Manufacturing metrics

PAGE

TABLE OF

CONTENTS

2013-2014

MANUFACTURING METRICS THAT REALLY MATTER

© 2014 MESA International and LNS Research

2013-2014

MANUFACTURING METRICS THAT REALLY MATTER TABLE OF CONTENTS Section 1: Research Objectives & Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section 2: Improvements in Financial & Operational Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 3: Key Relationships Between Operational & Financial Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4: Key Relationships Between Metrics and Software Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 5: Role-Based Performance Dashboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 6: Anticipated Impacts of Emerging Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 7: Best Practices for Metrics Program Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36 Section 8: Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39 Section 9: Summary & Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

lnsresearch.com

mesa.org

SECTION 1

Research Objectives & Overview

Research Objectives & Overview PAGE

4

The manufacturing industries are experiencing a bit of a renaissance these days. As shifts continue to occur in the global economic landscape

MANUFACTURING METRICS THAT REALLY MATTER

around labor and energy costs, supply and demand preferences, regulatory considerations, and new applications of automation and information tech-

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what you do not measure,” and “what gets measured gets done.” Therefore,

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nologies, we are seeing a resurgence of manufacturing excellence across

FINDING ANSWERS & INSIGHTS •

•

both established and emerging regions of the world.

Core to new levels of excellence is a keen focus on continuous improvement programs that go after business and manufacturing process improvements – supported by the collaborative efforts of people and smart

•

How do we connect operational metrics to financial metrics?

•

How can technology help support and impact metrics programs and performance?

• Which

effective metrics approaches continue to be key to manufacturing excellence. was to understand the business impacts of metric programs and Key Performance Indicators (KPIs) that are being utilized across a wide range of manufacturing industries. With so many different metrics that are possible, it is important for organizations to choose the right metrics approaches that align to their business and manufacturing processes to help drive improvements in their organizations.

How does my company’s performance improvements compare to industry?

technologies. Also, these sayings are absolutely true, “you cannot improve

The focus of this MESA Metrics research, conducted by LNS Research,

Which metrics are being used to best understand manufacturing performance and opportunity areas for improvement?

•

metrics are being utilized as part of role-based dashboards?

How frequently should these metrics be measured and utilized?

• What

are some of the best practices I can learn from market leaders?

Research Methodology PAGE

MANUFACTURING METRICS THAT REALLY MATTER

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This 2013-2014 MESA Metrics research survey was conducted in partnership between MESA International and LNS Research from October

KEY OBSERVATION:

2013 through February 2014. MESA International is a global not-for-profit

66% of survey respondents were knowledgeable about financial

industry association of manufacturers, producers, industry leaders, and

and/or operational metrics improvements in their organizations and

solution providers. LNS Research is a technology research firm focused on

able to provide specific metric performance data.

operational excellence in the industrial space.

A comprehensive online survey was created and conducted by LNS Research with the assistance of the MESA Metrics Working Group, along with

21%

an industry advisory team with members from Aditya Birla, Volvo, and Whirlpool, and also with inputs from the following leading companies that were sponsors of the 2013-2014 MESA Metrics research project: Epicor, InfinityQS,

2013-2014 Metrics That Matter Survey - Industries COLOR BY INDUSTRY

45%

13%

Discrete Manufacturing Batch Manufacturing

Plex Systems, Rockwell Automation and Schneider Electric (Invensys).

Process Manufacturing

21%

Data analysis and research report creation was done by LNS Research

Other

and reviewed by the MESA Metrics Working Group. Valuable insights came from this team approach, given that this is the fifth generation of MESA Metrics That Matter research that has been conducted every two years. The

16%

goal was to collectively understand and present new results in context to where the industry has come from, based on previous survey results.

As part of the data analysis, a number of market leading performers in

COLOR BY COMPANY REVENUE

51% 33%

financial and operational metrics were identified, and the research team is

2013-2014 Metrics That Matter Survey - Company Sizes

able to share some of their specific case study information. As the graphs

Small: $0 - $250MM Medium: $250MM - $1BB Large: $1BB+

indicate, 214 survey respondents from a mix of manufacturing industries, company sizes, and geographies contributed to this year’s research. Typical

10%

titles of respondents were plant managers, operations managers, manufacturing IT leaders, engineering and quality leaders, and continuous improvement team leaders.

12% 53%

2013-2014 Metrics That Matter Survey - Geographies COLOR BY HQ LOCATION North America

25%

Europe Rest of the World Asia / Pacific

Scope of Metrics Information Provided PAGE

6

Survey respondents were asked about the scope of the annual improvement information they were providing. We can see that across all 28

MANUFACTURING METRICS THAT REALLY MATTER

metrics (Overall), that the largest percentage (42%) were providing Corporate/Company-Wide information. The next most popular level of informa-

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Financial metrics were only provided 19% of the time.

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tion that was provided was at the Business Unit and Plant levels – at 27% each. Production Line level information was typically provided – at 3%.

Scope of Overall Metrics

42%

Corporate Level Business Unit Level

27%

Plant Level

27%

Looking at the subset of Financial and Operational metric categories, there were some additional insights that can be uncovered from these responses. For Financial metrics, almost half (49%) of respondents indicat-

0%

ed that they were providing Corporate level information, and Plant level Operational metric inputs were dominated by Plant level (36%) and Corporate level (35%) information, followed by Business Unit level information, at 23%.

