Metrics that Matter Uncovering KPIs that Justify Operational

Metrics that Matter: Uncovering KPIs that Justify Operational Improvements Charlie Gifford Director, Lean Production Management

Metrics Matter: How Mfg Operations Influence Business You can’t improve what you can’t measure. You can’t measure what you can’t see. - Dr. W. Edwards Deming Metrics that Matter Page 2

Metrics that Matter Topics § § § Study Background Metrics Matter to Performance Fast, Effective Metrics Manufacturing Enterprise Solutions Use Guide to Metrics Framework Success Metrics that Matter Page 3

MESA Metrics that Matter Study Sponsors Lead Sponsors Supporting Sponsor Metrics that Matter Page 4

Industry Council MESA Members Guided Project • Scott Daugherty, Plant Manager, Cormetech Inc. • John Plassenthal, Project Manager, Strategic Integration, Enterprise Applications IT, International Truck and Engine • John Moore, Quality Program Manager, KLA Tencor • Neil Crew, Group IT Director, Princes Limited • Brian Leinbach, MES Deployment Team Lead, Wyeth Pharmaceuticals Metrics that Matter Page 5

Response Demographics • On-line: 135 different manufacturers – Representing 20 industries – Range of Products Counts & Mix in plants – Nearly evenly divided by size: over $2 B, $500 M-$2 B, under $500 M • Telephone: 16 “Industry Leaders” Metrics that Matter Page 6

Three Major Respondent Groups by Role Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 8

Metrics that Matter Topics § § § Study Background Metrics Matter to Performance Fast, Effective Metrics Manufacturing Enterprise Solutions Use Guide to Metrics Framework Success Metrics that Matter Page 9

Metrics Justify Improvement MES Projects • Industry struggles with the financial hurdles • Disconnect between operations, IT and finance • Bridging gap justifies projects Metrics that Matter Page 10

Common Business & Financial Metrics • • Net Operating Profit (78%) EBITDA (71%) Labor cost per unit (68%) Customer Fill Rate / On-time Delivery (64%) ROA / RONA (62%) Economic Value / Economic Profit (60%) Market Share (54%) Top Productivity Metrics • Revenue per employee • Revenue per square foot • Cash-to-cash cycle time Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 11

Business Movers: Operations Improvement to Financial Metrics Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 12

Business Movers Improved Operations Areas Also Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 13

Some Operations KPIs Are Common Across Segments Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 14

Which Operations KPIs Matter Varies by Industry Type Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 15

Metrics that Matter Topics § § § Study Background Metrics Matter to Performance Fast, Effective Metrics Manufacturing Enterprise Solutions Use Guide to Metrics Framework Success Metrics that Matter Page 16

Business Movers: More Effective Links Between Business & Ops Metrics Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 17

KPI Data Collection: Core to Link Operations KPIs Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 18

24 Hours or Faster Feedback to Operators So They Can Take Action Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 19

Latency between Business Metrics and Operations that Cause Them Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 20

Metrics that Matter Topics § § § Study Background Metrics Matter to Performance Fast, Effective Metrics Manufacturing Enterprise Solutions Use Guide to Metrics Framework Success Metrics that Matter Page 21

Most Common Applications in Investment Plans for Next 12 Months Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 22

MES, ERP, Stand Alone, Custom for Common MES Functions Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 23

Gaining Benefits from Manufacturing Software Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 24

Those with MES & Dashboards Perform Better Source: MESA Metrics that Matter: Uncovering KPIs that Justify Operational Improvements © 2006 MESA International & Industry Directions Inc. Metrics that Matter Page 25

Metrics that Matter Topics § § § Study Background Metrics Matter to Performance Fast, Effective Metrics Manufacturing Enterprise Solutions Use Guide to Metrics Framework Success Metrics that Matter Page 26

Graphical Representation of Metrics Framework Corporate Strategy: Increase Brand Margin & Value Net margin per brand Financial Metrics Operational Metrics # of Profitable Brand Extensions Lower Production Costs Reduce Stock-outs Plant Metrics Changeover Speed NPI Rampup Time Upside Production Flexibility Source: Metrics that Matter Guidebook & Framework © 2006 MESA International Planned vs. Emergency Maintenance First Pass Yield Metrics that Matter Page 28 OEE Energy Consumption Per Unit

[Presenter] Title Company Metrics that Matter Page 29