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Balanced Scorecard in Lean Manufacturing

VIEWS: 42 PAGES: 76

									        A Lean Leadership
         Training Module
 Performance Measurement and
     the Balanced Scorecard
“Financial numbers may tell us we’re winning the war, but it
takes a balanced scorecard to focus our energy and efforts to
win each of the battles along the way.”

                                                 Bill Gaw
      PERFORMANCE MANAGEMENT
       Performance Measurement
        •   Participative goal setting
        •   Benchmarking
        •   Balanced scorecard
        •   Basis for continuous improvements
       Structure and Deployment
        • The process review
        • Metrics philosophy
        • Metrics Selection and Design
        • Commitment and reward

3-2
        WHY PERFORMANCE MEASUREMENT
       Management By Facts
                      “Without data, you're just another opinion.”
          SELECT          PARETO DIAGRAM             HISTORGRAM
         PROBLEM
                                             SCRAP                  REWORK

          ANALIZE
         PROBLEM

                                          DATA COLLECTION
          ID ROOT         C & E DIAGRAM                        CHECK SHEET
           CAUSE
                                          CONTROL CHARTS
                               GRAPH                        SCATTER DIAGRAM
         PLAN & X
         ACTIONS


         CONFIRM
         RESULTS         BEFORE                        AFTER



           FINE
                                            ACTION 1           ACTION 2
           TUNE
                                                TIME
3-3
         WHY PERFORMANCE MEASUREMENT

       Establish Foundation for Continuous Improvement
        –   Identify and size critical customer complaints
        –   Research and track world class performance
        –   Establish world class benchmarks
        –   Create relevant performance measurements
        –   Establish performance tracking and reporting
        –   Equate customer perception to reality

       Equate Customer Perception to Reality
        – Always use historical data when meeting with customers




3-4
           WHY PERFORMANCE MEASUREMENT
        A Basis for Achievement Recognition and Reward


                 Annual Personal Performance Recognition


                    Quarterly Team Achievement Award


                   Monthly Individual Achievement Award


                   Weekly Individual Achievement Award


                         Best-to-Date Celebration




3- 5
                      PERORMANCE MANAGEMENT
       The Where and What of the Balanced Scorecard

         Timely       Yes          Timely            Yes       On-Time          Yes                         Yes
                                                                                           Inventory
        Product                   Materials                   Prod’n and
                                                                                         Effectiveness
      Development                Availability                 Shipments


            No    Engineering          No     Forecast and           No      Linearity and        No   Receiving and
                 Documentation               Master Schedule                   Resource                 Stock/Issue
                    Review                       Review                         Review                    Review




          Total       Yes        Excellent           Yes           Valid          Yes           Timely
        Customer                  Internal                        Material                   Direct Labor
       Satisfaction               Quality                          Costs                     Availability



            No   Feedback and                                                    Cost                   Resource and
                                       No       Cost of Quality      No                           No
                  Corrective                                                  Accounting                  Capacity
                                                   Review
                 Action Review                                                  Review                     Review



3-6
         PERFORMANCE MANAGEMENT
       The “Balanced Scorecard”
             Sales/Service                   Engineering
      1. Build Release Timing          1. ECN Accuracy
      2. S.O. Accuracy                 2. Engrg Quality
      3. SER Response                  3. SER Execution
      4. Customer Samples              4. Warranty Expense
      5. On-site Startup               5. Equip. Reliability

            Operations                        Finance
      1. Production Linearity          1. Accounts Receivable
      2. On-time Delivery              2. Accounts Payable
      3. Product Quality               3. CODs and Checks
      4. Supplier Performance          4 Information Integrity
      5. ECN Execution                 5. Inventory Utilization

3-7    Cascading measurements with aggregate performance roll-up
                    THE BALANCED SCORECARD
       The Ten Period Rolling Method

                             STOCKROOM - NEGATIVE BALANCES
              ITEMS
              100
                                           Annual
               90                          Personal
               80                          Performance           Quarterly
                             72
                                           Recognition           Team
               70                                                                      Weekly
                                                                 Achievement
               60
                                                                                       Performance
                                                                 Rewards
                                    46
                                                                                       Incentives
               50
                                           41
               40                                  35           35
                                                          31            30
               30                                                             26
                                                                                            22
                        16
                                                                                     18
               20

               10   7

                0
                    GOAL     FY96   FY97   QTR1   QTR2   QTR3   MAR     4/3   4/10   4/17   4.24

                                     GOAL       WEEKLY AVERAGE        BEST-TO-DATE
       Best-to-date
       Celebrations
                SR02: Number of inventory, on-hand balances reported as negative.