3%

Line Level

10%

20%

The data indicates that most Operational metrics programs are reviewing a combination of individual Plant level metrics rolling up to a Corporate

40%

50%

Scope of Financial Metrics

49%

Corporate Level

31%

Business Unit Level

KEY OBSERVATION:

30%

19%

Plant Level Line Level

view. Also, most Financial metrics programs are reviewing Corporate and

1% 0%

10%

20%

30%

40%

50%

40%

50%

Business Unit level metrics. Note that some Machine and Line level metrics are required in order to aggregate into Plant level metrics, as well as to

Scope of Operational Metrics

support detailed operator actions.

36%

Corporate Level

35%

Business Unit Level

23%

Plant Level

6%

Line Level 0%

10%

20%

30%

SECTION 2

Improvements in Financial & Operational Metrics

Improvements in Financial & Operational Metrics PAGE

financial and operational metrics were included in this year’s survey. All re-

KEY OBSERVATION:

spondents were also asked about their specific performance levels for three

Manufacturers continue to make great strides as this new survey shows that the overall average for those who provided metrics was consistently

ment Effectiveness (OEE), and % of successful New Product Introductions

10% or above for most metric categories.

(NPIs). It is important to note that these three metrics are multi-disciplinary

This level of annual performance improvement is unlikely to be occurring

in nature and not fully under the control of the manufacturing operation.

across the entirety of the manufacturing industries.

MANUFACTURING METRICS THAT REALLY MATTER

8

Based on the most utilized metrics from previous surveys, 28 different

critical metrics – % of On Time Complete Shipments (OTCS), Overall Equip-

The additional 25 metrics were grouped into the eight categories indicat-

Most of the respondents that took this survey are also engaged in continu-

ed by the dials in this figure, and respondents were asked for year-on-year

ous improvement activities for manufacturing excellence. In fact, 85% cur-

% performance improvements for each of the metrics within each category.

rently have formal process improvement programs in place, such as Lean,

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Only those who knew their performance improvements for the specific

Six Sigma, ISO 9000/9001, etc. Therefore, many of the learnings that this

categories were included and evaluated further.

report explores can be considered best industry practices.

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The dials indicate the average annual performance improvement for that category of metrics. The graph to the right also shows these same categories of metrics and which were most relied upon to manage operations.

Types of Manufacturing Metrics Relied on for Managing Operations

There were very impressive levels of improvements being made by respondents, and these results may provide some inspiration for others on

69%

Financial

what is achievable. In the previous Metrics That Matter survey, the analysis looked at companies that improved metrics by 10% or more versus all others.

Average Manufacturing Performance Improvements from 2012-2013

62%

Quality

53%

Efficiency

52%

Inventory

43%

Reponsiveness Maintenance

28%

Compliance

27% 15%

Innovation 0%

10%

20%

30%

40%

50%

60%

70%

80%

Improvements in Financial Metrics PAGE

MANUFACTURING METRICS THAT REALLY MATTER

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This section takes a closer look at what is behind these categories of average annual performance improvements, starting with the Financial metrics.

EBITDA is typically used as top-level indication of the current operational profitability of a business.

The graph shows the average improvements for each of 10 individual

. Revenue Per Employee – A measure of how much revenue is generated by

Financial/Business oriented metrics, and below is a brief description/defi-

a plant, business unit, or company, divided by the number of employees.

nition of each:

A financial measure of productivity.

. Total Cost Per Unit Excluding Materials – A measure of all potentially

. Cash To Cash Cycle Time – The duration between the purchase of a

controllable manufacturing costs that go into the production of a given

manufacturing plant or business unit’s inventory, and the collection of

manufactured unit, item, or volume.

payments/accounts receivable for the sale of products that utilize that

. Customer Fill Rate/On-Time Delivery/Perfect Order Percentage – This

inventory – typically measured in days.

metric is the percentage of times that customers receive the entirety of

. Return On Net Assets (RONA) – A measure of financial performance calcu-

their ordered manufactured goods, to the correct specifications, and

lated by dividing the net income from a manufacturing plant or business

delivered at the expected time. This metric is very often utilized by busi-

unit by the value of fixed assets and working capital deployed.

ness management as it is of top concern to customers and has a strong

. Average Unit Contribution Margin – This metric is calculated as a ratio of

correlation to overall financial performance. It is also known as On Time

the profit margin that is generated by a manufacturing plant or business

Complete Shipments (OTCS).

unit divided into a given unit or volume of production. . Energy Cost Per Unit – A measure of the cost of energy (electricity, steam,

KEY OBSERVATIONS:

oil, gas, etc.) required to produce a specific unit or volume of production.

The survey showed that the average OTCS was 87.6%.

The top performers achieved OTCS of 95% or better and this represented

Types of Manufacturing Metrics Relied on for Managing Operations

21% of the respondents. Top performers’ solutions are explored later in this eBook. . Net Profit Margin – Measures the financial profitability for all investors/ shareholders/debt holders, either before or after taxes, for a manufacturing plant or business unit.

13.1%

Total cost per unit - excluding materials Customer fill rate/On-time delivery/ Perfect Order

12.5%

Net profit margin

10.4%

Manufacturing cost as a % of revenue

10.2% 8.6%

. Manufacturing Cost as a Percentage of Revenue – A ratio of total manufac-

EBITDA

turing costs to the overall revenues produced by a manufacturing plant or

Revenue per employee

8.0%

Cash to cash cycle time

7.9%

business unit. . EBITDA - Stands for Earnings Before Interest, Taxes, Depreciation, and

Return on net assets (RONA)

Amortization. This is a calculation of a business unit or company’s earn-

Average unit contribution margin

ings prior to having any interest payments, tax, depreciation, and amor-

Energy cost per unit

tization subtracted for any final accounting of income and expenses.

