The study shows that benchmarking your organization’s manufacturing performance allows you to identify best practices and compare how well your organization is performing in a variety of functional areas.  

The following is a representation of what the study found comparing key performance indicators of cost effectiveness, process efficiency, and cycle time.  

Make it for less, but don’t forget the customer.

Total cost to manufacture per $1,000 in Revenue: Top Performers ($222), Median Performers ($442), and Bottom Performers ($662). 

The amount spent by organizations to manufacture products varies widely. The $430 difference between top and bottom performers in manufacturing cost per $1,000 in revenue represents a potential cost savings of $2.15 billion for an organization with $5 billion in annual revenue. A lower manufacturing cost is desirable for obvious reasons. However, using cost alone as the basis for decision making can have unintended consequences on quality, cycle time, and other strategic concerns. When selecting lower-cost options-including outsourcing-consider how each will ultimately affect customer satisfaction. 

Improvement Steps

Organizations can take several concrete steps to help contain the cost to manufacture. Preventative maintenance programs protect investments in equipment, thereby reducing the cost of delays resulting from unscheduled downtime and/or quality slippage. Team members and management can create realistic road maps to cost and quality improvements (think Lean systems and COPQ initiatives). Lastly, motivated employees are more likely to identify cost-cutting, quality-improving opportunities, so take time to develop your employee engagement and training program.

Engaged Employees Are Productive Employees

Value of plant shipments per employee: Top Performers ($453,348), Median Performers ($283,000), and Bottom Performers ($122,189).

In manufacturing, cost alone is not sufficient for evaluating performance. To understand the efficiency of manufacturing processes, a helpful measure is the value of plant shipments per employee. Top performers ship more than $300,000 more product per employee than bottom performers. 

Improvement Steps

It is often difficult to motivate employees to contribute ideas and energy to make the factory more productive. Therefore, manufacturing managers should look for new approaches to motivate people and increase employee engagement. Communicating customer expectations and market challenges to all employees prepares them for optimal performance (think performance measurement and visual management systems).

Simpler, more transparent systems that automatically collect and transmit transaction data can speed up performance measurement and the flow of information to internal and external stakeholders. This can lead to faster implementation of performance improvement measures.

Get rid of the unplanned, undesirable, and unproductive. 

Unplanned Machine Downtime as a Percentage of Scheduled Run Time: Top Performers (2%), Median Performers (4%), and Bottom Performers (6%).  

A multimillion dollar investment in new facilities and equipment can create enormous pressure to get it right in terms of cost, deadlines, and return on investment (ROI). Unplanned downtime can drastically reduce ROI by causing disruptions in quality, cost, and cycle time. The gap between top and bottom performers for this metric is 4 percent of scheduled run time. That unexpected downtime can wreak serious havoc on an organization’s production schedule.

Improvement Steps

Once an organization determines the frequency of such downtime, it can begin tracing and addressing the source or sources of the interruptions (think P.M., Improved Production Resource Planning and Execution). Preventative maintenance programs protect investments in equipment, thereby reducing the cost of delays resulting from unscheduled downtime and/or quality slippage.

If you want to be quick, be flexible.

Manufacturing Cycle Time in Hours:  Top Performers (8 hours), Median Performers (24 hours), and Bottom Performers (96 hours).

Manufacturing cycle times vary dramatically. Bottom performers take 88 more hours to produce products than top performers take-a difference of 11 working days.

Improvement Steps

Thanks to lean manufacturing and other process improvement initiatives, many factories have undergone radical transformations in recent years. Long production lines and stacks of work-in-process inventory have been replaced by flexible work cells that pull materials from suppliers and customize products based on individual orders (think value stream mapping, removing process waste).  Such efforts have resulted in dramatically reduced lot sizes and manufacturing cycle times. Customizable processes can reduce customer order lead times and yield better returns on invested capital.

To accomplish all of this, manufacturing leaders must establish production schedules, optimum work flows, effective maintenance procedures, and continuous improvement programs that will keep the organization moving forward.

Looking for more information on this study or methods to improve your organizations effectiveness, process efficiency, and cycle time performance?  Contact us.

AS5553 is for use by organizations that procure and/or integrate electronic parts and/or assemblies containing such items. The requirements of this standard are generic and intended to be applied/flowed down through the supply chain to all organizations that procure electronic parts and/or assemblies, regardless of type, size and product provided. The mitigation of fraudulent/counterfeit Electrical, Electronic, and Electromechanical (EEE) parts in this standard is risk-based and will vary depending on the desired performance or reliability of the equipment/hardware.

AS6081:2012, Fraudulent/Counterfeit Electronic Parts: Avoidance, Detection, Mitigation, and Disposition – Distributors