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Jan 18 2012

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Lean Success, Part 2: It’s not Lean if You Can’t Measure It

I came across a startling statistic recently, from a survey of manufacturing executives. Fully 14% said they did not know how much their Lean initiatives had saved. Think about that for a moment. Manufacturers have invested significant amounts of time, resources and cash in Lean initiatives, yet one in seven can’t say how much they’ve saved – or even if they’ve saved. (The study was by AlixPartners and is available here.)

This brings me to Part 2 in my series of blog posts on Lean manufacturing success. In my last post, I proposed that Lean success depends on three factors:

  1. When the approach is complete
  2. When the results are measurable
  3. When continuous process improvement is enforceable

In this post, I will discuss the second factor: Lean must be measurable.

So how is it possible that so many executives are in the dark about the performance of their Lean projects? After all, you can’t improve what you can’t measure. Measuring the right things, the Key Performance Indicators that drive behavior is essential to successful continuous improvement initiatives. As important, and too often overlooked, these metrics need to be defined, measured and reported the same way so they mean the same thing, at each plant in the enterprise. This concept is paramount to achieving long-lasting Lean success.

I can think of two reasons why visibility is hard to achieve. One is the difficulty in deciding what needs to be measured. In Microsoft’s white paper “The Value of Manufacturing Visibility,” the authors state that “most manufacturers are challenged in knowing which few numbers really need to be captured.” The paper suggests several key metrics to track, including capacity and availability, labor efficiency per unit of production, quality, inventory turns and value-add time. MESA’s Metrics that Matter Guidebook is another valuable resource for determining the right KPIs for your organization. And, of course, your organization has its own set of metrics, though often I’ve seen organizations with too many KPIs. Initial effort devoted to defining what the right metrics are as well as the right number will be rewarded down the line.

Let’s assume you have clearly defined what will be measured. A big question still remains … how will you measure it? Even within a single plant, producing metrics correctly and in a timely fashion can be a challenge, especially if some processes are paper-based. For example, a production line might have automated execution, but downstream assembly is still using paper. Or, you might have several automated data collection systems making data integration difficult and costly.

Having identified what and how to measure, the next step is to actually perform the measurement, which can sometimes take too long, reducing their “actionable” value. The challenges grow exponentially when you want to measure the flow of materials and production processes across multiple plants.

While these challenges are great, they are far from insurmountable. World class companies that have been most successful have built common processes and metrics on a common global platform, which has greatly simplified data aggregation, visibility and accuracy. I have seen a medical device company reduce inventories by 25-35% across 16 plants. A consumer goods manufacturer cut WIP inventory by 50% and reduced cycle time by 50%.

The bottom line is that manufacturers can certainly meet – or even exceed – their Lean goals. A critical step is that you must know what should be measured and you must have a system in place to accurately, consistently measure these activities in order to ascertain if performance improvement has really occurred. Consistent visibility and measurement of key activities can drive performance or anticipate issues, across all facilities and operations.

In my next post, I will look at the third factor in successful Lean projects, enforcement.

Jordan can be found on Google+

Permanent link to this article: http://www.apriso.com/blog/2012/01/lean-success-part-2-its-not-lean-if-you-can%e2%80%99t-measure-it/

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