3-8
             THE BALANCED SCORECARD

       Six Critical “Must Dos”
         1. KISS! Simplicity is important - complete understanding
            is necessary - start slow and let it grow
         2. Negotiations are required and agreements are crucial
         3. The number isn’t important, direction is the best focus
         4. Tenacity is everything - good measurements should
            never die and never fade away
         5. Timing is paramount - for example: financial data is too
            aggregate and way too late
         6. Target selections - cascading structure is good, but
            performance analysis is best




3-9
           MAINTAINING SYSTEM CREDIBILITY
        Establishing a Measurement Mindset




       “THERE IS NO
       STATUS QUO!

                                                    YOU’RE EITHER
                                                     WINNING OR
                                                   YOU’RE LOSING”




3-10            There is no effective control without measurements!
          MAINTAINING SYSTEM CREDIBILITY
        Databases, Ownership and Maintenance
         1. Simple Department Processes- Sales Order Input
            - User: process owner
           - Database: chalk board, tick chart and hand plot graphs
           - Maintenance: process customer
         2. Complicated Department Processes - On-time Delivery
            - Users: process owner or team
           - Database: Excel spreadsheet and computer graphs
           - Maintenance: assigned team member
         3. Intradepartmental Processes - Cost of Quality
           - User: functional manager or self-directed process team
           - Databases: computerized business systems down
             loaded to Access for additional input forms and graphs
           - Maintenance: MIS and/or team data specialist
         Remember, “Without data, you're just another opinion.”
3-11
       MAINTAINING SYSTEM CREDIBILITY


        Some Requisites for Success
         –   Management acceptance and support
         –   A few good champions
         –   Trust and understanding
         –   Valid, timely and consistent measurements
         –   Need to review and adjust range of metrics
         –   Demonstrated benefits from use of system
         –   A “want to succeed” business culture
         –   A true sense of accomplishment




3-12
                        BENCHMARKING

        Internal - A Good Starting Place
          – Define critical company success factors
          – Identify relevant work processes and prioritize by
            importance
          – Identify process owners and internal customers
          – Agree on current performance levels and establish data
            measurements
          – Negotiate improvement goals - celebrate the goal
            achievements and reset the marks




3-13
                            BENCHMARKING
        External - Some of the Options
         –   Customers
         –   Non-Competitive Businesses
         –   Competitors
         –   American Electronics Association
         –   American Production & Inventory Society
         –   Society of Manufacturing Engineers
         –   Purchasing Management Association
         –   American Management Association
         –   Institute of Quality and Productivity -SDSU

         – Your Best Option: Industry Week
             - Benchmarking Tool Kit   - www.industryweek.com




3-14
                       BENCHMARKING
        Internal - The Line on the Wall Story




                         100




                         Engines on the Floor




3-15
                     BENCHMARKING
        Internal - The Line on the Wall Story




                         100




                         Engines on the Floor




3-16
      INFORMATION INTEGRITY
      Objectives
        •   Accuracy
        •   Timely availability
        •   Ready accessibility
        •   Ease of understanding
      Targets
        •   Engineering Documentation
        •   Systems Data
        •   Work Instructions
        •   Work Standards


1-2
                                  INFOTEGRITY
                        CRITICAL RESOURCES COMSUMPTION CURVE
      Percent
      Consumed
        67%


                                                           EXECUTIVES

        52%


                                                       SUPERVISORS
                                                       & MANAGERS
        35%


                                                   BUYER/PLANNERS
        20%


                                          SCHEDULERS, EXPEDITERS,
                                             PROD’N PLANNERS


                 100%       90%         80%          70%         60%


                         “INFOTEGRITY” - (ACCURACY AND TIMING)
1-3
               SALES FORECAST

      Up/Down Cycle, Product Management
                   PURGING THE DEADBEATS
      70
      60
      50                                           Target
                                                   GPM
      40
      30
      20
      10
       0
           A   B       C      D    E       F   G

                   Up Cycle   Down Cycle


1-4
             SALES FORECAST

      Field Sales Data - Credibility Reviews

              The Annual Forecast - SWAG

             Field Sales Management Review

                 The Quarterly Forecast
                     SBs and WTs
                   Inside Sales Review
                         Funnel
                         Report
             Production Planning Team Review
                          Build
                          Plan




1-5
                        SALES FORECAST
      Forecast-Master Schedule Decision Process
      DOLLARS
      100%                        COST EXPENDITURE CURVE


      75%




      50%




       25%




                             12                   10                8              6
                                     Weeks Remaining to Ship Date

                FORECASTED         CUST. ID            90% CONF         EXE HOLD       ORDER



                   DROP FENCE MANAGEMENT – MASTER SCHEDULE
1-6
                 ENGINEERING DOCUMENTATION
                  Cost and Speed of Product Development

      100
       Dollars
                       PRODUCT DEVELOPMENT COSTS AND SPEED CURVES
                                                                      Time in
       ($x000)
                                                                      Months


