J Fraser Mesa Metrics Repeating Session RSTech Ed June 2012

www.mesa.org

Crafting a Metrics Program

for Maximum Impact

Julie Fraser

Independent Advisor & Research Leader

Cambashi-MESA Metrics Research

Introductions

• My background – why am I here?

– 25 years manufacturing tech industry watcher

– Research leader for study

– Former MESA Metrics WG Chairperson

– Passion for manufacturing & improvement

• Your background

– Why are you here?

Copyright 2012, MESA International

Topics

• Introduction – people, topics, MESA

• What works for improvement

• Designing a metrics program

• IT and automation role in metrics

• Exercise to focus

• Key take-aways

• Whatever you want to discuss!


Two Main Data Sources #1

MESA Metrics Guidebook

MESA Metrics Guidebook and

Framework

• Guidelines to drive operational

excellence

• Design of metrics program

• Linking and aligning metrics for

business success

• Get a diverse team to a common

understanding

• Justifying improvement projects

• 60-page guidebook plus

resources and a glossary


MESA Metrics Research

• Primary research on how manufacturers measure & improve performance

– On-line survey

– Telephone interviews

– Team for analysis & advice

• Series started in 2006: Metrics that Matter, Metrics for Major Initiatives, etc.

• Pursuit of Performance Excellence

– Summary Report

– Comprehensive Report

New in this report:

• Depth & detail into

Best Practice Processes

• Views into why speed is a

challenge

• Analysis of widely used metrics

• Correlation between improved

plant & financial metrics

• Key take-aways summary

#2 New Study: Pursuit of

Performance Excellence

Metrics maturity

• Where are you on the metrics maturity journey?

• Is maturity different for culture, process, automation, IT?


Source: Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics © 2012 Cambashi Inc. and MESA International

Who is MESA International?

MESA is… a not-for-profit industry association

a global community of like-minded companies and professionals

working to make Operations more reliable, capable and profitable

shaping important discussions impacting the

enterprise solutions of tomorrow

the knowledge broker for the MES/MOM* domain globally

*MES/MOM = Manufacturing Execution Systems/Manufacturing Operations Management


Who is MESA International?

Resource Library: Whitepapers, Guidebooks, Research, etc.

Member companies and individuals in 89 countries

Committees & Working Groups attacking the most pressing

and demanding challenges manufacturers and producers face

A seat at the table to shape solutions to drive

Operations Excellence for the next 20 years!

Inside MESA for YOU is…

Industry's only independent, professional Global

Education Program


Visit: www.mesa.org

http://www.mesa.org/

MESA Metrics Working Group

MESA Metrics Research Timeline

2004 2005 2006 2007 2008 2009 2010 2011 2012

Need data

Members

want to

know Metrics that

Matter: Metrics,

quality matter

Metrics Framework

and Guidebook:

Core practices

Members

form WGs

Metrics for

Major Initiatives:

Lean, RTE, Quality

Holistic Metrics:

Supply chain

Correlating

Plant to Business

Performance

Harnessing the

Power of Metrics

to Diagnose & Solve

WP#35

Liaison to

ISO #22400

Plant KPI

Standards

begins

Metrics

Framework

and Guidebook:

2nd Edition

Metrics

Makeover

Contest

Pursuit of

Performance

Excellence

ROI Guidebook;

IndustryWeek,

Reference Model,

Your topics

• Research team:

– Cambashi analysts

– Sponsors

– Industry Council

– MESA Volunteers

• On-line survey

• Telephone interviews

• Written reports

– Summary

– Comprehensive

• Webcast

Pursuit of Performance Excellence


2011-2012 Study Sponsors

SEMICONDUCTOR /

MEDICAL DEVICE

PREMIUM SPONSOR

SUPPORTING

SPONSOR

PREMIUM SPONSORS

Industry Council

Members • Manufacturer/producers only

(13 active)

• Wide range of disciplines,

titles, responsibility, scope

Experienced and

passionate about

metrics • Hot button issues shape

survey

• Alcoholic beverages

• Construction materials

• Electronics

• Engineered industrial catalytic

converters

• Food

• Home & garden consumer

durables

• Power generation

• Resins & advanced plastics

• Semiconductors

Industries Represented

Response Demographics

300+ Responses

0% 10% 20% 30% 40%

Staff / Employee

Supervisor/ Teamleader

Manager / Projectmanager

Director / Manager ofmanagers / Head of

department

Senior executive / C- orVP-level executive

Scope of Responsibility

Source: Pursuit of Performance Excellence:

Business Success through Effective Plant Operations Metrics

© 2012 Cambashi Inc. and MESA International

Companies

All sizes, 40% under $100M

24+ industries

Every production mode: discrete,

packaged goods, other mixed,

batch, continuous

Individuals

All regions

Variety of titles & domains

Current Situation

Majority of respondents:

• Growing revenues and

production volumes

• More products, SKUs,

variants

• Increasing automation

• Concerned about staff skills

More 55%

Same 34%

Less 11%

Concern about Operator Skills: Change Over Past Three Years




Topics






• Key take-aways



Who are Leading Performers?

