World Class Manufacturing Performance Measurements

1 Buker, Educationand Consulting 800-654-7990email: Class Manufacturing Performance Measurements to World Class of World Class Class Manufacturing Performance Measurements6 Quality7 Cost9 Flexibility11 Reliability16 Innovation18 World Class Performance History of ContentsVery few industries are unaffected by global higher levels of competitiveness it follows that theconsumer will ultimately decide upon the products which meettheir needs in the areas of product features, dependability,availability and overall value. No business can afford to standstill. If a company is successful today it can be certain there issomeone who is preparing to take all or part of the marketplace inthe today s business environment it is no longer good enough tobe better than the competition down the street or in the localmarketplace. Each company must strive to meet and beat thebest from anywhere in the World .

2 A business enterprise can nolonger think that failure to make it in World markets will notaffect business in local markets. The very opportunity tocompete in World markets carries with it the explicit threat thatthe same opposition experienced overseas can indeed knock thecompany out of its local response to this challenge of global competition is throughthe ideal of World Class Manufacturing . World ClassManufacturing is the term used to describe the very bestmanufacturers in the World . These World Class companiesrecognize the importance of Manufacturing as a strategic plays a fundamental role in developing andsustaining customer satisfaction through the elements of quality,cost flexibility, reliability and Class Manufacturing is being worked on by manycompanies today under many names. Some of the namesinclude: Just-In-Time (JIT) or Lean Manufacturing , TotalEmployee Involvement (TEI), Value-Added Manufacturing (VAM), Continuous Improvement (CI), Activity BasedManagement (ABM), Total Quality (TQ) and EnterpriseResource Planning (ERP).

3 Each is an improvement vehiclewhich, when utilized properly, can yield significantimprovements to the the past several years World Class Manufacturing has been thesubject of several books and executive seminars which havebegun to spring up in an attempt to pull together the bestpractices and experiences into a cohesive toWorld Class ManufacturingBECOMING AWORLD CLASSCOMPANY MEANSBEING THEPREFERRED SUPPLIERIN World MARKETS;THE CAPITAL MAGNET IN FINANCIALMARKETS;THE SOUGHT-AFTERPLACE OF EMPLOYMENT;AND THE BUSINESS OFCHOICE BY THE 2001 and beyond World Class Manufacturing is the descriptorof the emerging globally competitive term World Class Manufacturing is used to describe thehighest level of Manufacturing Performance . Some of theconcepts of World Class Manufacturing go all the way back toHenry Ford s River Rouge plant in 1914.

4 Achieving World ClassManufacturing comes only when the improvement effort isintegrated across all functions in the company. The real strengthfor a manufacturer lies in its ability to add value in itsmanufacturing is important to note that all types of businesses banks,hospitals, insurance companies and distribution companies areutilizing World Class principles. What business is not working toimprove flexibility, responsiveness, timeliness, exactness,precision and repeatability to delight the customer? Manufacturing companies today are where the premier examplesof improved quality, lead time reduction and shorter productintroduction cycles can be Class Manufacturing benefits the major stakeholders inthe business management, employees, shareholders and thecommunity. Management is in control of a continuouslyimproving business; employees develop their skills.

5 Knowledgeand productive abilities; shareholders receive a higher thannormal rate of return on their investment; and the communitybenefits by having a business entity that creates jobs andproduces product with an absolute minimum of the World Class manufacturer, Manufacturing plays afundamental role in developing and sustaining customersatisfaction through the elements of quality, cost flexibility,reliability and characteristics of these World Class manufacturers are:1. An ongoing company-wide education and traininginitiative for human resource development to alloweveryone to actively participate in the importance of education and training for allemployees cannot be over-emphasized. Studies show thatWorld Class Manufacturers provide a minimum of forty(40) hours of education and training per employee on anannualized basis. In today s business environment the onlylong-term sustainable competitive advantage isorganizational Relentless pursuit of continuous improvement in allbusiness management focus is on establishing operatingperformance Measurements that drive the behaviorsconsistent with the goal of continuous improvement inboth process and product.