        5000                                                           36

        4500

        4000                                                           30

        3500

        3000                                                           24

        2500

        2000                                                           18

        1500

        1000                                                           12

         500




                 50%          60%         70%        80%        90%



      NFOTEGRITY” - “DOCUMENTATION” - (ACCURACY AND TIMING)
1-7
                       ENGINEERING DOCUMENTATION
                                                  Timely Availability
      % Availability       DETAILED PARTS DRAWINGS            % Availability             ASSY DRAWINGS
              100                                                    100


               75                                                     75

               50                                                     50

               25
                                                                      25

                0
                                                                          0
                       DESIGN       PROTO           PROD’N
                                                                               DESIGN        PROTO         PROD’N
                    TIME
                                                                               TIME
                             WORK INSTRUCTIONS                                          TEST SPECIFICATIONS
              100                                                   100

               75                                                    75


               50                                                    50


               25                                                    25


                0                                                     0
                       DESIGN             PROTO      PROD’N                   DESIGN         PROTO         PROD’N

                                "As Is"    "Should Be"                                  "As Is"   "Should Be"



1-8
            ENGINEERING DOCUMENTATION

       Release and Change Control Process
        –   Engineering has design ownership
        –   Manufacturing has implementation ownership
        –   Block change concept
        –   The obsolete ECR-CCB-ECO process
        –   The “World Class Design Team”
             * Concurrent engineering concept
             * Conceptual design buy-off gate
             * Project management and design reviews
             * Design focus - do it right the first time
             * Prototype and Beta design buy-off gates
             * Up front design for manufacturing



1-9
               SYSTEMS EFFECTIVENESS
                           Infotegrity Controls
             MRP – MATERIAL REQUIREMENTS PLANNING
       MASTER SCHEDULE


       BILLS OF MATERIAL
          LEADTIMES
          LOT SIZES
                                                                   WORK-IN-
                                                                   PROCESS




                                                                  PURCHASE
                                                                   ORDERS
                             Cancel                Reorder



                                      Reschedule             INVENTORY


1-10
                             SYSTEMS EFFECTIVENESS

                   THE MRPII CRUSADE – What went wrong, Olie?



                                       Sales Forecast   Master Schedule

            Sales Configurator                                                  Production BOM
                                                             82.1%
           FG Inventory                     92%                           99%         Prod’n Inventory
                                 98%
                          100%                                                  96%
       Product Design                                     COMPUTER                       Purchase Orders
                                   COMPUTER                                     94%
                          92%                             GENERATED
                                   GENERATED
                                                           MRP TAKE-
                                     MASTER
           Order Entry                                      ACTIONS                     Shop Orders
                                    SCHEDULE
                                                                            93%
                           99%




                                       82.1%
                                 MASTER SCHEDULE
                                   “INFOTEGRITY”                         68.2%
                                                                     ORDER-LAUNCH
                                                                     “INFOTEGRITY”
1-11
             SYSTEMS EFFECTIVENESS


        Visual Management
         –   Sequential production
         –   Point of use logistics
         –   Everything has a place and is in its place
         –   The “constraints” board
         –   Trouble lights
         –   Kanbans
         –   Time phased schedules
         –   Cycle time and GPM displays
         –   The daily walk around




1-12
                       INFOTEGRITY CONTROLS

                        The Effectiveness Curve
       Percent
       Effectiveness
                        “INFOTEGRITY” EFFECTIVENESS CURVE

       90%
                                                             “TAKE
                                                             ACTION”
                                                            REVIEWS
       80%
                                                       SYSTEMS
                                                      PARAMETER
                                                     MAINTENANCE
       70%
                                                   PRODUCT
                                                  DOCUMENTATION
                                                 AUDITS
       60%


                                        BUSINESS PROCESS REVIEWS




                          Reviews - Audits - MBWA - SPC
1-13
                               INFOTEGRITY CONTROLS
             Audits, Tracking and Corrective Actions
                                                                 STOCKROOM - NEGATIVE BALANCES
                                               ITEMS
       INVENTORY RECORD ACCURACY              100

                                               90              87

       1. TOP 20                               80
                                                                        72
                                               70
       2. Negative Balances                                                      62
                                                                                          56
                                               60

       3. 100%ers                              50
                                                                                                  43     45

                                               40                                                              35
                                                    31
       4. Average Count                        30
                                                                                                                       30
                                                                                                                             26            28

                                                         16                                                                         18
                                               20
       5. Average Net $
                                               10

       6. Average Absolute $                    0
                                                    GOAL      Year 3   Year 2   Year 1   QTR1    QTR2   QTR3   MAR     4/3   4/10   4/17   4.24

       7. Location                                                        FY98 GOAL            WEEKLY AVERAGE        BEST-TO-DATE

                                               SR02: Number of inventory, on-hand balances reported as negative.



