Quality, cost, delivery: measuring business performance

1 Published by the Department of Trade and Industry. Crown Copyright. URN 04/814; 03/05 ACHIEVING BEST PRACTICEIN YOUR BUSINESSQ uality, cost, delivery: measuring businessperformanceContentsRead the steps that are relevant to your is QCD?04 Step 1: Not Right First Time doesyour company end up with a high levelof defective products/waste? 06 Step 2: Delivery Schedule Achievement would you like to deliver tocustomers on time, every time? 08 Step 3: People Productivity wouldyou like to raise staff productivity?10 Step 4: Stock Turns do you need totighten stock control?To stay ahead of the market, it s crucial to monitor your company sperformance, however big or small your business is. Once you vegauged how well you are doing, you can start improving the wayyou do things and boost your brochure is for:Companies that want to take a fresh look attheir business processes, with the goal of increasing profitabilityand delivering exceptional customer service.

2 Companies outsidemanufacturing can adapt the principles to their covers:The key roles of quality, cost and delivery (QCD). Thisapproach puts your whole business under the microscope and aimsto raise standards in seven key areas: quality of finished products;on-time delivery; staff productivity; stock levels; efficiency ofequipment; added value and floor space utilisation. 12 Step 5: Overall EquipmentEffectiveness are you using yourequipment to maximum capacity?14 Step 6: Value Added Per Person is each team member adding value to products? 16 Step 7: Floor Space Utilisation are you making best use of your premises?18 Case studies read how othercompanies are reducing waste andcutting costs24 Further help and adviceThe DTI drives our ambition of prosperity for all by working tocreate the best environment forbusiness success in the help people and companiesbecome more productive bypromoting enterprise, innovation and champion UK business at homeand abroad.

3 We invest heavily inworld-class science and protect the rights of workingpeople and consumers. And westand up for fair and open markets in the UK, Europe and the best practice in your businessis a keytheme within DTI s approach to business support,providing ideas and insights into how to improveperformance across your business . By showingwhat works in other businesses, we can help yousee which approaches can help you, and thensupport you in implementation. This brochurefocuses on these was originally developed for the carindustry to help British companies evolveinto world-class operations. The organisationthat created QCD is the Industry Forum ofthe Society of Motor Manufacturers and Traders (SMMT). If you are in the service industries, you canadapt the principles of QCD to your sector tomeasure how efficiently you work and bringabout business improvements.

4 What is QCD?The QCD approach has beenwidely adopted by manysectors in manufacturing, from textiles to chemicals. HOW CAN MY COMPANY BENEFIT FROM QCD?The benefits of the Quality, Cost, Deliveryapproach include:FOCUSU sing QCD can clarify your priorities forimproving your production process orservice delivery whichever sector youoperate measures give you the big picture,simplifying even a complex productionprocess and identifying a straightforwardroute for can use the tools to assess the results of any changes you make to your productionprocess or service delivery. QCD providesrapid feedback it gives you the facts andfigures you need to make tells you how well you are currentlydoing, to help you decide which part of yourbusiness or production process to data gives you a standard to set targetsfor the future.

5 Once you ve decided whichactivities to improve, you will need to reviewthem, to establish why you do things in acertain way. THE BOTTOM LINEU sing the techniques to monitor yourperformance and set goals will noticeablyimprove efficiency. It can bring rapidimprovement and increased case studies in this booklet show howQCD has helped businesses tighten up theiroperation and improve their bottom line. You can put NRFT into figures, by measuringthe number of defective parts per million .Take the number of defective products anddivide it by the total quantity of productsyou supplied. Multiply this by 106to get the number of parts per million thestandard way that industry looks at thenumber of in service industries need to lookat factors such as the number of customercomplaints, the number of returns orcancelled NOT RIGHT FIRST TIMET here are two points at which you canmeasure NRFT before it reaches thecustomer (internally) and after it reaches the customer (externally).

6 If a company produces two defectivecomponents in every thousand, thistranslates into 2,000 parts per million. See the working example you know this figure, you can settargets for improvement you should aimfor below 100 parts per million, which is theindustry best of which industry you are in,getting things right first time and every time,leads to a lower defect rate, improvingquality and customer satisfaction. Not Right First TimeStep1 Working example:NOT RIGHT FIRST TIME =(2/1000) X 10 X 10 X 10 X 10 X 10 X 10=2,000 DEFECTIVE PARTS PER MILLION. 05 Not Right First Time (NRFT) looks at the quality of yourproducts or services how often do they meet thecustomer s specification? ChecklistCOLLECT DATA Measure the amount you waste not just waste materials, but wasted time and effort.

7 Do you have the right data to identifyproblems in the production cycle or thegeneral workflow? Consider getting external help and advice,for example from business Link (or itsequivalent in Scotland, Wales and NorthernIreland), consultants or industry Once you ve identified where the problemlies, communicate this to all relevant staff you need everyone to understand theimportance of getting it right first time andthe effect on the bottom line. ANALYSE Brainstorm a solution. Ask yourselves why you carry out activities in a certainway. Is it simply because you ve alwaysdone it that way? Consider an alternative way of doing Put in place improvement activities. Set goals short term and long term. Make staff responsible for improvement.

8 MONITOR Monitor improvement activities. Take measurements to make sure they re working. Set new goals for the case study on NRFT on page Collect data to measure the ratio of correctto incorrect Use brainstorming to identify bottlenecksand inefficiencies that are affectingdelivery. Ask staff to come up with solutions, not just Explain to staff the effect on the bottomline of bottlenecks and Test new ways of working. Refine them with feedback. Formalise them in company goal is 100% on-time delivery of thecorrect goods or services. Businesses need toachieve this in a cost-effective way, withoutresorting to expensive special deliveries orovertime payments. Neither should you incurincreased costs for stock, scrap or reworkingto meet a deadline.

9 If you do end up withextra costs, it shows you are not in control ofyour DELIVERY SCHEDULEACHIEVEMENTIn one week, a company makes 100deliveries. Of those deliveries, five are lateand three are of incorrect measure how well you re delivering whatthe customer needs, you need to work outthe ratio of correct to incorrect deliveries. See the working example below. Incorrect deliveries include late and earlydeliveries. Incorrect deliveries include deliveries ofthe wrong quantity (too many, too few,and parts that are not right for the job). If a delivery is both not on time and incorrect quantity , count it only you ve measured your performance ,you need to look at ways of improving it. Step2100-(5+3)100x100 =92%DELIVERY SCHEDULE ACHIEVEMENT=Delivery ScheduleAchievementDelivery Schedule Achievement looks at how well asupplier delivers what the customer needs, when theyneed it.

10 07 Working example:ChecklistMEASURE Get staff to record cycle times to provide abenchmark for improvement. Use a camcorder to capture the way staffcurrently do Watch the video to spot wasteful actions. Use brainstorming techniques to question the traditional way of doing things and identify new ways of working to reduce Test new ways of working build a mock-up of a production cell. Pilot new practices with one team, andmake modifications according to Roll out new ways of working across the factory. Set targets for speeding up cycle times,and make staff responsible for hittingtargets. 0908To measure it, you need to take the numberof good units and divide it by the totalnumber of direct operator hours (directoperators are staff who are vital to theproduction process).