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Metrics & KPI's
Metrics & KPI's
Metrics and Key Performance Indicators (KPIs) are important tools for measuring and managing the performance of a manufacturing process.
Metrics are numerical measures of performance that can be used to track progress, identify trends, and measure the effectiveness of process improvements.
Key Performance Indicators (KPI's) are a subset of metrics that are specifically designed to measure the performance of specific aspects of processes that are deemed vitally important to an organization.
Most metrics/KPI's can be categorized into one of three traditional Lean metric categories; Quality, Time, & Cost:
Quality metrics:
First Pass Yield: The percentage of products that are produced correctly on the first attempt, without the need for rework or repair.
Defect Rate: The percentage of products that do not meet the quality standards of the manufacturing process, either due to defects or non-conformance to specifications.
Overall Equipment Effectiveness (OEE): A measure of the effectiveness of a manufacturing process, calculated as the product of availability, performance, and quality.
Customer Satisfaction: A measure of how satisfied customers are with the products and services provided by the manufacturing process.
Time metrics:
Cycle Time: The time it takes to produce one unit of product, from start to finish.
Lead Time: The time it takes to complete an order, from the time the order is received to the time it is delivered to the customer.
Downtime: The amount of time that a machine or production line is not operational, either due to scheduled maintenance or unplanned downtime.
Throughput: The rate at which products or materials are processed or produced by a manufacturing process.
On-Time Delivery: A measure of how often products are delivered to customers on time, as promised.
Cost metrics:
Inventory Turns: The number of times that inventory is sold and replaced over a specific period of time.
Cost of Quality: A measure of the cost of producing high-quality products, including costs associated with inspections, testing, and rework.
Overall Labor Effectiveness (OLE): A measure of the effectiveness of labor resources, calculated as the product of availability, performance, and quality.
Supplier Performance: A measure of the performance of suppliers and vendors, including factors such as on-time delivery, quality of materials, and responsiveness to issues or concerns.
In addition to these traditional metric categories, a relatively newer category of Safety has been incorporated in many companies:
Safety Metrics:
Near-Miss Incidents: The number of incidents that do not result in injuries but have the potential to cause harm.
Lost-Time Injuries: The number of injuries that result in lost workdays.
Total Recordable Incident Rate (TRIR): A measure of the number of recordable incidents per 100 employees.
The above metric categories are typically operationally-focused, but the most modern way of thinking about metrics/KPI's from an organizationally-focused perspective is under the umbrella of 3-Pillar Sustainability, which encompasses & recategorizes all the above metrics, as well as adding new ones that are key to the sustainability of any organization, including:
Social Sustainability Metrics:
Employee Satisfaction: A measure of how satisfied employees are with their jobs and working conditions, often measured through surveys or other feedback mechanisms.
Worker Safety: A measure of how safe the workplace is for employees, including metrics such as lost-time injuries, near-miss incidents, and total recordable incident rate (TRIR).
Diversity and Inclusion: A measure of how diverse and inclusive the workplace is, including metrics such as employee demographics, representation in leadership roles, and employee feedback on diversity and inclusion.
Community Engagement: A measure of how engaged the company is with the local community, including metrics such as volunteer hours, charitable donations, and partnerships with local organizations.
Environmental Sustainability Metrics:
Carbon Footprint: The net amount of greenhouse gases, such as carbon dioxide, added to the environment by the manufacturing process, measured in metric tons or other units.
Energy Consumption: The amount of energy used by the manufacturing process, measured in kilowatt-hours (kWh) or other units.
Water Usage: The amount of water used by the manufacturing process, measured in gallons or other units.
Waste Generation: The amount of waste generated by the manufacturing process, measured in pounds or other units.
Air Pollution: The amount of pollutants released into the air by the manufacturing process, measured in pounds or other units.
Economic Sustainability Metrics:
Profitability: A measure of how profitable the manufacturing process is, including metrics such as net income, gross margin, and return on investment (ROI).
Revenue Growth: A measure of how quickly the company is growing its revenue, often measured as a percentage increase over time.
Cost Reductions: A measure of how much the company is able to reduce its costs over time, often measured as a percentage reduction in costs.
Return on Investment (ROI): A measure of how much return the company is able to generate from its investments in the manufacturing process, often measured as a percentage.
Overall, Metrics and KPIs are important because they provide a way to measure the effectiveness of process improvements and to track progress towards specific goals.
By setting targets for each metric or KPI, manufacturers can identify areas of improvement and measure the impact of process improvements over time.
This helps to ensure that the manufacturing process is continuously improving and delivering value to customers.
Takt-, Cycle-, & Lead-Times
Takt-, Cycle-, & Lead-Times
The term "takt time" has its origins in German, where "Takt" means "beat" or "rhythm".
The term was first used in the manufacturing industry by German engineers in the early 20th century to describe the concept of producing goods at a steady pace to meet customer demand.
The idea was that the manufacturing process should be driven by the rhythm of customer demand, and that the pace of production should be adjusted to match that rhythm.
The concept of takt time was later popularized in the Toyota Production System, which is widely regarded as the origin of modern lean manufacturing.
Toyota used the concept of takt time as a key metric to optimize their manufacturing processes and align production with customer demand.
Today, takt time is a fundamental concept in lean manufacturing, and is used by manufacturers around the world to improve efficiency, reduce waste, and deliver greater value to customers.
