Bio-Pharma Quality and CAPA Process Benchmarks for Operational Excellence
Adopting Operational Benchmarks For Long Term Success
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Transcript of Adopting Operational Benchmarks For Long Term Success
Adopting Operational Benchmarks
For Long Term Success
2009 OFA ShortCourse
Credits
New York Greenhouse Business Summary and Financial Analysis. Pub. EB-2002-03
Wen-Fei Uva and Steve Richards, 2002
How many weeks does your operation do business?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. 11 (Spring Only)
2. 22 (Spring/Fall)
3. 52 (Full Year)
4. 26 (Half Year)
5. 44 (Eleven Mo.)
How many full time employees do you have?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. One
2. 6
3. 12
4. 24
5. Over 24
How many supervisors manage those employees?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. One
2. Two
3. Three
4. Four to Five
5. Over 5
How do you pay your worker bees ?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. Hourly Wage
2. Piece Work
3. Task Unit
4. Sub-Contract
5. Familial Slavery
Small Changes Add Up!
As we saw in Charlie’s profit analysis, even small changes can add up to significant increases in profit!
Making management and procedural changes to your production operation is no different. Several simple changes may bring you back to profitability.
Sensitivity of Changes in Profit to a 1% Increase:
Price Per Plant
Yeild
Production Increase
Labor Hours
Labor Cost (Wage)
Equipment Investment
Management Cost
Packaging Costs
Fuel
Interest Rate
Change + 26.90 %
+ 24.63 %
- 7.17 %
- 5.25 %
- 4.18 %
- 3.93 %
- 2.28 %
- 2.18 %
- 0.97 %
Source: Kirschling and Jensen, 1974
Benchmarking Operational Metrics
Each operational metric is based on, and will tie into, the financial metrics to be used by the company.
Labor metrics are assessed by work unit / process
Benchmarking Operational Metrics
External benchmark metrics are useful for establishing comparisons, if you can find benchmarks for a industry segment similar to yours.
Internal or “historic” metrics are the most useful guides for assessing improvements to efficiency, organization, production flow and marketing.
Example: Ask Yourself....
• Is my transplant line managed effectively?
• Is my shipping department efficient?
• Is my sales team meeting goals?
• Am I meeting company conservation goals?
• How much room do I have for improvement?
Example: Transplant Line MetricsWhat Do I Need to Know?
• Line production per day or per hour.
• Productivity per person, per day or per hour.
• Overall labor hourly cost
• Number of labor hours utilized crop.
• Loss (shrinkage) at transplant line by crop.
Productivity Assessment
020406080
100
Pos 1 Pos 2 Pos 3 Pos 4
Line 1
Line 2
Line 3
Line 1
Line 2
Line 3
In-Series Task Process
How many employees work for you?
1 2 3 4 5
0% 0% 0%0%0%
1. One – Three
2. Four – Six
3. Seven- Nine
4. Ten to Fifteen
5. Over 15
Answer Number
Productivity Assessment
76 75 74 66
020406080
100
Pos 1 Pos 2 Pos 3 Pos 4
Line 1
Line 2
Line 3
Line 1
Line 2
Line 3
In-Series Task Process
Poor Pace Setter
Poor Line Manager62%
52%
28%
Productivity Assessment
020406080
100
Pos 1 Pos 2 Pos 3 Pos 4
Line 1
Line 2
Line 3
Line 1
Line 2
Line 3
Independent Task Process
How many employees work for you?
1 2 3 4 5
0% 0% 0%0%0%
1. One – Three
2. Four – Six
3. Seven- Nine
4. Ten to Fifteen
5. Over 15
Answer Number
Productivity Assessment
020406080
100
Pos 1 Pos 2 Pos 3 Pos 4
Line 1
Line 2
Line 3
Line 1
Line 2
Line 3
Independent Task Process
Profit Killers
Best Employee!Horrid Placement !
So What?
Let’s assume we have a production goal of 12,000 units / day. (4000 units per line…or 500 units / hour) Hourly wages are paid @ $10.50 per hour.