                                INVENTORY PROBLEMS AND CORRECTIVE ACTIONS

       WK                                                                                                  REOCCURRENCES
       No.          PROBLEM       CORRECTIVE ACTIONS                              Who                   WK53  WK54 WK55 WK56




                                                                                                        “Four blanks and you’re Off”
1-14
                              INFOTEGRITY CONTROLS
                       The “Where, What, and Why of Controls

          Timely        Yes         Timely            Yes       On-Time          Yes                         Yes
                                                                                            Inventory
         Product                   Materials                   Prod’n and
                                                                                          Effectiveness
       Development                Availability                 Shipments


             No    Engineering           No      Forecast and         No      Linearity and        No   Receiving and
                  Documentation                 Master Schedule                 Resource                 Stock/Issue
                     Controls                      Controls                      Controls                 Controls




           Total        Yes         Excellent         Yes           Valid          Yes           Timely
         Customer                    Internal                      Material                   Direct Labor
        Satisfaction                 Quality                        Costs                     Availability



             No    Feedback and                                                  Cost                    Resource and
                                         No      Cost of Quality      No                           No
                    Corrective                                                 Accounting                  Capacity
                                                   Controls
                  Action Controls                                               Controls                   Controls



1-15
       ACCURACY AND TIMING
       •   Sales Forecasts
            – Up/down cycle, product management
            – Field sales data - input credibility reviews
            – Forecast-Master Schedule decision process
       •   Engineering Documentation
            – Cost and speed of product development
            – Timely availability
            – Release and change control process
       •   Systems Effectiveness
            – KISS
            – Management controls
            – Visual management
       •   Infotegrity Controls
            – The effectiveness curve
            – Audits, tracking and corrective actions
            – The where, what and why of controls

1-16
STRUCTURE AND DEPLOYMENT
  The Methodology
    •   The process review
    •   Metrics philosophy
    •   Metrics Selection and Design
    •   Commitment and reward
  Benefits
    • A focus on critical success targets
    • Establishes process ownership
    • Relevant innovation and learning
    • Bottom Line Results
                                            6 -2
               THE PROCESS REVIEW
   The Business Survey

 Credible       Yes          Timely      Yes      On-Time        Yes       As               Yes
   Sales                    Product              Prod’n and              Received
Forecasting               Development            Shipments                Quality


      No    Forecast and        No    Engineering      No    Materials and      No      Mini-ISO-9000
           Master Schedule           Documentation            Scheduling                   Quality
           Process Review            Process Review         Process Review             Process Review




                Yes          Total        Yes                     Yes
  Strategic                                        Inventory                  Profit
                           Customer
  Planning                                       Effectiveness               Margins
                          Satisfaction



              Strategic               Feedback and                                     Cost of Quality
                Plan            No      Proactive      No Days of Supply        No       and Kaizen
                                                          Process Review
               Review                Process Review                                    Process Review


                                                                                                  6 -3
     THE PROCESS REVIEW
In Search of Constraints/Opportunities


                         Constraints/Opportunities
     Credible     1. Untimely forecast updating
       Sales
    Forecasting   2. Sandbagging and SWAGing
                  3. Lack of credibility analysis
                  4. No formal forecasting process


          No
                  Sales Forecast &
                  Master Schedule
                  Process Review


                                                     6 -4
    THE PROCESS REVIEW
In Search of Constraints/Opportunities


                       Constraints/Opportunities
      Timely     1. Bill of material errors
     Product
                 2. Late drawing releases
   Development
                 3. Excessive engineering changes
                 4. Ineffective product design process


         No
                  Engineering
                 Documentation
                 Process Review


                                                     6 -5
     THE PROCESS REVIEW
In Search of Constraints/Opportunities


                          Constraints/Opportunities
      On-Time       1. Poor supply chain performance
   Production and
                    2. Ineffective MRP system
     Shipments
                    3. Excessive inside-of-lead-time orders
                    4. Worker inflexibility


           No
                     Materials and
                      Scheduling
                    Process Review


                                                         6 -6
    THE PROCESS REVIEW
In Search of Constraints/Opportunities


                        Constraints/Opportunities
      As         1. Lack of worker training
    Received
                 2. Poor supply chain performance
     Quality
                 3. Inadequate work instructions
                 4. Poor general quality attitude


         No
                  Mini-ISO-9000
                     Quality
                 Process Review


                                                    6 -7
    THE PROCESS REVIEW
In Search of Constraints/Opportunities


                      Constraints/Opportunities
    Product      1. Excessive scrap and rework
     Profit
                 2. Poor supply chain performance
    Margins
                 3. No continuous improvement program
                 4. Too much overtime


        No
                  Financial and
                 Cost of Quality
                 Process Review


