How to measure the performance of the Lean efforts? Is there one number like ROI to tell the organization whether the Lean efforts are successful. After all ROI is the single measure which is often talked about everywhere. Managers always keep looking for such measures to check the performance of the Lean efforts.
A successful Lean implementation always results in various operational and financial gains.
1. Operational improvements include higher quality and better productivity as well as lower nonproductive capacity and through put time. Ultimately becoming On Time In Full Error Free (OTIFEF)
2. Some financial improvements include increased cash flow (realized from improved material & information flow) lower inventory levels, and lower costs.
As a company begins its improvement journey, the questions about what to measure and how to measure it become paramount.
The 1st W – WHY?
“…we don’t know until we measure We don’t measure what we don’t value We don’t value what we don’t measure” Mike Harry, co-founder of Six Sigma at Motorola.
The KAIZEN™ principles says “Speak with Data” and to speak with data, one needs to go to the gemba (real place where value is added), gather data using all five senses, analyze data, make decisions with data, take actions based on data, and check results.
The 7 guiding principles for other 3 Ws
1. CUSTOMER oriented – NOT INTERNALLY oriented
2. PROCESS (and results) – NOT RESULTS only
3. TEAM performance - NOT INDIVIDUAL performance
4. IMPROVEMENT oriented – NOT REPORTING oriented
5. CURRENT – NOT HISTORICAL
6. VISUAL – NOT HIDDEN
7. At the gemba – NOT with the BOSS
The 2nd W – WHAT to measure?
1. CUSTOMER (internal or external) needs
2. PROCESS KPIs & Result KPIs
• TEAM level – Cells; Workstations
• Value Stream Level
• Unit Level
The 3rd W – WHEN to measure?
Since Measurement is C of S-D-C-A:
• It’s objective is to enable timely & effective A of S-D-C-A.
• It must trigger timely corrective action to restore to S
FREQUENCY of Measurement, therefore, is a function of what constitutes ‘timeliness’:
‘Critical’ measurements need to happen all the time, abnormality (e.g. fire) must trigger alarm/ stoppage autonomously & instantaneously. These kind should normally be subject to Poka-Yoke.
Others follow ‘high frequency’. These frequencies can be as low as equal to ‘takt time’, or a reasonable multiple of ‘takt time’. Illustrations follow.
Frequency of performance measurements
The measures have to be proactive hence the frequency must be determined by:
Without this frequency any measure will become historical.
Cell performance measures
Value stream performance measures – starter set examples
The 4th W – WHO should measure (rather record)?
• Measurement is for the purposes of ‘control’.
• Control happens through ‘feedback’ & comparison against standard.
• The best ‘control’ is ‘self control’.
Using the above logic:
> Recording & posting of ‘actual’ performance against ‘expected’/ ‘standard’ should be done by the person accountable for that process (Team Leader)
> The first shot at ‘problem solving’ is, therefore, assigned to the team performing the process
Measurement in itself is not a control. Hence appropriate controls (automated or otherwise) need to be devised and used to ensure that the “action” is taken on the “proactive measurement”
What is wrong with traditional measurements?
1. They motivate non Kaizen® behavior “Such as building large batches and increasing inventory which ruins flow.”
2. The Measurements come too late to be useful “In most companies monthly reports are made and much time is spent explaining variances.” In some cases reports giving daily information are
available but they do little to support the company’s KAIZEN™ goals.
3. They Focus primarily on Financial information “Such as efficiency of people, machine utilization, manpower utilization, overhead absorption etc.
4. The Measurements waste a lot of time gathering data “Detailed information is collected – manpower utilization per job, machine time per job, materials issued etc.” As we move to Lean manufacturing the burden of data collection becomes worse. Smaller batches lead to more work orders, more tracking, more manpower reporting, more machine time reporting etc. Tracking all this through ERP etc. is just automating waste.
Change thinking > Change environment > Change habits > Change culture
Mr. Vinod Grover, Founding Partner & Director, Kaizen Institute India