Business Movers Defined

• Improved EBITDA 10%

or more

• Improved Net Operating

Profit 10% or More

• Improved by 1% or

more on over half of the

Business Metrics

in the study

Improvements are average per

year over past three years

Business Movers

25%

Others 75%

Portion of Response Qualified as Business Movers by Financial

Improvement




Business Movers Practices

Speed

• Data collection

• Analysis

• Display & Use

0% 10% 20% 30% 40%

Quality metrics

Efficiency metrics

Fully automated data collection for two major groups of operational metrics

BusinessMovers

Others




More likely to use other best practices that enable action

Line-level metrics best practices

0% 10% 20% 30%

Others

Business Movers

Portion of respondents that ALWAYS provide line-level metrics to operators and technicians


Types of Metrics More Business

Movers Improve Dramatically

• Predictive/preventive

• Translate operational

results into financial

terms

• Include suppliers &

partners

• Holistic/multi-faceted

• Non-value added time

0%

5%

10%

15%

20%

25%

Suppliers'manufacturing yield

or test results

Overall equipmenteffectiveness (OEE)

Portion of respondents who improved by 10% or more on

key operational metrics

Business Movers Others




People Want Speedier Metrics

0% 20% 40% 60% 80% 100%

Rarely/ never

Monthly or less

Weekly

Daily

End of shift

Within a shift

Real-time (minutes or less)

Satisfaction with Staff Speed to See Metrics by Timing of Availability

Yes: typically fast enough: satisfactory No: typically not fast enough: unsatisfactory


Metrics drive behavior, actions & outcomes so FASTER = BETTER

Challenges in timeliness

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

50%

Extremely Reasonably Not very Not at all

How necessary is it to have an analyst involved to cleanse the data prior to analysis and display?


Differences of opinion about

issues

0%

10%

20%

30%

40%

50%

60%

70%

Senior executive / C- or VP-level executive

Staff / Employee

What is the Major Problem Causing Slower or Less than Ideal Frequency of Metrics Display of Results?

Lack ofmanagementcommitment

Lack of will tochange

IT challenges


Topics






• Key take-aways



MESA Metrics Guidebook

Second Edition 2011

• Guidebook:

– Why metrics matter

– Explanations by role

• Framework

– Overview

– Alignment

– Manufacturing to business

linkage

• Reference

– Metrics

– Justifying systems

– Resources

– Glossary

Conceptual framework


Inc

reas

ing

ag

gre

ga

tio

n

Audience:

CFO, CEO

Plant Accounting,

Finance

Plant Management,

Operations

Management

Operators, Supervisors,

Quality, Engineers,

Technicians

Profitability

Inc

reas

ing

ab

ility to

take

ac

tion

CorporateFinancials

Aggregated Financial& Operations Metrics

Operations-level KPIs &Dynamic Performance Metrics

External

Investors

& Creditors

Internal

Strategic

Business

Planning

Source: MESA Metrics Guidebook and Framework, Second Edition © 2011 MESA International

Key to Success: Linking Plant

and Business Metrics


0% 10% 20% 30% 40% 50% 60%

Not at all

Not very

Reasonably

Extremely

How well linked are the operational metrics to your financial and business metrics?

BusinessMovers

Others

Useful construct for metrics

framework: Vollmann triangle


Strategy

MeasureAction

Strategy

MeasureAction


Linking corporate objectives to

metrics at each level



Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Strategy

MeasureAction

Corporate Strategy:

Increase Brand Margin & Value

Net margin per product line or brand

# of Profitable

models/ brand

extensions

Reduce

Cycle time or

Stock-outs

Lower

Production

Costs

Financial Metrics

Operational

Metrics

Plant

Metrics

Changeover

Speed

NPI

Ramp-up

Time

First

Pass

Yield

Planned vs.

