Output, Customer, and Process Metrics

Adapted from:  “Lean Six Sigma Metrics”, LeanOhio Resources, Ohio Department of Administrative Services; and “Lean Six Sigma Metrics," Wisconsin Department of Transportation.

Developed in July 2013  by the Colorado Department of Transportation's (CDOT’s) Office of Process Improvement; updated April 24, 2018 

The following is a list of metrics frequently used in Lean process improvement projects to measure the outcomes of a process and various aspects of the process itself, in order to identify opportunities for improvement and monitor changes over time. These metrics help to pinpoint sources of waste, variability and/or customer dissatisfaction. By focusing on them, Managers and the improvement teams they charter will have a greater potential to find the root causes of problems and thus high‐leverage areas for improvement.

The “right” metrics will depend on the goals of the improvement project and may require multiple iterations to discover more about the process that is being studied. It is often helpful to focus on one metric that is directly meaningful to the customer and another that will resonate with leaders and the organization’s strategic goals. Use this list of Tips in conjunction with the “Manager’s Quick Start Guide for Organizational Performance and Process Measurement”.

Output-related metrics

• Production: the total number of services or products (“widgets”) completed or produced in a given amount of time (goal varies by service or product; the optimal level should align with customer demand to minimize backlogs and excess inventory)

• Work in process: number of services or products currently being processed (goal varies by service or product)

• Backlog: number of services or products that are waiting to start the process (a lower number is better)

• Inventory: a supply of raw materials, finished products or unfinished products in excess of customer demand (a lower number is better)

Process-related and Customer-related metrics

1. Time-related metrics (Efficiency) 

• Lead time: the total time from start to finish to develop a service/product and deliver it to the customer, including waiting time (expressed in days typically; a lower number is better)

• Processing time: “touch time”, or the number of working hours spent on process steps, not including waiting time (a lower number is better)

• Response (wait) time: the number of working hours it takes to react to a customer request for a service or product (a lower number is better)

• Activity ratio: processing time divided by lead time (expressed as a percentage; a higher number is better)

• Best and worst completion time: the range of variation in lead time or processing time;  may also include standard deviation if data are available (a smaller range is better)

• Percent on time delivery: how often your lead time meets your target (a higher number is better)

• Value added (VA) time: the amount of processing time spent adding value to the service/product, where the value is defined as “something the customer is willing to pay for” such as drafting a contract for a vendor (a higher proportion of VA time is better)

• Non‐value added (NVA) time: the amount of time is not spent adding value to the service/product, activities that the customer is not “willing to pay for” such as waiting for a signature or review (a lower proportion of NVA time is better)

• Business / regulatory non‐value added (BNVA) time: non‐value added steps that cannot be eliminated (goal varies by service or product; typically aim to minimize BNVA)

2. Quality metrics and Customer metrics (Effectiveness and Elegance)

• Defect rate: percent of services/products that are “defective”, where a defect is defined as “something the customer does not like” (a lower number is better)

• Rework steps/time: the amount of a process spent correcting mistakes or going back for missing information (a lower number is better)

• Percent complete and accurate: percent of occurrences where a process step is completed without needing corrections or requesting missing information (a higher number is better)

• Rolling first pass yield: percent of occurrences where the entire process is completed without rework, or the product of all steps’ percent complete and accurate rating (a higher number is better)

3. Process complexity 

• Process steps: the total number of steps to complete the process (aim for reduction)

• Value-added process steps: number of process steps which add value to service/product (aim to increase the proportion of value-added steps, or eliminate non‐value added steps)

• Decisions: Number of decision points where process changes for different situations and staff must decide the appropriate path to follow (goal varies by service or product, typically aim for reduction)

• Signatures required: number of approvals needed, usually involve delays and handoffs (aim for reduction)

• Handoffs: number of times the service/product changes hands, can be a source of errors, miscommunication, or delays (aim for reduction)

• Loopbacks: when steps of a process must be repeated, usually to correct errors or find missing information (aim for reduction)

4. Cost metrics

• Total process cost: total costs, including labor, material, and overhead, to produce the service/product (a lower number is better, given the same level of production)

• Cost per item or transaction: total process cost divided by the number of services/products produced (a lower number is better)

• Cost savings: the dollar or percentage reduction in total process cost or cost per transaction (a higher number is better)

• Cost avoidance: dollar or percentage reduction in planned spending that would otherwise have occurred (a higher number is better)

• Labor savings: reduction in labor hours needed to perform the process, usually “soft cost savings” as staff hours are redirected to value‐added activities (expressed in hours, FTEs, or percentage reduction; a higher number is better)