Line 1 = 4,000 * 0.28 = 1,120Line 2 = 4,000 * 0.52 = 2,080 5,680 Line 3 = 4,000 * 0.62 = 2,480
12,000 / 5680 = 2.11 days * 8 hr = 16.9 hoursLine efficiency is only 47.3% !!!!!Cost = 12 employees * $10.50 * 16.9 = $2130.00
So What?
…………..5680? Can we do better? Now let’s assume we can impart a 20% increase in productivity
(units) by rearranging personnel in the lines: Yield = 8040 Units
Let’s also assume we can increase productivity by 20% by re-training or replacing poorly performing employees: Yield = 10440 units
12,000 / 10440 = 1.15 * 8 = 9.20 hours
12 employees * $10.50 * 9.20 hours = $1159.00
$2130.00 – $1159.00 = $971.00 savings ….(in one day!)
Where Do Your Place Your Slowest Worker?
A. At the end of the line, with the line manager positioned at the end point.
B. In the front of the line, with the line manager positioned in front of the line.
C. At whatever position has the easiest task.
21 3 4In Out
Are We Done?
• What if I cleaned house and eliminated a transplant line? Can I do the whole job for the same money in the same # of days?
• Could I actually get rid of one supervisor’s salary?
Do you think it would be more efficient to eliminate one
transplant line?
1 2 3
0% 0%0%
Answer Number
1. Yes
2. No
3. Don’t know.
Productivity Assessment
0.0020.0040.0060.0080.00
100.00
Pos 1 Pos 2 Pos 3 Pos 4
Line 1Line 2
Line 3
Line 1
Line 2
Line 3
Independent Task Process
Positions to be eliminated!
Productivity Assessment
0.0020.0040.0060.0080.00
100.00
Pos 1 Pos 2 Pos 3 Pos 4
Line 1
Line 2
Line 1
Line 2
In-Series Task Process
66%
68%
Reconfigured In-Series Process = 67% average efficiency(assumes training, and effective management implemented)
Eliminating a Transplant Line?
Two lines operating at 67% efficiency yields 8040 units per day.
12,000 / 8040 = 1.49 @ 8 = 11.94 hours
8 Employees * $10.50 * 11.94 hours = $1002.28
Our previous best was $1159.00…We can get the job done for $157.00 less by firing four employees and only running two transplant lines!!!!
……..and we free up a supervisor!
Benchmarks?
Set your benchmark at 67 % efficiency.
Track production (by task) to get perspective.
Reward managers that exceed this benchmark
Troubleshoot if productivity fails to reach this benchmark at any point in the future.
Tracking Benchmarks Visually
0
10
20
30
40
50
60
70
80
90
100
Snaps Pansies Dianth Vinca Salvia Begonia
Line 1
Line 2
Task
Pro
duct
ivity
per
line
Transplant Operations
???
If the production problem cannot be fixed……?
1 2 3 4
0% 0%0%0%
Answer Number
1. Increase assigned cost
2. Decrease # units made
3. Increase # units made
4. Fire the manager
Charlie’s Turn
Crop Production Metrics
• Units Produced / Person, Team, Line
• Units Per Hour / Person, Team, or Line
• Waste Units / Person, Team, or Line______________________________________
• Percent Loss by Crop or “% Shrink”
Number units Invoiced / Number units produced.
45,906 / 58,424 = (1 - 0.786) = 21.4% shrink!
Operations
• Labor As A Percent of Sales Total Labor Cost / Total Variable CostsThis is an indirect measure of labor efficiency and cost efficiency.
$176,322 / $588,037 = 0.315 or 31.5%
• Operating Expense Ratio Total Variable Costs / Total RevenueThe average % of sales price needed to cover direct costs of crop.
$425,562 / $588,037 = 0.762 or 76.2%
Production Efficiency Metrics
• Worker Equivalents.
Total # of labor hours / year divided by 2760 (55h per week)
This accounts for part-time labor and temporary workers.
(8 wkrs x 51wks x 40hr) + (19 ptwr x 36 wks x 20hr) =
(16,320 hours + 13,680 part hours) = 30,000 hours
30,000 hours / 2760 hours = 10.8 worker equivalents!
Production Efficiency Metrics
• Net Income per Worker Equivalent Net Income / Number of Equivalent Workers
This measures how well labor is used to generate net income.