6 Measurements in place focuson rates of A dedication to developing a competitive advantage basedupon superior product quality and World Class company creates a level of customersatisfaction through being not only "easy to do businesswith, but by exceeding customer expectations. The term"customer delight" is an often used expression whenprocuring product or service from a World Utilization of an integrated business system that linkspeople and business functions actively pursue a process of factoryand business simplification resulting in a systemsintegrative ofWorld Class ManufacturingWorld Class Manufacturing gives a company the lowestcosts, the fastest time to market, the best customer serviceand satisfaction, the highest quality, the shortest productlead time, the highest return on investment and the mostproductive work force.

7 The results companies areachieving from a World Class Manufacturing initiative are:Lead time 50-75 Percent Reduction - A lead time reduction of 50-75 percent applies not only tothe Manufacturing cycle time but also from order entry toproduct shipment. To accomplish significant reductions incycle or lead time, the focus is on elimination of cost-added activities. Cost-added activities would includeinspection of material and/or information, rework ofmaterial, storage of material and subsequent issuing ofproduction material, and moving material from onecontainer to another. Our studies show the typicalmanufacturer has a 70 percent ratio of cost-addedcompared to 30 percent value added activities. The WorldClass Manufacturer has a ratio of 70 percent work to 30percent Costs 45-55 Percent Reduction -The reduction in the cost of quality by 45-55 percent isaccomplished through a reduction in appraisal, internal andexternal failure costs.

8 Elimination of inspection ofincoming material, in-process material, sorting finishedproduct and fool-proofing processes that eliminate reworkcontribute to a reduction in 40-60 Percent Reduction The reduction in inventory may include not only in-processmaterial but raw material and finished goods. Reductionsare attributable to collapsing the throughput time in thetotal business process, significantly improved quality andimproved flexibility to respond to customer Space 40-60 Percent Reduction A 40-60 percent reduction in floor space pertains to thedistance product travels during the Manufacturing preferred method of Manufacturing becomes one of afocus on flow and throughput, using concepts such ascellular Manufacturing , group technology and continuous4 World Class Manufacturing ResultsWorld Class Business100 90 80 70 60 50 40 30 20 10 0 PERCENT REDUCTION30%-50%40% -60%20% - 40%5% -20%40% -60%45% -55%50% -75%Material CostManufacturing CostsNew Product Development Lead TimeFloor SpaceRM & WIP InventoryQuality CostsLead TimeCost Added VS.

9 Value AddedCost Added = WasteValue Added = 30%Cost Added = 70%FundamentalPrinciple:flow Manufacturing . This method replaces the more traditionalapproach to manufacture by department where the focus is onmaximizing individual department Product Development Lead Time 30-50 PercentReduction With a business environment characterized by shorter productlife cycles a competitive advantage is achieved through time tomarket. Reducing new product development lead time enablesmore frequent product introduction and roll our of productperforming to a slot in Costs 20-40 Percent Reduction -The reduction in Manufacturing costs results from a managementfocus on process improvement throughout the business. Processimprovements are achieved through elimination of non-value-added activities (see lead time reduction) driving factory andbusiness simplification.

10 Reduction in Manufacturing costs are aconfirmation of quality, improvements in cycle time reduction,reduced inventory levels and space utilized to Costs 5-20 Percent Reduction - Material costs are reduced not by focusing on price, but on totalcosts. Approximately 40 percent of total cost of purchasingmaterial from the supplier base is in non-price areas. Examplesof non-price areas are inspection of incoming material, storage ofmaterial, rework of material, and excessive material handlingbefore performing value-added World Class Manufacturing results in the businessbecoming:(1) The Preferred Supplier in World Markets(2) The Capital Magnet in World Financial Markets(3) The Sought After Place of Employment(4) The Business of Choice by the Community5In World Class Manufacturing the focus is on continuousimprovement. Measurements in place should therefore activateimprovements.