                                                    6 -8
     THE PROCESS REVIEW
In Search of Constraints/Opportunities


                          Constraints/Opportunities
                   1. Little line item accountability
     Inventory
   Effectiveness   2. Excessive work-in-process
                   3. No inventory parameter maintenance
                   4. Poor record accuracy


          No

                   Days of Supply
                   Process Review


                                                        6 -9
     THE PROCESS REVIEW
In Search of Constraints/Opportunities


                          Constraints/Opportunities
       Total       1. Lack of sales/service feedback
     Customer
                   2. Limited customer communication
    Satisfaction
                   3. Untimely inquiry response times
                   4. No corrective action logs/history


           No
                    Feedback and
                      Proactive
                   Process Review


                                                          6 -10
     THE PROCESS REVIEW
In Search of Constraints/Opportunities


                         Constraints/Opportunities
                  1. Too little down the chain communication
     Strategic
     Planning     2. Little low level commitment
                  3. Ineffective benchmarking
                  4. No relevant tactical plan or execution


           No
                    Company
                   Performance
                      Review


                                                        6 -11
   THE PROCESS REVIEW
Selection of a Few Relevant Metrics

               Company

       1. Gross profit margin
       2. Customer satisfaction index
       3. Sales revenue
       4 New product introduction cycle
       5. Productivity (Sales per employee)




                                              6 -12
            Top Level measurements
    THE PROCESS REVIEW
Selection of a Few Relevant Metrics

                        Sales

           1. Missed sales opportunities
           2. Inside of lead-time bookings
           3. Sales order entry errors
           4. Open customer complaints
           5. Customer order cycle time




                                                             6 -13
 Cascading measurements with aggregate performance roll-up
    THE PROCESS REVIEW
Selection of a Few Relevant Metrics

                Customer Service

         1. Past due delivery dates
         2. Open corrective action items
         3. On-site equipment MTBF
         4. Open “Request for Quotations”
         5. Warrantee Expenses




                                                             6 -14
 Cascading measurements with aggregate performance roll-up
    THE PROCESS REVIEW
Selection of a Few Relevant Metrics

                     Engineering

          1. Bill of material errors
          2. Late engineering releases
          3. Routing and planning errors
          4 Product design cycle times
          5. Sales information cycle times




                                                             6 -15
 Cascading measurements with aggregate performance roll-up
    THE PROCESS REVIEW
Selection of a Few Relevant Metrics

                Operations

        1. Non-Linear carry-overs
        2. Build cycle times
        3. As delivered quality problems
        4. Supplier line rejects
        5. Product cost-of-sales




                                                             6 -16
 Cascading measurements with aggregate performance roll-up
                       METRIC PHILOSOPHY
A Focus on Improvement
  Example #1:
                       STOCKROOM - NEGATIVE BALANCES
       ITEMS
       100

        90
                       80
        80
                             69
        70                         63                  65
                                                62             61                 61
                                          58                         58
        60
                  52                                                       52
        50
        40

        30   25

        20

        10
         0
             G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                             TARGET      WEEKLY AVERAGE       BEST-TO-DATE

        Process 5-03: Number of inventory, on-hand balances reported as negative.


                                                                                         6 -17
                      METRIC PHILOSOPHY
A Focus on Accomplishment
  Example #2:
                                   PROFIT MARGINS
     PERCENT (%)
            55
       55

       53        52                                                 52      52
                                                              51
       51
                                                                                 49
       49                                 48   48
                                                      47
       47

       45
       43                         42
                            41
       41
       39             38

       37
       35
            G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                            TARGET      WEEKLY AVERAGE       BEST-TO-DATE

        Results02: Aggregate product profit margins


                                                                                        6 -18
       METRICS PHILOSOPHY

Keep It Simple Stupid (KISS)
     Easily understood
     Controllable by team actions
     Reliable and true
     Traceable to a source
Make Sure it Provides
     A number that you can quantify and graph
     Useful feedback
     An aggressive target
     A team’s ability to influence the outcome
     A relationship to critical success targets
                                              6 -19
            METRICS RECORDING
Scorecard Template Design

                      STOCKROOM - NEGATIVE BALANCES
      ITEMS
      100

       90                   85
                      81
       80                            76      77
                                                         72       73
                                                   69                          68
       70        65                                                     65           66

       60

       50
            40
       40

       30
       20

       10
        0
            G B       1/6   1/13   1/20     1/27   2/3   2/10    2/17   2/24   3/3   3/10

                              GOAL        WEEKLY AVERAGE        BEST-TO-DATE

       SR02: Number of inventory, on-hand balances reported as negative.