• Sales per Square Foot Total Sales / Sq. Ft. Production Space
This establishes how well use is used to generate sales
• Sales per Worker Equivalent Sq. Ft. Production Space / Number of Equivalent Workers
This establishes how well use is used to generate sales
Production Efficiency Metrics
• Square Feet per Worker Equivalent Sq. Ft Production / Number of Equivalent Workers
This is an indirect measure of worker efficiency / responsibility.
• Sales Per Square Foot* (This is not net income!) Total Sales / Sq. Ft. Production Space
An indirect measure of how well the greenhouse generates income
Cost Efficiency Metrics
• Overhead Costs per Square Foot Total Overhead Cost / Sq. Ft. Production Space
• An indirect measure of greenhouse operation cost efficiency.
• Overhead Costs per Square Foot per Week Total Overhead Cost / (GH Sq.Ft. x # of Wks in Operation)
• A direct measure of how much overhead cost should be assigned to each square foot production space / week.
Cost Efficiency Metrics
• Total Cost per Square Foot Total Cost / Sq. Ft of Greenhouse Production• This is an indirect measure of operations cost efficiency.
• Total Cost per Square Foot per Week• This is an indirect measure of operations costs spread over
production area for the weeks the greenhouse is in operation…
Operational Profitability
• Net Income per Owner Hours Worked Net Income / Number Hours Worked by Owner
This is an indirect measure of owner’s return on management.
• Net Income per Square Foot. Net Income / Number of Worker Equivalents
Indicate the dollar amount each sq. ft. of production space generates
• Net Income per Square Foot per week Net Income / GH Sq. Ft. X Weeks in Operation
This adjusts income / sq. ft. for different lengths of operations.
Inventory Metrics
• Average Age of Inventory (Can be days, weeks, months, FIFO? LIFO?)
Number of weeks product was stored
• Cost Per Day Per Square Foot Total Warehouse Costs / Sq. Ft Warehouse Space
• Inventory Turnover C.O.G.S. / Average Inventory Age
Cost of Goods Sold …. Guess we better ask Charlie!
Charlie’s Turn
Sales Team Metrics
• Ratio New Customer To Total Customers• Total new customers / Total customer that year This is a direct measure of customer base growth
• Ratio New Customers to Customer Dropped• Total New Customers / Total Dropped Customers
This is a direct measure of customer turnover.
Sales Team Metrics
• New Contacts / Week Total number of new contacts / Number of weeks of sales
event. … or number of sales weeks / year.
This is a direct measure of sales team efficiency.
• Customer Value Ratio Number of Orders / Dollar Value of Orders
This is an indirect assessment of overall customer value. You can also apply this metric on a per customer basis to evaluate customer base.
Remember, we want customers…..not costomers!
Tracking Temporary Effects
0100200300400500600700
Janu
ary
Febr
uary
Mar
ch
April
May
June
July
Augu
st
Sept
embe
r
Oct
ober
Nove
mbe
r
Dece
mbe
r
2007
2006
2005
Tho
usan
ds o
f D
olla
rs
Drought / Watering Bans
Two, Cool, Sunny
Weekends
Three rainy Weekends
Southern Living Promotion*
Sal
es
Rainy Weekends
How many employees work for you?
1 2 3 4 5
0% 0% 0%0%0%
1. One – Three
2. Four – Six
3. Seven- Nine
4. Ten to Fifteen
5. Over 15
Answer Number
Salesperson Performance
0
10
20
30
40
50
60
70
2001 2003 2005
Mike
Roger
Pam
Year
Gen
erat
ed C
onta
cts
Marketing Metrics
• Market Impact (Sales per dollar spent) Total Sales / Market Program Costs
Sum of advertising, sales expenses, etc. divided into total sales generated for that particular program
Remember, a marketing program can be divided by market segment, product line, season or by some other special metric of effort organization.
Marketing Metrics
• Program Contact Efficiency Total Program Costs / # Customers Contacted
• Program Customer Yield Program Costs Per Buying Customer
• Program Product Yield Program Costs / Product Line Units Sold
Customer Metrics
• Units Rejected by Customer / Week
• Customer Complaints / Week
• Follow-up Customer Contacts Made
• Consecutive Years as Customer
• Percent of Total Sales per Customer This is best used by wholesalers who sell to large
clients. More than 35% to any one customer is not good!