6.0% 5.0% 3.9% 0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

Improvements in Operational Metrics – Inventory, Innovation, and Responsiveness PAGE

MANUFACTURING METRICS THAT REALLY MATTER

10

These graphs show the details behind average annual improvements for

Even though Engineering Change Order Cycle Time was the only metric

the Inventory, Innovation, and Responsiveness categories of Operational

surveyed for annual improvements in the Innovation category, the % of

metrics. Below is a brief description/definition of each:

successful NPIs is also a key measure of a manufacturing company’s ability to innovate.

. WIP Inventory/Turns – A commonly used ratio calculation to measure the efficient use of inventory materials. It is calculated by dividing the cost of goods sold by the average inventory used to produce those goods. This was the only metric used in the Inventory category.

KEY OBSERVATION: Based on the survey results, the average % of successful NPIs was 71.5%.

2012 to 2013 Average Improvements - Inventory Metric

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Therefore, introducing new, ever more complex products to market is an imperfect science. The top 7% performers achieved 90% or greater successful NPIs. Solutions used by these top performers will be explored later.

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15.0%

WIP INVENTORY TURNS

1 2 3 4 5 6 7 8 9 0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

. Manufacturing Cycle Time – Measures the speed or time taken for manufacturing to produce a given product from the time the order is released to production to finished goods.

16.0%

. Time to Make Changeovers – Measures the speed or time taken to switch a manufacturing line or plant from making one product over to making a different product.

. Engineering Change Order Cycle Time – A measure of how rapidly design changes or modifications to existing products can be implemented all the

2012 to 2013 Average Improvements - Responsiveness Metrics

way through documentation processes and volume production.

ENGINEERING CHANGE ORDER CYCLE TIME

REDUCING TIME TO MAKE CHANGEOVERS

7.8% 0.0%

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

10.7%

MANUFACTURING CYCLE TIME

2012 to 2013 Average Improvements - Innovation Metric

14.0%

16.0%

2.0%

4.0%

6.0%

8.0%

9.3% 10.0%

12.0%

14.0%

16.0%

Improvements in Operational Metrics – Efficiency and Quality PAGE

11

These graphs show the details behind average annual improvements for the Efficiency and Quality categories of Operational metrics. Below is

MANUFACTURING METRICS THAT REALLY MATTER

a brief description/definition of each:

The survey showed that the average OEE was 70.7.

. Production Output/Throughput – Measures how much product is being produced on a machine, line, unit, or plant over a specified period of time. . Production/Schedule Attainment – A measure of what percentage of time a target level of production is attained within a specified schedule of time. . Capacity Utilization – Indicates how much of the total manufacturing

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output capacity is being utilized at a given point in time.

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2012 to 2013 Average Improvements - Efficiency Metrics

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KEY OBSERVATIONS: The top performers achieved an OEE of 80 or better, representing 11% of the of the respondents. Solutions used by these top performers will be explored later. . Customer Rejects/Return Material Authorizations/Returns – A measure of how many times customers reject products or request returns of products based on receipt of a bad or out-of-specification product. . Supplier Quality Incoming – A measure of the percentage of good quality materials coming into the manufacturing process from a given supplier. . First Pass Yield – Indicates a percentage of products that are manufactured correctly and to specifications the first time through the manufacturing

INCREASED PRODUCTION / THROUGHPUT PRODUCTION / SCHEDULE ATTAINMENT INCREASED CAPACITY UTILIZATION 15.0%

15.5%

17.6%

process, without scrap or rework.

2012 to 2013 Average Improvements - Quality Metrics

17.3%

CUSTOMER REJECTS / RMA / RETURNS

16.1% 16.0%

16.5%

17.0%

17.5%

SUPPLIER QUALITY INCOMING

18.0%

In addition to these three efficiency oriented metrics, OEE is another

FIRST PASS YIELD

related and popular metric that contains multiple dimensions. . OEE – A multiplier of Availability x Performance x Quality, and can be used to indicate the overall effectiveness of a piece of production equipment or an entire production line.

15.0%

0.0%

2.0%

4.0%

6.0%

13.3% 12.9% 8.0%

10.0%

12.0%

14.0%

16.0%

Improvements in Operational Metrics – Maintenance and Compliance PAGE

MANUFACTURING METRICS THAT REALLY MATTER

12

These graphs show the details behind average annual improvements

. Reportable Environmental Incidents – A measure of the number of

for the Maintenance and Compliance categories of Operational metrics.

health and safety incidents that were recorded as occurring over a

Below is a brief description/definition of each:

specified period of time.

. Downtime in Proportion to Operating Time – This ratio of downtime to

. Non-Compliance Events – A measure of the number of times a plant or

operating time is a direct indicator of asset availability for production.

facility operated outside the guidelines of normal regulatory compliance rules over a specified period. These non-compliances need to be

. Planned Versus Emergency Maintenance Work Orders – This ratio metric is an indicator of how often scheduled maintenance takes

. Reportable Health and Safety Incidents – A measure of the number of

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resolutions.

place, versus more disruptive/un-planned maintenance.

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fully documented as to the specific non-compliance time, reasons, and

health and safety incidents that were either actual incidents or near

2012 to 2013 Average Improvements - Maintenance Metrics

DOWNTIME IN PROPORTION TO OPERATING TIME PLANNED VS. EMERGENCY MAINTENANCE WORK ORDERS 0.0%

2.0%

4.0%

6.0%

8.0%

15.8%

misses that were recorded as occurring over a specified period of time.