                                                                                            6 -20
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80                         72      73
                           69                          68
      70        65                              65

      60

      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   2/3   2/10    2/17   2/24   3/3   3/10   3/17   3/24   4/7

                           TARGET       WEEKLY AVERAGE       BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                        6 -21
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80                         72      73
                           69                          68
      70                                        65            66
                                                                    62
                                                                                  58
      60        55                                                         55

      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   2/3   2/10    2/17   2/24   3/3   3/10   3/17   3/24   4/7

                           TARGET       WEEKLY AVERAGE       BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                        6 -22
            METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80
                           69    68
      70                               66
                                              62
                                                            58
      60        55                                   55

      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   FEB   3/3   3/10   3/17   3/24   4/7     4/14   4/21   4/28   5/5

                            TARGET     WEEKLY AVERAGE             BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                               6 -23
            METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80
                           69    68
      70                               66                                  65
                                              62                    62            61
                                                            58                           58
      60        55                                   55

      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   FEB   3/3   3/10   3/17   3/24   4/7     4/14   4/21   4/28   5/5

                            TARGET     WEEKLY AVERAGE             BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                               6 -24
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80
                           69
      70                         63                  65
                                              62             61
                                        58                         58
      60        55

      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                           TARGET      WEEKLY AVERAGE       BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                       6 -25
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
                     80
      80
                           69
      70                         63                  65
                                              62             61                 61
                                        58                         58
      60
                52                                                       52
      50
           40
      40

      30
      20

      10
       0
           G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                           TARGET      WEEKLY AVERAGE       BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                       6 -26
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
      80
                      71
      70                      62                   61
                                     58
      60
                52                          52
      50
           40
      40

      30
      20

      10
       0
           G    B    QTR-1   APRIL   5/5    5/12   5/19   5/26    6/2   6/9   6/16   6/23

                              TARGET       WEEKLY AVERAGE        BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                            6 -27
           METRICS RECORDING
Ten Periods Cascading

                     STOCKROOM - NEGATIVE BALANCES
      ITEMS
     100

      90
      80
                      71
      70                      62
                                      58
      60
                                              52
      50
                                                    42
      40        36

      30
           18
      20

      10
       0
           G    B    QTR-1   QTR-2   QTR-3    OCT   NOV   12/1   12/8   12/15   12/22   12/29

                              TARGET         WEEKLY AVERAGE      BEST-TO-DATE

      SR02: Number of inventory, on-hand balances reported as negative.


                                                                                                6 -28
            METRICS RECORDING
Establishing Historical Performance

                    STOCKROOM - NEGATIVE BALANCES
      ITEMS
      100

       90
       80

       70
       60

       50           44
       40

       30                   23
       20
            11 13
       10
        0
            G   B   2000   2001   1/5    1/12   1/19   1/26   12/8   12/15   12/22   12/29

                           TARGET       WEEKLY AVERAGE        BEST-TO-DATE

       SR02: Number of inventory, on-hand balances reported as negative.


                                                                                             6 -29
           METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                              INSIDE OF LEAD TIME CHANGES
                           ITEMS
                           20


                                        15
                           15
                                                     13
                                               12
   Sales Forecast &        10                                9
                                                                  10
                                                                         11
                                                                                               9
                                                                                 8                   8
   Master Schedule                  7                                                  7
                                5
   Process Review           5



                            0
                                G   B   JAN    FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                                TARGET     WEEKLY AVERAGE       BEST-TO-DATE

                            SR02: Description of the metric measurement




                      INSIDE OF                                           TACTICAL
                      LEAD-TIME                                          CORRECTIVE
                      CHANGES                                               PLAN

    Example #1                                                                                      6 -30
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                              BILLS OF MATERIAL ERRORS
                         ITEMS
                         30             28
                                                           26
                         25                   24
                                                                                22
                                                    21           21
                         20                                             18                    18
    Engineering          15
                                   16                                                 16           16

                              12
   Documentation         10

   Process Review         5


                          0
                              G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                              TARGET      WEEKLY AVERAGE       BEST-TO-DATE

                          SR02: Description of the metric measurement




                     BILL OF                                             TACTICAL
                    MATERIAL                                            CORRECTIVE
                    ERRORS                                                 PLAN

    Example #2                                                                                     6 -31
          METRICS RECORDING
SCPM Cycle (Survey- Constraint -Plan-Metric)
                                                    Late Orders/Shipments
                          ITEMS
                          50
                          45            42
                          40                         37
                                              35
                          35                                32            31

    Materials and         30

                          25
                                                                  28
                                                                                 26
                                                                                       22      23

     Scheduling           20       18                                                               18

                          15
   Process Review         10
                               9

                           5
                           0
                               G   B    JAN   FEB    MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                              TARGET       WEEKLY AVERAGE       BEST-TO-DATE

                           SR02: Description of the metric measurement




                    LATE ORDERS                                           TACTICAL
                        AND                                              CORRECTIVE
                     SHIPMENTS                                              PLAN

    Example #3                                                                                      6 -32
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                              INSTALLER/CUSTOMER COMPLAINTS
                            NUMBER                                                   6
                            6