Shipping Metrics
• Gallons Fuel Used / Week / Driver
• Miles off Route Distance / Week / Driver
• Percent On-time Delivery / Driver
• Percent Follow Up Orders / Driver
Shipping Metrics
• Route Efficiency
Dollars spent per mile
Dollars spent per unit load value
Load value per mile driven
Load value per hour driven
Number of client visits per day
Dollars spent per number clients on route.
How many supervisors manage those employees?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. One
2. Two
3. Three
4. Four to Five
5. Over 5
Conservation Metrics
• Gallons Water Used / Week
• KWH Electricity Used / Week
• KWH Used Per Dollar Gross Income Generated / Week
• Gallons Heating Fuel Used / Week
• Gross Value In Truck per Shipment
• Per Mile Cost per Dollar Gross Revenue
Human Resource Metrics
• Percent Turnover by Unit
• Percent Turnover Company-wide
• Total HR Expense Accrued Per Employee
• Number of Accidents / Injuries / Disciplinaries
How many supervisors manage those employees?
1 2 3 4 5
0% 0% 0%0%0%
Answer Number
1. One
2. Two
3. Three
4. Four to Five
5. Over 5
Charlie’s Turn
The Process Required To Improve Benchmarks
• Define• Measure• Analyze• Plan• Improve• Control
Lean Flow, Six Sigma, DMAIC
Photo
The Process Required To Improve Benchmarks
• Establish Planners (Teams)• Set Team Leaders• Hold Kick-off Meeting – Define Project• Define Metric Segments and Teams• Set Baseline Goals / Metrics Record Keeping!!!!• Establish Timeline for Reports
Define and Organize
The Process Required To Improve Benchmarks
• Document Operations / Product Flow• Define Product to Process Relationships
Transactions, Inventory, Labor, Grow Schedule
• Quantify Scrap, Loss, By Products, Rework• Document Hidden Processes
Approval stops, bottlenecks, paperwork,
• Define customer-driven capacity• Create new SOP’s, Quality Metrics, Output Metrics
Measure & Collect Data
The Process Required To Improve Benchmarks
• Identify process cells or families• Calculate resources and time for process• Define working groups by task• Create optimized flow pattern• Validate process design• Review future capacity vs business strategy
Analyze Plan
The Process Required To Improve Benchmarks
• Document process, Change layout• Train supervisors working in the process• Implement an employee feedback protocol• Implement employee flexibility & training plan• Create SOP’s and Visual work standards• Verify process meets sales expectations
Improve - Make Physical Changes
The Process Required To Improve Benchmarks
• Reinforcement training / certification• Verify SOP’s implemented at ea. cell / station• Establish metric reporting responsibilities• Implement control via Charts / Graphics• Evaluate upper management compliance• Maintain control of daily operations / work
Control and Maintain
Lessons From Lean Flow
AreaScheduling
Production
Lead Time
Batch Size
Inspection
Layout
Empowerment
Inventory Turn
Flexibility
C.O.G.S.
TraditionalForecast - Push
Speculative Stock
Long
Large
Spot Sampling
Functional
Low
3-4
Low
Rising
Lean ProcessCustomer Order - Pull
Customer Order
Product Specific
Small
100% at Source
Continuous Flow
High
5-7
High
Lowering
Virtual Grower
Allows you to estimate energy costs
Allows you to track energy costs
Allows you to play what if on technology upgrades and retrofits.
Allows you to measure / track system efficiencies and weather / cost per hour metrics.
Virtual Grower
Now:
Let’s go to VG example!
Seven Signs A Company (Maybe Yours) Is In Trouble!
• Lower Liquidity
• Low Cash Flow
• Disappearing Profit Margins
• Too Much Debt
• Slow Inventory Turnover
• Slow Paying Customers
How many supervisors manage those employees?
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0% 0% 0%0%0%
Answer Number
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2. Two
3. Three
4. Four to Five
5. Over 5
How many supervisors manage those employees?
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Answer Number
1. One
2. Two
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How many supervisors manage those employees?
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Answer Number
1. One
2. Two
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How many supervisors manage those employees?
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Answer Number
1. One
2. Two
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4. Four to Five
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