2012 to 2013 Average Improvements - Compliance Metrics

14.0% 10.0%

12.0%

14.0%

REPORTABLE ENVIRONMENTAL INCIDENTS 16.0%

NON-COMPLIANCE EVENTS

18.0%

REPORTABLE HEALTH & SAFETY INCIDENTS 15.5%

16.0%

16.5%

17.0%

19.9%

18.5% 17.1% 17.5%

18.0%

18.5%

19.0%

19.5%

20.0%

Impact of Changing Manufacturing Business Conditions PAGE

13

In order to further understand shifts in the manufacturing business landscape, a multiple choice question was asked that was consistent with

Changing Manufacturing Business Conditions - 2012 to 2013

MANUFACTURING METRICS THAT REALLY MATTER

previous Metrics That Matter surveys, “Please indicate if your business has undergone any of the following shifts over the past 18 months.� The graph shows the results by indicating the % of respondents that experienced specific business shifts.

As global and regional manufacturing goes through continual changes, the job of manufacturing businesses is more challenging than ever. There-

Increased the Number of products, SKUS, or variants

71%

Increased volatility of customer demand

66%

fore, there were some specific metric improvement correlations based on these changing business conditions.

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64%

Introduced more complex products

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KEY OBSERVATIONS: The number of product variants/SKUs has increased to 71% of respondents over the last survey, which was 62%. This indicates a greater level of challenges in getting new products to market along with the need for increased flexibility within manufacturing operations.

Those who improved the % of successful NPIs appear to also be doing a better job at OTCS, at an average annual improvement of 19.1% versus an overall annual OTCS improvement average of 12.5%. This makes sense, given that effective management of new product processes would carry forward into ongoing customer deliveries.

Those who introduced more complex products appeared to have a more difficult time managing Inventory turns, with an average annual improvement of only 4.1% versus an overall annual improvement average of 7.8%.

This also made sense, since carrying larger inventory buffers can make up for unplanned or unexpected activities that can be associated with complex products.

Customers demanding increased traceability documentation

54%

Shortened the time for new product introduction

45%

Increased the amount of work sent out as sub-contracting or out-sourcing

42%

Taken on new business as a subcontractor to others

41%

Created or moved a manufacturing facility

39%

Undertaken a merger, or acquired another company or facilities

35% 0%

10%

20%

30%

40%

50%

60%

70%

80%

SECTION 3

Key Relationships Between Operational and Financial Metrics

Key Relationships Between Operational and Financial Metrics PAGE

15

There should be no surprise that one of the key relationships that was uncovered in this year’s survey was positive correlations between average

Conversely, those who did not improve any of these same Efficiency metrics by 10% or more (17-19% of respondents) only had average annual Fi-

MANUFACTURING METRICS THAT REALLY MATTER

annual Operational metric improvements or Operational metric perfor-

(10% of Respondents for each) had average Financial improvements of 14%.

mance, and improvements in average annual Financial metrics. This has

KEY OBSERVATIONS:

had 24% annual improvements in Net Profit Margin % versus an average

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Average annual Financial improvements were 8.6%; however, top Opera-

of 10.4% overall.

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been true in every MESA Metrics Survey since 2006. It stands to reason

nancial improvements of 6%.

that the converse is also true. Those who had lower Operational metrics or

Those who increased Production Throughput/Output by 10% or more also

improvement percentages also had lower Financial metric improvements.

had 15% annual improvements in Cash to Cash Cycle Time versus an average of 7.9% overall.

Additionally, those who increased Capacity Utilization by 10% or more

tional metric performers did significantly better:

OEE

SUCCESSFUL NPIs

Those with OEE of 80 or better (11% of Respondents) had average Financial

Those with Successful NPIs of 90% or better (7% of respondents) had av-

improvements of 14%.

erage annual Financial improvements of 16%.

They also had 32% annual improvements in Customer Fill Rate/On Time Delivery/Perfect Order versus an average of 12.5% overall.

Additionally, they had 17% annual improvements in RONA versus an average of 6% overall.

Lastly, they also had 14% annual improvements in Average Unit Contribution Margin versus an average of 5% overall.

WIP/INVENTORY Those with annual Inventory WIP Improvements of 10% or better (7% of respondents) had average annual Financial improvements of 12%.

EFFICIENCY Those who had top annual improvements in Efficiency metrics such as Increased Production Throughput/Output by 10% or more, or Increased Capacity Utilization by 10% or more, or Improved Schedule Attainment by 10% or more

They also had 20% annual improvements in Revenue per Employee/Productivity versus an average of 8% overall.

More Relationships Between Operational and Financial Metrics PAGE

MANUFACTURING METRICS THAT REALLY MATTER

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RESPONSIVENESS Those who had top improvements in Responsiveness and improved Manufacturing Cycle Time by 10% or more (7% of respondents), had average Financial improvements of 14%.

Those who had top improvements in improved Manufacturing Cycle Time by 10% or more also had 22% annual improvements in Manufacturing Costs as a % of Revenue versus an average of 10.2% overall.

QUALITY

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Those who had top annual improvements in Quality metrics such as Improved First Pass Yield by 5% or more, or Increased Supplier Quality Incoming by 5% or more, or Reduced Customer Rejects by 5% or more (10-11% of respondents for each) had average Financial improvements of 14%.

Conversely, those who did not improve any of these same Quality metrics by 5% or more (21-22% of respondents) only had average annual Financial improvements of 6%.

Those who had top improvements in Supplier Quality Incoming of 5% or more also improved Total Cost Per Unit – Excluding Materials by 24% versus an average of 13.1% overall.

SECTION 4

Key Relationships Between Metrics and Software Use

Key Relationships Between Metrics and Software Use PAGE

18

One of the key relationships that was uncovered in this year’s survey

Manufacturing Software Applications Currently Implemented and Plans

was the correlations between average annual metric improvements and/or

MANUFACTURING METRICS THAT REALLY MATTER

market leading metric performance and the use of software technologies in support of these improvements.