                                                    5           5
                            5

                                              4           4
                            4

    Mini-ISO-9000           3
                                                                       3


       Quality              2
                                                                              2                           2


   Process Review           1
                                                                                           1
                                                                                                   0.5
                                       0.5
                                0.25
                            0
                                 G     B     JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12    5/19

                                                    TARGET     WEEKLY AVERAGE       BEST-TO-DATE

                            SR02: Description of the metric measurement




                    INSTALLER AND                                             TACTICAL
                       CUSTOMER                                              CORRECTIVE
                      COMPLAINTS                                                PLAN

    Example #4                                                                                           6 -33
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                                       COST OF SALES
                          Percent
                          60                         58           57     58
                                               55           56
                                         53                                            54
                                                                                 52            51
                                    50                                                              50
                          50
                               45

                          40

   Cost of Quality        30

     and Kaizen           20

   Process Review         10


                           0
                               G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                                TARGET     WEEKLY AVERAGE       BEST-TO-DATE

                           SR02: Description of the metric measurement




                     HIGH COST                                            TACTICAL
                        OF                                               CORRECTIVE
                       SALES                                                PLAN

    Example #5                                                                                      6 -34
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                                     DAYS OF SUPPLY
                          ITEMS
                         100                   94
                          90
                          80

                          70                         66


      Inventory           60

                          50
                                    48
                                                            52    50      48     48    49    49     49


   Days of Supply         40
                               30
                          30
   Process Review         20

                          10
                           0
                               G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                               TARGET      WEEKLY AVERAGE       BEST-TO-DATE

                          SR02: Description of the metric measurement




                    EXCESSIVE                                             TACTICAL
                     DAYS OF                                             CORRECTIVE
                      SUPPLY                                                PLAN

    Example #6                                                                                      6 -35
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                                   OPEN PROBLEM ISSUES
                           Points
                           10

                                         8
                            8
                                               7                         7

      Customer              6
                                                     6            6             6     6              6

                                    5                       5                                 5
    Feedback and            4

      Proactive                 2
                            2
   Process Review
                            0
                                G   B   JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12    5/19

                                               TARGET     WEEKLY AVERAGE       BEST-TO-DATE

                            SR02: Description of the metric measurement




                    TOO MANY OPEN                                        TACTICAL
                      PROBLEM                                           CORRECTIVE
                        ISSUES                                             PLAN

    Example #7                                                                                     6 -36
          METRICS RECORDING
SCPM Cycle (Survey-Constraint-Plan-Metric)
                                      METRICS WITH NEGATIVE TRENDS
                      Quantity
                      40
                                                 35
                      35             32    33                 32
                                                                                   29
                      30                                28                  28
                                                                                                25
                      25        23                                   23                  23

     Strategic        20

                      15
     Planning         10
                           12



                       5

                       0
                           G    B    JAN   FEB   MAR    4/7   4/14   4/21   4/28   5/5   5/12   5/19

                                            TARGET     WEEKLY AVERAGE       BEST-TO-DATE

                       SR02: Description of the metric measurement




                 NEGATIVE                                             TACTICAL
                  METRIC                                             CORRECTIVE
                  TRENDS                                                PLAN

    Example #8                                                                                  6 -37
                    THE METHODOLOGY
Aggregate Performance Index
                    88        Top Level = Company



   122        92         60        76     2nd Level = Divisions


                                               3rd Level =
         43    22        69      78      86
                                               Departments


               62        25      121    4th Level = Teams



         12    43        23      33      26      14    5th Level =
                                                       Metrics


                                                                  6 -38
                 METRICS RECORDING
                                                 SALES
                                                     16                               THE
   IN PURSUIT
   OF THE                                                                        PERFORMANCE
                                                  _ 32
   BOTTOM LINE                                                                     DIAMOND
                                                  _ 48

                                                  _ 64
                                                                                           10 SERVICE
            50                                                                       20
HUMAN            100
                                                  _ 80                     30
RESOURCES               150                                       40
                                 200
                                           250            50



                                                          125
                                            10

                                      20                        100

                                                                      75
                                 30

                            40                                             50

                       50                                                       25

       OPERATIONS                                                                    ENGINEERING

                                                                                                   6 -39
         COMMITMENT AND REWARD
     Performance Recognition
                      STOCKROOM - NEGATIVE BALANCES
       ITEMS
       100
                                    Annual
        90                          Personal
        80                          Performance           Quarterly
                      72
                                    Recognition           Team
        70                                                                    Weekly
                                                          Achievement
        60
                                                                              Performance
                                                          Rewards
                             46
                                                                              Incentives
        50
                                     41
        40                                  35           35
                                                   31          30
        30                                                           26
                                                                                   22
                 16
                                                                            18
        20

        10   7

         0
             GOAL     FY96   FY97   QTR1   QTR2   QTR3   MAR   4/3   4/10   4/17   4.24


Best-to-date              GOAL WEEKLY AVERAGE BEST-TO-DATE
Celebrations
         SR02: Number of inventory, on-hand balances reported as negative.


