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Metrics That Matter: Part Two

10/28/2014

In our initial post on the metrics report issued by the Manufacturing Enterprise Solutions Association (MESA International) and LNS Research, we provided the study’s list of 28 metrics identified as most used by manufacturers to best understand manufacturing performance and opportunity areas for improvement. Today we look at the second and third questions the report answers: “How does my company’s performance improvement compare to industry?” “How do we connect operational metrics to financial metrics?”

All those surveyed were asked about specific levels of three critical metrics: on time completed shipments (OTCS), overall equipment effectiveness (OEE), and successful new product introductions (NPI). The other 25 metrics were surveyed to uncover average annual performance improvement percentages, which were combined into eight categories:

  • Financial: 8.6 percent
  • Inventory: 15.0 percent
  • Innovation: 7.8 percent
  • Responsiveness: 10.0 percent
  • Efficiency: 17.0 percent
  • Quality: 13.7 percent
  • Maintenance: 14.9 percent
  • Compliance: 18.5 percent

The consistent double-digit improvement indicates the strides the manufacturing sector is making.

Respondents were also asked about changes that occurred in their businesses since over the last year:

  • Increased the number of products, SKUs or variants: 71 percent.
  • Increased volatility of customer demands: 66 percent.
  • Introduced more complex products: 64 percent.
  • Customers demanded increased traceability documentation: 54 percent.
  • Shortened the time of new product introduction: 45 percent.

In light of these challenges, the improvements listed above are even more impressive.

Relationships Between Financials and Operationals

Many positive correlations were found between average annual metric improvements and average annual financial metrics. (This has been true for every MESA Metrics Survey since 2006.)

  • The average percent of successful NPIs was 72 percent, with the top 7 percent of performers achieving 90 percent or better.
  • The average OEE was 71, with the top 11 percent of performers achieving 80 or better.
  • The top performers in NPI had average annual financial improvements of 16 percent versus 8.6 percent for all others.
  • Those with OEE of 80 or better had average annual financial improvements of 14 percent versus 8.6 percent for all others.

Respondents with NPIs of 90 percent or better reported average annual financial improvements of 16 percent. These respondents also had 32 percent annual improvements in customer fill-rate/on-time delivery/perfect order versus an average of 12.5 percent overall.

Those with OEE of 80 or better had average financial improvements of 14 percent. Specifically, 11 percent of respondents had 20 percent annual improvements in Revenue per Employee/Productivity versus an average of 8 percent overall.

Posted by Stewart Baillie, Vice President, Products, Manufacturing



 

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