17% ERP Software

9%

The graph shows the categories of manufacturing software that are

74%

either currently implemented, planned within one year, or not planned by survey respondents.

Reflecting on changes in adoption of these technologies since the last survey, there are some interesting trends that were uncovered.

30%

Planning, Scheduling & Dispatching software

17% 53% 31%

Quality Management software

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22% 47%

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KEY OBSERVATIONS: The most deployed applications by all respondents were Enterprise Resource Planning (ERP); Planning, Scheduling & Dispatching; Quality Man-

30%

Document Management software

23% 47%

agement; Document Management; Data Historians; Manufacturing Execution Systems (MES); and Asset Management Software.

In comparison to previous Metrics That Matter survey respondents, com-

41% Data Historian(s)

17% 42%

panies had more manufacturing software applications implemented. Key examples include ERP, which grew from 67% to 74% adopted, Data Historians, which grew from 39% to 42%, and MES, which grew from 35% to 40%.

There were many more, as well as much stronger (up to 2x) correlations

39% Manufacturing Execution System(s)

20% 40%

between the use of software technologies and improvements in Financial and Operational metrics in this year’s survey.

48%

Asset Management software

14% 38% 0%

10% Not Planned

20%

30%

40%

Planned within 1 year

50%

60%

70%

80%

Currently implemented

To put software use in perspective, it is important to note that 85% of PAGE

19

survey respondents also have process improvement programs in place

The next key correlation to discuss is average annual improvements in Net Profit Margin.

such as ISO 9000/9001, Lean Manufacturing, Six Sigma, Operational Ex-

MANUFACTURING METRICS THAT REALLY MATTER

cellence, etc. So software in and of itself is not magically creating these differences; however, software is being used to support, accelerate, and sustain process and metrics improvements.

One of the key correlations uncovered was exceptional annual performance improvements in making product cost reductions by companies

use ERP software was only 2% versus 10.4% for all respondents.

Average annual improvement in Net Profit Margin was 19.4% for users of a

gence (OI/EMI) or MES and software applications versus all respondents.

Comprehensive Suite of Manufacturing Operations Management (MOM) software versus 10.4% for all respondents.

ERP systems are clearly a fundamental tool of most manufacturers today.

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The average annual Net Profit Margin improvement for those who DID NOT

that use either Operational Intelligence/Enterprise Manufacturing Intelli-

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KEY OBSERVATIONS:

ERP systems are the most adopted software application for many good

KEY OBSERVATIONS: Average annual improvement in Total Cost Per Unit Excluding Materials was 24.1% for users of OI/EMI software, versus 13.1% for all respondents.

reasons. They enable consistent business and financial practices and typically contain the master data for customers and products alike. They also perform the overall manufacturing resource planning of what will be produced, when, and where.

Average annual improvement in Total Cost Per Unit Excluding Materials was 22.5% for users of MES software versus 13.1% for all respondents.

These relationships stand to reason. OI/EMI software specifically helps users to aggregate and contextualize data coming from multiple information sources or applications and uncover correlations between operational and financial performance. MES software enforces operational procedures and provides traceability of, among other things, all steps and procedures, labor, quality, and other in-process performance of sub-assemblies and completed products. These two software applications make for a powerful combination of tools for manufacturers who are looking to carefully monitor and improve product costs by allowing users to look across all of the steps and procedures in the manufacturing value chain that are under manufacturing’s control. Typically, material and component selection is in the control of engineering departments. That is why this metric excludes material costs.

When survey respondents referred to a Comprehensive Suite of MOM software, they were indicating a combination of real-time, in-process management software tools that included combinations of MES, OI/EMI, Quality Management, Document Management, Workflow, Asset Management, etc. Sometimes these capabilities are all available in a single, pre-integrated software package, and other times it takes a suite of real-time applications to cover all required functionality. It certainly stands to reason that companies that have a comprehensive set of real-time process management applications in place would have their processes and quality in control for greater profitability.

More Relationships Between Financial Metrics and Software Use PAGE

20

The next key set of financial correlations was related to average annual improvements to OTCS.

The percentage of use of these applications by this group is in line with data from all respondents; however, the role that these applications can play in

MANUFACTURING METRICS THAT REALLY MATTER

OTCS related initiatives will be explored further.

TABLE OF

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

It has been established that ERP is fundamental to managing and planning

KEY OBSERVATIONS:

production on behalf of customers. The use of Quality Management software

Average OTCS performance was 87.6%—with the top 21% of respondents

to ensure consistent in-process quality as well as the handling of non-confor-

having OTCS of 95% or better.

mances can also be key to ensuring customer deliveries are being met.

Average annual improvement in OTCS was 22.0% for users of MES software versus 12.5% for all respondents.

Planning, Scheduling & Dispatching software is often utilized at both the enterprise level and at the plant level of organizations to deal with the dynamics of supply and demand and ensure that the best possible plans are being put

Average annual improvement in OTCS was 19.1% for users of Product Life-

into action to meet customer deliveries. MES ensures production procedures

cycle Management (PLM) software versus 12.5% for all respondents.

happen according to those plans and Asset Management systems can help

Average annual improvement in OTCS was 20.4% for users of Quality Man-

ensure that equipment and other production assets are properly maintained

agement software versus 12.5% for all respondents. Conversely, the average

and available.

annual OTCS improvement for those who DID NOT use Quality Management

PLM systems have traditionally been used by engineering organizations to as-

software was only 7% versus 12.5% for all respondents.

sist with managing new product designs into production. However, more and

Those who use Quality Management software had an average OTCS of 91.0%, and those who DID NOT use Quality Management software only averaged 85.2%.

more, these systems are integrating with real-time plant workflows and bi-directional information from MES and Quality Management applications in order to speed time-to-market for engineering changes, while receiving direct feedback on production issues and quality in order to improve future designs.