                                                                                          6 -40
COMMITMENT AND REWARD

The “Make-it-Happen” Forum




            The Machinists’ Story


                                    6 -41
         COMMITMENT AND REWARD
                      A Time For Change

          CHANGE                  RESULT


Understanding the CEO’s vision   Increased self-worth
Employee empowerment             Increased morale
Tactical plans alignment         No finger pointing
Focused efforts                  Improved performance
Improved communications          Better decision-making
Optimized business processes     - only value added activities
                                 - reduced operating costs
                                 - reduced inventory
Performance recognition          Employee job satisfaction and
                                 retention

                                                          6 -42
           THE METHODOLOGY
•   The Process Review
    – The business survey
    – Critical success metrics
    – Typical business metrics
•   Metrics Philosophy
    – A focus on improvement
    – A focus on accomplishment
    – KISS
•   Metrics Monitoring
    – Scorecard template design
    – Ten periods rolling forward
    – Establishing historical performance
•   Commitment and Reward
    – Performance Recognition
    – The “Make-it-Happen” Forum
    – A time for change
                                            6 -43
        Take a break: “My Most Difficult Job Story!”
In 1970, I left the aerospace business to enter the commercial laundry and dry
cleaning business. Talk about a career change! My new job was superintendent of the
laundry. I had 65 direct labor workers under my direction and equipment valued at over
5 million dollars. On the second day of my new employment, I was roaming through
my standup desk and I found a large envelope with "Attn: New Superintendent" written
on the outside. I opened it and inside I found a note and three sealed envelopes
identified simply as First Time, Second Time and Third Time. The note read, "Each
time you're in trouble you will get called to the president's front office. Before going to
his office, you should open the appropriate envelope."

A month later, a washman inadvertently added green dye to the white shirt washing
machine. I heard the commotion in the wash room and when I arrived there all I could
see were once white shirts that were now beautiful kelly greens. We setup a washing
machine with bleach in an attempt to recover to the original white color. You guessed
it, we got white shirts with many little holes in them.

The next day I received a call to report to the president's office. Before I went there, I
opened the 1st envelope. Inside I found a piece of paper that had only four words on it,
"Blame it on me." I went before the president and he was furious about the shirt
disaster. After 10-minutes of shouting, he asked for my explanation of what happened.
I told him that my predecessor had not properly instructed me in how to remove dye
from clothing. He accepted my explanation and sent me back to work.
Two months later, the woman performing the plastic-wrap packaging operation at the end of the
flatware folding conveyor was upset with me relative to her pay incentive. While I was on the
telephone at one end of the laundry, trying to settle down an irate customer, I heard shouting and
laughing in the area of the flatware packaging workstation. I left the phone hanging with the
customer screaming at me and rushed over to the flatware packaging workstation. Un-
believable! The flatware packager had become so angry that she quit working and went home
not turning off the conveyor and not telling anyone of the situation. By the time I arrived, there
were probably 20 customer orders that had fallen off the end of the conveyor and were all mixed
up in one huge pile of laundry. It took hours to sort it out and we knew that many of the
customers' orders would be delivered as a mix-up.

Within a week, I received a call to report to the president's office. Before I went there, I opened
the 2nd envelope. Inside I found a piece of paper that had six words on it, "Plead for your family's
well being." I went before the President and he was furious about the packaging disaster. After
ten-minutes of shouting, he asked for my explanation of what happened. I told him that an
employee problem was the cause and that It wouldn't happen again. He said, "You're fired!" I
said, "Please give me another chance, my wife can't work because she has to stay home and
take care of our sick children and I need this job to maintain the well being of my family." It
worked. He said, "Get out of here and get back to work."

A month later, I was short washroom help. I used a company truck to go pick up some
temporary help at the rescue mission and on our way back to the plant, I got into an auto
accident, destroying the right side of the truck.

The next day I received a call to report to the president's office. Before I went there, I
opened the 3rd envelope. Inside I found a piece of paper that had these words on it, "It's time for
you to make up the three envelopes."
    In-house Training Programs
              … anywhere… anytime

Lean Manufacturing – Balanced Scorecard – ISO 9001 - OHSAS
      Strategic Planning – Supply Chain Management
            Total Productive Management (TPM)
             Kaizen Event (A3 Problem Solving)
  Lean Six Sigma - Value Stream Mapping – Team Building
     Shopfloor Excellence – Leadership Development

                       Website:
                www.bsc-indonesia.com
              www.sixsigma-indonesia.com

                         Info:
           megawati@freemind-consulting.com
                    +628123504957

								
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