Benchmarking Manufacturing Performance

 Sustaining Edge Solutions, Inc. Newsletter

Performance Improvement Solutions for Your Business                              March 2013

 


This Month
* Benchmarking Manufacturing Performance
* Fraudulent or Counterfeit Parts
* Instruction or Quick Reference?
* Driven By Metrics
* Training Courses

 

Events… 
Aerospace, Defense and Manufacturing Expo March 14, 2013 Phoenix, AZ. We are a Sponsor, Presenter and Exhibitor of this Conference. See you there!

 

 

 
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Our newsletters provide information on business management systems.  These systems include ISO 9001 QMS, AS9100 Aviation, Space and Defense, ISO/TS 16949 Automotive, ISO 27001 Information Security, ISO 13485 Medical Devices, ISO 14001 Environmental, and others.  Subjects include performance improvement methods such as Six Sigma, Lean Enterprise, and other topics of interest to our readers.

If you have any questions regarding the content or have a subject of interest for a future newsletter, please let us know.  

 

Benchmarking Manufacturing Performance        

According to a recent study by the American Productivity & Quality Center (APQC) an international resource for benchmarking and best practices a wide gap exists within American manufacturing companies and their performance effectiveness. Widespread outsourcing of production activities has put tremendous pressure on manufacturing managers to be cost competitive and offer unique customer value. This pressure has intensified the need to produce quality products that are delivered on time, at a competitive price, and with excellent customer service.

 

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.

Fraudulent or Counterfeit Parts     

  

Two aerospace standards have been published on fraudulent or counterfeit parts: AS5553:2013 (Revision A) for organizations that procure and/or use electronic parts and AS6081:2012 for distributors of electronic parts.

AS5553A:2013, Fraudulent/Counterfeit Electronic Parts; Avoidance, Detection, Mitigation, and Disposition

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

 AS6081 standardizes practices to:

  • Identify reliable sources to procure parts
  • Assess and mitigate risk of distributing fraudulent/counterfeit parts
  • Control suspect or confirmed fraudulent/counterfeit parts
  • Report suspect and confirmed fraudulent/counterfeit parts to other potential users and the “authority having jurisdiction” 

 AS5553A:2013 and AS6081:2012 can be ordered at the SAE website.

 

Instruction or Quick Reference?       

  

 A “cheat sheet” is a concise set of notes used for quick reference. In the academic world, cheat sheets are so named because they may be used by students without the instructor’s knowledge to cheat on a test. 

In the business world, so called “cheat sheets or reference document” are popular in any setting where a quick reference is useful. New employees often make notes on how to perform their job, especially if written instructions aren’t available, supplied instructions are incomplete or complex, or the job training was inadequate. These personal job notes may be also referred to as cheat sheets.

On the surface, use of cheat sheets would seem to be helpful and may even be encouraged. However, these job notes may not accurately describe the tasks, may be in conflict with written instructions, or be unapproved by management. ISO 9001:2008, clause 4.2.3 states that “Documents required by the quality management system shall be controlled.” So, if cheat sheets are needed by employees to carry out their activities, these cheat sheets would be viewed as documents that must be controlled.

 

To control a document means it must be approved prior to use, updated as necessary and re-approved, and identified with the current revision status. Cheat sheets become authorized documents if they are controlled. If not, auditors will write them up as nonconformities. 

 

Employees do not like their cheat sheets being called nonconformities, especially if the corrective action is to just discard the cheat sheets. The existence of cheat sheets may indicate they are needed, so simply removing them might be a mistake.

 

Instead, find out why some employees need the cheat sheets/reference document and take the appropriate action, e.g., improve training, provide mentoring, add the cheat sheets as controlled documents, or include the reference information in existing documents.  

 

Audits correctly spot the use of these reference items. Make sure your response supports the employees by providing alternative support.  

 

Driven by Metrics     

Performance metrics are a vital part of managing an organization. Many organizations have a tendency to select metrics by copying what competitor’s measure, what is read in the business press and what benchmarked firms are using.

The best organizational metrics keep the focus on its strategic direction, not the direction in which others are going. 

 

The types of metrics and the right mix of metrics drives effective outcomes. For example, some metrics should focus on customer needs (externally focused, effectiveness metrics) and some on organizational needs (internally focused, efficiency metrics) so the organization can effectively balance the management of resources used to achieve the market results. An organization with high customer satisfaction and costs that create negative profitability is not going to be a sustainable venture.   

 

Some metrics should be able to evaluate results (outcome or lagging metrics), while others should allow proactive management of the vital factors (process or leading metrics) that create those outcomes. For example, on-time delivery (an outcome) might be significantly impacted by equipment reliability (a leading indicator for delivery performance). However, equipment reliability is an outcome measure for the maintenance management process. As much as possible, metrics should be biased toward business drivers, such as process or leading indicators, instead of outcomes.

 

Once the desired metrics have been identified, the real work begins. Decisions must be made regarding:

  • Who owns the metric?
  • Where will the data be acquired and how often?
  • How might the raw data be manipulated (normalized) to allow more equivalent comparisons over time?
  • How often should the metrics be reported and analyzed for decision making?

Although it might sound simple, creating operational definitions is an important component of metric details. What is meant by the terms as expressed in mathematical terms (for example, numerator, and denominator and time boundaries)? A company might ask, “What is meant by on-time delivery?” When it is picked up by the carrier or when it arrives at the target location?  Clear measurement and accurate definitions are important to an organizations success.    

 

Training Courses

To see the course description, schedule, and on-line registration click on the course title below. We deliver onsite training for all these courses and customized training to fit your specific needs.  We offer group discounts.  

 

View all our Courses

View Our Web Based E-Training Courses   

ISO 9001 Quality Management

Understanding and Implementing ISO9001:2008

ISO 9001:2008 Process Based Internal Auditor 

Documenting Your Management System

AS9100 Aviation, Space and Defense

Understanding and Implementing AS9100C (9110 &9120) Aviation, Space and Defense

AS9100C:2009 Process Based Internal Auditor

Documenting Your Management System 

ISO/TS 16949 Automotive

Understanding and Implementing ISO/TS16949:2009 Automotive

ISO/TS16949:2009 Process Based Internal Auditor
Documenting Your Management System 

ISO 14001 Environmental

Understanding and Implementing ISO14001:2004 Environmental
ISO14001:2004 Process Based Internal Auditor

Lean Enterprise and CI 

5S Five Pillars of a Lean Workplace Organization
Continuous Process Improvement
Lean Six Sigma
8 Disciplines (8D) of Problem Solving

ISO 13485 Medical Devices

Understanding and Implementing ISO 13485:2003 Medical Devices
ISO 13485 Process Based Internal Auditor 

ISO 27001 Information Security

Understanding and Implementing ISO 27001:2005 Information Security
ISO 27001 Process Based Internal Auditor 

All courses can be delivered at your company. Don’t see a course, location, or date that fits your needs?

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