Quality Management Software Use and Average % OTCS Applications Used by Companies with OTCS of 95% or Better

USING Quality Management software NOT USING Quality Management software

91.0%

75.0%

80.0%

85.0%

90.0%

95.0%

Quality Management

45.0%

Planning, Scheduling & Dispatching

45.0%

100%

The top manufacturing applications used by companies that had OTCS of 95% or better are shown in the graph. When looking at the top performers that had OTCS of 95% or better, ERP; Quality Management; Planning, Scheduling & Dispatching; MES; PLM; and Asset Management are the top applications used by this group.

68.0%

ERP

85.2%

41.0%

Document Management Asset Management

32.0%

MES

32.0% 0%

10%

20%

30%

40%

50%

60%

70%

80%

Key Relationships Between Operational Metrics and Software Use PAGE

21

The following are key relationships identified between Innovation and

MANUFACTURING METRICS THAT REALLY MATTER

Efficiency related Operational metrics.

The top manufacturing applications used by companies that had NPI success rates of 95% or better are shown in the graph below. ERP; Planning, Scheduling & Dispatching; and Document Management use was significantly higher than that of all survey respondents.

KEY OBSERVATIONS: Average % of Successful NPIs was 71.5%, while the top 7% of respondents

Going beyond ERP, it makes sense that effective use of the below set

had 90% or better.

manufacturing applications could also be contributing to the success-

Those who use ERP software had an average of 75.4% Successful NPIs, and those who DID NOT use ERP software only averaged 59.9%.

ful lifecycle of new product introductions, as these collectively support both the business planning and the manufacturing reality dimensions.

TABLE OF

CONTENTS

Those who use Quality Management software had an average OTCS of

SECTION

91.0%, and those who DID NOT use Quality Management software only

1 2 3 4 5 6 7 8 9

averaged 85.2%.

Applications Used by Companies with OTCS of 95% or Better

93%

ERP Planning, Scheduling & Dispatching

ERP Software Use and the Average % of Successful NPIs

60%

Document Management

75.4%

USING ERP software

67%

53%

Quality Management

59.9%

NOT USING ERP software 0%

10%

20%

30%

40%

50%

60%

70%

80%

Process Management / Workflow / EWI

47%

MES

47%

Comprehensive MOM suite

47% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

PAGE

MANUFACTURING METRICS THAT REALLY MATTER

22

KEY OBSERVATIONS: Average OEE was 70.7, while the top 11% of respondents had OEE of 80 or

The top manufacturing applications used by companies that had OEE of

better.

80 or better are shown in the graph below. The percentage of use of

Those who use Quality Management software had an average OEE of 73.5, and those who DID NOT use Quality Management software only averaged 67.7.

these applications by this group is in line with what the data showed for all respondents.

Since driving higher OEE requires a combination of ensuring production uptime and availability, along with ensuring consistent high quality, it

Quality Management Software Use and Average OEE

was no surprise to see that high OEE performers are using ERP and Planning, Scheduling & Dispatching on the planning and management side,

TABLE OF

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

USING Quality Management software

73.5

NOT USING Quality Management software

along with Quality Management, MES, and MOM to support both the quality and production dimensions.

67.7 60

62

64

66

68

70

72

74

76

Applications Used by Companies with OTCS of 80 or Better ERP

67%

Planning, Scheduling & Dispatching

67% 58%

Quality Management

54%

Document Management

50%

Asset Management

46%

MES Comprehensive MOM suite

42% 0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

More Relationships Between Operational Metrics and Software Use PAGE

23

The following are key relationships between Compliance related Op-

MANUFACTURING METRICS THAT REALLY MATTER

erational metrics.

These key observations make a strong case for the powerful combination of Document Management and Quality Management applications in support of compliance initiatives.

All of these initiatives require diligent monitoring and documentation

KEY OBSERVATIONS:

of procedures as well as enforcement to specified actions surrounding

Average annual improvement in Reportable Health & Safety Incidences was

any type of incident – whether the incident is related to Health & Safety,

23.8% for users of Quality Management software versus 17.1% overall.

Environmental, or Industry Regulations. Document Management software

Conversely, the average annual improvement in Reportable Health & Safety

solutions capture and track the lifecycle of documents such that only the

Incidences for those who DID NOT use either Document Management or

most up-to-date and valid document is in use and only authorized per-

TABLE OF

Quality Management software was only 6%.

sonnel can access or modify documents. They also support team collab-

SECTION

Average annual improvement in Reportable Environmental Incidences was

CONTENTS

1 2 3 4 5 6 7 8 9

27.6% for users of Quality Management software versus 19.9% overall.

Average annual improvement in Reportable Environmental Incidences was

oration around documentation. Given that documented proof is required in support of compliance activities, Document Management is a natural supporting fit.

It is also clear that today’s Quality Management software solutions

23.9% for users of Document Management software versus 19.9% overall.

are being used not only to focus on ensuring that quality procedures are

Conversely, the average annual improvement in Reportable Environmental

being followed, but also compliance related procedures as well. All related

Incidences for those who DID NOT not use either Document Management

actions are enforced and recorded in these systems. And most of them

or Quality Management software was only 7%.

include a Document Management capability and/or can work directly with

Average annual improvement in the Number of Non-Compliance Events was

a separate Document Management system.

24.6% for users of Document Management software versus 18.5% overall.