Emergency

Maintenance

Ratio

Upside

Production

Flexibility

OEE Energy

Consumption

Per Unit

Changes in Production Resources = Changes in Cost

(Operations)

Improvements in Revenue

(Sales & Marketing)

Example metrics that correlate


Business Metric Operational Metrics

Manufacturing Cost % Revenue

Main factors:

• Batch/lot/unit right first time

• Throughput

Secondary factors:

• Manufacturing cycle time

• Time to make changeovers

• Scrap

• Capacity utilization

• On-time delivery to commit Source: Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics © 2012 Cambashi Inc. and MESA International

Example of Conflicting Answers

How many cases can we ship out tonight?

• Production line supervisor reports line counter’s total number.

• Warehouse manager reports a smaller number.

Why?

• Some pallets were shrink-wrapped incorrectly, so they were set

aside to be wrapped again later.

• Other cases failed quality tests, so these products had to be

either reworked or scrapped.

• Others may have been put aside for further quality tests.



Example of Tradeoffs to achieve

a metric

Schedule attainment

• Resource utilization

• Changeover times

• Inventory levels

• Planned maintenance

• Customer order priorities

What happens when:

• Machine breaks

• Key skilled employee(s) out sick

• Materials don’t meet spec

• Rush order comes in for important customer



Why a Framework?

“The structure of data is only as good as your model

supports. A metrics program must take into

consideration a holistic model to link the data (metrics)

from a machine or work cell to and through the ERP,

the financial and scheduling of your discrete or process

manufacturing.”

Tony Jenovino, Campbell's Soup



Resource Consumption

Accounting for realistic decisions

4,000

Units

Add

1,000

with OT

Selling Price $ 120 $ 120

Material $ 25 $ 25 Raw or Purchased material

Direct Labor $ 30 $ 45 Full Labor Cost of Work Team and

with 150% OT Premium

Other Direct Costs $ 5 $ 5 Work unit operating costs - Protective

Clothing, hand tools, etc.

Overhead Allocation $ 40 $ 40

Plant wide allocation of Utilities,

Machinery Depreciation,

Maintenance, Administration

Expenses $ 100 $ 115 The sum of material, Direct labor,

Other Direct costs and Overhead

Gross Margin $ 20 $ 5



Topics






• Key take-aways



IT Support


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

ERP MES / MOM OI/ EMI/ OpsDashboard

Use of Selected Information Technologies

Planning to buyin next 1-2years

Some use orpilot

Widely in use

MES/MOM Use Correlates to

Success

37

0% 5% 10% 15% 20%

Manufacturing cost as % ofrevenue

EBITDA

Higher portion of MES Users achieved at least 10% improvement on key financial metrics

MES/MOMUsers

Others


How did that happen?

Operational improvements



Operational dashboard users line

level metrics practices


0% 10% 20% 30% 40% 50%

Real-time (minutes orless)

Within/end of shift

Daily

Less Frequent

When do operators, line workers, supervisors, and those managing the operations see the metrics for their scope

of control?

OI / EMIUsers

Others

Topics






• Key take-aways



Metrics Maturity Model

Phase

Aspect

Baseline /

Understand

Visibility /

React

Reliable

Response

Avert &

Improve

Enterprise

Foresee &

optimize

Ecosystem

Culture

Process

Automation

IT


Exercise

• Find one block in the metrics maturity

model where you lag

• Develop a description of the key gap

• Develop a business case for improving it

• Identify key stakeholders

• Set up a meeting when you return


Topics






• Key take-aways



Two of Top Six Take-Aways

• Align metrics from business to plant to

line and through the supply base

– Train and communicate in all levels critical to

business success.

– Use metrics consistently as part of the

company culture.

– Employ sound practices in performance

measurement.


Two of Top Six Take-Aways

• Engage, educate, and empower

employees

– Understand metrics to enhance skills.

– Provide line-level metrics during the shift.


Go out and improve

• Develop metrics to align efforts, learn and improve

• Gain speed: it matters to employees and results

• Move toward metrics that tell the entire story

• Use applications to support speed and improvement

• Be confident IT has a payback

• Metrics maturity is a never-ending journey: keep at it!

Learn more with us…

• Report as a thank-you for attending today

• Participate in MESA

– Metrics Working Groups

– ROI Working Group

– Food Safety SIG

– Continuous Process SIG

– Technical Committee

• MESA Unconference session here at RSTechEd

St. Johns 29 Tuesday 4-5pm, Wednesday 11-noon

WWW.MESA.ORG

[email protected]

Further Discussion & Follow-up


http://www.mesa.org/

mailto:[email protected]

J Fraser Mesa Metrics Repeating Session RSTech Ed June 2012

Business

Transcript of J Fraser Mesa Metrics Repeating Session RSTech Ed June 2012