product Recovery                      55%          65%
• Packaging Materials Waste                 6%            0%
• Premium Grade                                 80%          96%
• Pounds per Gallon of Water                2               3
• BTUs per Pound Produced                500           600    

Along with the above information, all that’s needed to calculate and prioritize opportunity (using some sample numbers) is:

• Monthly Pounds Produced              2,500,000
• Monthly Units of Film Consumed    2,250,000
• Loaded Labor Rate                              $15.00
• Raw Product Cost Per Pound                $0.12
• Packaging Film Cost Per Unit                $0.06
• Premium Grade Value Increment           $0.04
• Cost per Gallon of Water                      $0.003
• Cost per BTU of energy                $0.0000123

With the above information, potential savings are calculated for each opportunity measure.  We’ll use monthly numbers.

Pounds Per Labor Hour Savings
Labor savings are based on lower unit labor costs.  More output per hour results in fewer labor hours (minutes) per unit and less cost per unit.  Potential labor savings are:

                    Units                
                   Per Hr    Inverted          Hrs Per Unit
Baseline        300       1 / 300       =    0.00333333
Target            400       1 / 400       =    0.00250000
Difference    (100)                        =    0.00083333


Hours Saved        Loaded           Monthly     Potential Savings
    Per Unit         Hourly Rate     Production        Per Month  
0.00083333     x    $15.00    x    2,500,000    =    $31,250

NOTE: Even though we’re after labor hours (or cost) per unit, we measure and share with employees the inverse of that because output per labor hour is much more friendly a measure.

Overtime Savings
Here we are capturing the premium portion of paid hours plus payroll taxes on that premium.  Keeping things simple for our example — using an average hourly rate of $12.00, and a payroll tax load factor of 10 percent, potential overtime savings are:

   Overtime           Hours    OT (15% – 5%)    Potential Savings
Cost ($6 x 1.1)    Worked    Opportunity             Per Month  
      $6.60      x      8,333     x     10%          =         $5,500

Recovery Savings
Increased recovery means less raw product is processed to produce the same output, thereby reducing material costs per unit.  Potential material-cost savings are:
                                                              Raw Pounds
                  Recovery    Inverted    Per Finished Pound
Baseline        0.550        1 / .55        =        1.5385
Target            0.650        1 / .65        =        1.8182
Difference    (0.100)                         =       (0.2797)

Raw Pounds Saved     Raw Cost        Monthly     Potential Savings
Per Finished Pound    Per Pound    Production        Per Month  
              0.2797        x       $0.15    x    2,500,000     =     $83,916

Packaging Savings
How much film is wasted, and how much does each unit of film cost?

  Film              Units       Waste (6% – 0%)   Potential Savings
 Cost              Used           Opportunity             Per Month  
$0.06    x    2,250,000      x      6%           =           $8,100

Less Than Premium Grade Savings
This might be non-grade A product, or some similar lower-value output:

Lost Value       Pounds   Grade (96% –80%)   Potential Savings
Per Pound     Produced      Opportunity              Per Month  
    $0.04    x    2,500,000      x      16%          =          $16,000

Pounds Per Gallon of Water
More output per gallon of water results in less water used per unit:

            Pounds Per            
                Gallon    Inverted   Gallons Per Unit
Baseline        2          1 / 2      =      0.5000
Target            3          1 / 3      =      0.3333
Difference    (1)                      =      0.1667

Gallons Saved   Cost Per         Monthly      Potential Savings
     Per Unit          Gallon         Production        Per Month  
       0.1667     x    $0.003    x    2,500,000    =    $1,250

BTUs Per Pound
BTUs are a way to combine Natural Gas and Electricity consumption.  Savings are based on lower unit energy costs.  More output per KWH or Therm results in fewer BTUs per unit.   Potential BTU cost savings are:

      BTU                   Units         BTU (600 – 500)   Potential Savings
      Cost                Produced       Opportunity             Per Month  
$0.0000123     x     2,250,000     x     100           =           $3,076

Summarizing . . . clearly recovery is where the greatest opportunity lies  — 2.7 times the potential savings associated with labor efficiency — which clearly suggests a wise focus first on that measure, then labor, then grade, and so forth.  In practice, all measures should continue to receive attention, but the differences in possibilities suggest some possible tradeoffs in resource usage...

                                                                      Potential
            Measure                                            Savings    

• Pounds Produced Per Labor Hour     $31,250    
• Percent Overtime Worked                    $5,500    
• Raw Product Recovery                       $83,916    
• Packaging Materials Waste                  $8,100    
• Premium Grade                                  $16,000    
• Pounds per Gallon of Water                 $1,250    
• BTUs per Pound Produced                  $3,076

            TOTAL                                              $149,092    

Next month we’ll pull everything together and conclude this five-part series on measurement.

Drop me a line if you have questions or want to explore more.

Part 2 of a five-part series on performance measurement.
by Glenn Felix

Measure twice, cut once – advice every good carpenter learns early on and takes to heart. It’s a saying with applications that go far beyond the building industry. In any business, how we measure is just as important as what we measure. Unfocused measurement is a waste of resources and a burden to management. Focused measurement, generating useful data, consolidated into a simple, easy-to-understand measurement platform, is the foundation for improved performance. It guides people who want to do truly good work toward the right outcomes by providing them feedback on their improvement journey.  

To accomplish this goal, you’ll need to answer three key questions.

• Who is your measurement audience?
• What metrics will they find most useful?
• What is the best and simplest way to provide this information?