Conversely, the average annual improvement in the Number of Non-Compliance Events for those who DID NOT use either Document Management or Quality Management software was only 7%.

SECTION 5

Role-Based Performance Dashboards

Role-Based Performance Dashboards PAGE

MANUFACTURING METRICS THAT REALLY MATTER

25

As part of corporate-wide and manufacturing metrics programs, com-

One goal of this year’s survey was to understand how the use of dash-

panies have been on a path over the last decade to bring greater visibility

boards continues to evolve in relation to the previous survey. And more

of key performance indicators to their employees so they can take decisive

specifically, to understand how people were tailoring dashboards to suit

improvement actions. As part of these initiatives, there have been many

specific roles, as well as to look at the timeliness of role-based information.

lessons learned, including how to do this “right,” with “right” meaning:

Related to this is the associated automated versus manual data capture, and the dashboard technologies and functionality being deployed in support

. Ensuring that the only the right/appropriate/correct information

of metrics programs.

is presented . Delivering this right information only to those individuals who

TABLE OF

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

need it, such that people are not distracted or overloaded with informational noise . Delivering this right information in the right/timely fashion, so people have what they need to take action while there is still time to impact a situation

KEY OBSERVATION: Operational dashboard use did not change from an overall usage perspective (38%) from respondents of the previous Metrics That Matter survey.

However, there were a number of shifts in how they are being used and these will be explored further in this section.

. Ensuring that the right information is delivered in context with the right/correct rationale, so that people are clear about why they are receiving the information and what they need to do about it

Operational Dashboards in Use

. Ensuring that the right actions are being taken and the right processes and procedures are being followed for a given situation A number of these “right” things are addressed by today’s performance dashboard software applications. Some of these applications are intended to be more enterprise/business focused, such as Business Intelligence (BI) dashboards. Others are more directly focused on manufacturing operations, such as OI/EMI. In addition, there is some blending/integration of

38% 62%

business and manufacturing operations information on dashboards seen in the marketplace.

No

Yes

Operations Use of Performance Dashboards PAGE

26

As part of the survey, respondents were asked about the timeliness of

Timelines of Performance Dashboard Information Operators & Supervisors

MANUFACTURING METRICS THAT REALLY MATTER

information being delivered on performance dashboards that are currently

TABLE OF

in use in support of the needs of a wide number of manufacturing organi-

7% 12%

zation roles. Responses are organized into three groupings – Operators & Supervisors, Technical Staff, and Management.

The graph shows the existing timeliness/frequency of performance dash-

8% Supervisors

29% 10%

board information for different levels of Operators, as well as Supervisors.

21% 14% 18%

CONTENTS

KEY OBSERVATIONS:

SECTION

Operators and Supervisors are seeing more performance information in

1 2 3 4 5 6 7 8 9

real-time than respondents of the previous Metrics That Matter survey.

13% 9%

Plant level operators

23% 7% 15% 15%

In the previous survey, the percentage was approximately 17%, and this is now up to 26% of Machine Level Operators seeing their performance

21%

information in real-time, and 19% of Line/Area Level operators are as well.

Seeing performance information within a shift has increased from the previous survey average of approximately 13% for Line/Area and Plant Level

11% 9%

Line / Area level operators

19% 5%

Operators to 15% in this new survey.

15% 19%

Plant Level Operators and Supervisors appear to be the sweet spot for using high frequency performance dashboard information in manufacturing

25%

operations.

The overall trend is toward faster visibility of performance metrics for manufacturing operations.

11% 6%

Machine level operators

18% 4% 9% 26% 0%

5%

10%

15%

20%

25%

Rarely / Never

Monthly

Weekly

Daily

End of Shift

Within a Shift

Real-Time (Seconds, Minutes)

30%

Technical Staff Use of Performance Dashboards PAGE

27

The graph on this page shows the existing timeliness/frequency of per-

Timelines of Performance Dashboard Information - Technical Staff

MANUFACTURING METRICS THAT REALLY MATTER

formance dashboard information for different manufacturing technical

TABLE OF

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

10%

roles, including Maintenance, Engineering, Process Improvement, IT/Business Analysts, and Quality personnel.

The graph shows that daily information is most typical for use by techni-

17% 15%

Quality personnel

30% 6% 11% 10%

cal staff. Maintenance and IT/Business Analysts are not using performance dashboard information as much as other roles that are more reliant, such as

23%

Quality, Process Improvement, and Engineering.

It was not surprising to see that in general, Technical Staff are less engaged in using performance dashboards than Plant Level Operators or

26% IT / Business analysts

15% 21% 2% 5%

Supervisors according to the survey, showing that more of the Technical

8%

Staff rarely/never use them. Operations have more opportunities to make

13%

day-to-day impacts on performance.

Process / Improvement staff

18% 17% 28% 3% 12% 8% 15% 17% 10%

Plant / Control engineers

28% 6% 12% 12% 22% 15% 10%

Maintenance personnel

29% 8% 14% 13%

0%

5%

10%

15%

20%

25%

Rarely / Never

Monthly

Weekly

Daily

End of Shift

Within a Shift

Real-Time (Seconds, Minutes)

30%

Management Use of Performance Dashboards PAGE

28

Timelines of Performance Dashboard Information - Management The graph on this page shows the existing timeliness/frequency of per-

MANUFACTURING METRICS THAT REALLY MATTER

formance dashboard information for different management roles, including

9%

C-Level Executives, Business Unit Managers, Plant Managers and Operations Managers.

50% C-level executives

16% 13% 1% 5% 5%

KEY OBSERVATIONS:

7% 31%

Management roles are not seeing as much performance information in reTABLE OF

CONTENTS

al-time as other roles (5% to 12% of managers are depending on role/level).