While the term may have originated in Germany, its use and application have been adapted and refined by manufacturers in many different countries and industries.
Takt Time
Takt time is calculated by dividing the available production time by the customer demand.
For example, if there are 480 minutes of production time available in a day, and the customer demand is 240 units per day, then the takt time would be 2 minutes per unit (480 minutes / 240 units).
Takt time is important because it helps to ensure that the manufacturing process is aligned with customer demand, and that products are produced in the right quantities and at the right pace.
By measuring takt time, manufacturers can identify bottlenecks and inefficiencies in the manufacturing process, and make adjustments to improve flow and efficiency.
For example, if the takt time is 2 minutes per unit, but it takes 3 minutes to produce one unit, then there is a mismatch between the production process and the customer demand.
To address this, manufacturers might implement process improvements such as reducing setup times, optimizing workstations, or reducing waste, in order to bring the production time in line with the takt time.
Cycle Time
Cycle time refers to the time it takes to complete one cycle of a manufacturing process, from start to finish.
This includes all of the individual steps required to produce a product, such as machining, assembly, and testing.
Cycle time is an important metric because it helps to identify bottlenecks and inefficiencies in the manufacturing process, and can be used to target improvements that will reduce the time required to produce a product.
Lead Time
Lead time, on the other hand, refers to the time it takes to complete an order, from the time the order is received to the time it is delivered to the customer.
Lead time includes not only the time required to produce the product, but also the time required for transportation, inspection, and other activities that are necessary to fulfill the order.
Lead time is an important metric because it helps to ensure that customer orders are delivered on time and in full, which is a key component of customer satisfaction.
ROI
ROI
Return on Investment (ROI) is an economic metric that is used to measure the profitability and effectiveness of investments in lean manufacturing.
ROI is important because it helps manufacturers to understand the financial impact of their lean initiatives, and to make informed decisions about where to allocate resources.
By calculating ROI in relation to lean manufacturing, manufacturers can prioritize investments that are likely to deliver the greatest financial benefits, and track the success of their lean initiatives over time.
ROI can also help manufacturers to make the business case for additional investments in lean manufacturing, by demonstrating the financial benefits that can be achieved through improved efficiency, reduced waste, and better quality.
Overall, understanding ROI is an important tool for manufacturers who want to achieve sustained success through lean manufacturing.
Calculating ROI
To calculate ROI in relation to lean manufacturing, manufacturers need to first identify the costs and benefits associated with a particular lean initiative.
Costs might include things like the cost of equipment or materials, or the cost of hiring consultants or trainers to implement the initiative.
Benefits might include things like increased productivity, reduced waste, and improved quality.
Once the costs and benefits have been identified, manufacturers can calculate the ROI using the following formula:
ROI = (Total Benefits - Total Costs) / Total Costs
For example, if a manufacturer invests $100,000 in a lean initiative and realizes $150,000 in benefits, the ROI would be calculated as follows:
ROI = ($150,000 - $100,000) / $100,000 = 0.5 or 50%
This means that for every dollar invested in the lean initiative, the manufacturer realized a return of $1.50, or a 50% ROI.
Pitching Process Improvements
When trying to convince an employer to make investments in lean manufacturing, it's important to make a compelling business case that clearly demonstrates the potential benefits of the investment.
Here are some steps to follow when making a business case for lean manufacturing investments:
Identify the problem or opportunity: Start by identifying a specific problem or opportunity that the investment could address, such as a bottleneck in the manufacturing process, high levels of waste, or low customer satisfaction. Be sure to quantify the impact of the problem or opportunity, in terms of financial costs or potential benefits.
Research potential solutions: Once you've identified the problem or opportunity, research potential solutions that could address it. Look for examples of similar companies or industries that have successfully implemented lean manufacturing initiatives, and identify best practices and success factors that could be applied to your situation.
Estimate costs and benefits: Estimate the costs and benefits associated with the proposed lean manufacturing investment. Be sure to take into account all relevant costs, such as the cost of equipment, training, and implementation, as well as the potential benefits, such as increased productivity, reduced waste, and improved quality.
Develop a financial analysis: Develop a financial analysis that clearly shows the potential return on investment (ROI) of the proposed lean manufacturing investment. This could include a cost-benefit analysis, a payback period analysis, or a net present value (NPV) analysis, depending on the specific circumstances.
Present the business case: Present the business case for the proposed lean manufacturing investment to key decision-makers in the organization. Be sure to clearly communicate the problem or opportunity, the potential solutions, and the financial analysis, and be prepared to answer questions and address concerns.
By following these steps, you can make a compelling business case for lean manufacturing investments, and help to drive continuous improvement and success in their organization.
2.2✔ CHECKPOINT
2.2✔ CHECKPOINT
Airplane Boarding - Metrics
Airplane Boarding - Metrics
Continue your previous analysis of aircraft boarding procedures, from the perspective of metrics, by doing step 4 of making a VSM
Identify metrics then KPI's for current airplane boarding processes used by commercial airlines
Feel free to utilize any external resources to support or come up with your ideas (research papers, YouTube videos, ChatGPT, etc.)
Once done, add documentation to your previously-created "Lean Airplane Boarding" project page on your portfolio website, and upload documentation of your progress, including:
Pictures(s)/Gif(s) and/or Summaries/Descriptions of:
Metrics identified & measured
KPI's identified & measured
Descriptions/summaries of what you did/learned
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