SECTION

However, a good portion of management roles are seeing performance in-

1 2 3 4 5 6 7 8 9

formation within a day or sooner (27% to 65% are depending on role/level).

Business unit managers

23% 27% 1% 4% 7%

Operations Managers are in the highest category of seeing/utilizing per6%

formance information within one day or sooner at 65%, and this is almost

15% 16%

double when compared to the last Metrics That Matter survey.

This indicates a stronger engagement and involvement of Operations Man-

Plant managers

40% 3% 7% 12%

agers in the overall manufacturing performance management process.

4% 11% 19%

Operations managers

37% 6% 10% 12% 0%

10%

20%

30%

40%

50%

Rarely / Never

Monthly

Weekly

Daily

End of Shift

Within a Shift

Real-Time (Seconds, Minutes)

60%

The State of Data Collection for Metrics PAGE

29

Another section of the survey asked where companies were on their

Financial & Operational Metrics - Data Collection Methodologies

MANUFACTURING METRICS THAT REALLY MATTER

journey towards more automated data collection techniques in support of their manufacturing performance metric programs.

The graphs show the spectrum of manual to automated data collection

Keyed into spreadsheets

in three different views. The first is overall/across both the Financial and

Fully automated

Operational metrics. The second view is just for the Financial metrics and the third is just Operational metrics. The goal was to see if there were

11% 10% 0%

10%

20%

30%

40%

50%

60%

Financial Metrics - Data Collection Methodologies

TABLE OF

1 2 3 4 5 6 7 8 9

25%

Manually recorded

differences in the levels of information automation for these groupings.

CONTENTS

SECTION

55%

Partially automated

KEY OBSERVATIONS: The graphs show there is more automated data collection occurring for

52%

Partially automated

34%

Keyed into spreadsheets

Operational metrics than Financial metrics, whereby a total of 67% have

Fully automated

Operational metrics that are partially or fully automated versus a total of

Manually recorded

60% for Financial.

8% 6% 0%

10%

20%

30%

40%

50%

60%

There were no significant movements seen in going to fully automated data collection methodologies, when compared to respondents from the previous Metrics That Matter survey. Progress in this area appears to be a longer journey in spite of the fact that the amount of available manufacturing information is rapidly increasing as more intelligent devices and systems are being deployed.

Operational Metrics - Data Collection Methodologies 55%

Partially automated

23%

Keyed into spreadsheets

12%

Fully automated

10%

Manually recorded 0%

10%

20%

30%

40%

50%

60%

Software Functionality of Performance Dashboards PAGE

30

The next area that was explored in relation to role-based performance

Operational Dashboards - Deployed Functionality

MANUFACTURING METRICS THAT REALLY MATTER

dashboards was the specific functionality that has been deployed to date.

TABLE OF

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

Some of the functionalities go to the heart of delivering on the needs that were discussed earlier as being “right.”

69%

Covers a single plant

The graph indicates that most Operational Dashboards cover a single plant – at 69%. However, 43% of respondents also indicated that their dashboards are covering multiple plants. Multiple selections were allowed

Purely electronic, rather than print outs

57%

in the survey.

At 57%, most have purely electronic/visual displays. It is relatively common to be able to drill down on dashboard displays to get to root

43%

Covers multiple plants

causes and more detailed information at 40%, while 35% have the capability to proactively alert users based on conditions/rules.

A recorded 40% have Operations performance information rolling up

Allows drill down to find root causes

40%

Operations data rolls up to an enterprise scorecard

40%

to Enterprise dashboards/scorecards. This is consistent with the trend described earlier towards more high frequency engagement by Operations Management in plant performance activities.

Can create an escalation or alert based on rules

KEY OBSERVATIONS: In comparison to respondents of the previous Metrics That Matter study, only 31% had dashboards that could escalate/alert based on rules, versus 35% in this new study.

Previously, only 30% rolled up to an enterprise scorecard; now it is 40% on average. This indicates further sophistication in the use of dashboards, along with higher transparency of manufacturing information going up the enterprise.

35% 0%

10%

20%

30%

40%

50%

60%

70%

80%

Technologies for Performance Dashboards PAGE

31

The last area of exploration in relation to role-based performance

Operational Dashboards - Software Packaging

MANUFACTURING METRICS THAT REALLY MATTER

dashboards was to understand the different software technologies and packages that are being utilized.

TABLE OF

KEY OBSERVATIONS:

CONTENTS

The graph clearly shows that there is a broad range of manufacturing

Part of a plant Historian software package

32%

and business applications being utilized to support metrics programs with visual performance dashboards.

SECTION

There is no clear single approach/package being used, and many compa-

1 2 3 4 5 6 7 8 9

nies are using multiple different software applications to meet their overall needs.

The percentage of companies using the performance dashboard functionality provided with MOM/MES and Quality Management software packages appears to be higher than the portion of companies using the ERP based performance dashboards.

This can be concluded from comparing the percentages of manufacturing software deployed by survey respondents (in Section 4), versus the associated use of the operational dashboards of those same software packages.

For example, ERP is the most used manufacturing software application at 74%, but ERP operational dashboard use is only 31%.

31%

Part of an ERP software package

Part of a BI software package

30%

Part of a MOM / MES software package

30%

Part of a Quality Management software package

28% 17%

Part of an EMI / OI software package

0%

5%

10%

15%

20%

25%

30%

35%

SECTION 6

Anticipated Impacts of Emerging Technologies

Anticipated Impacts of Emerging Technologies PAGE

MANUFACTURING METRICS THAT REALLY MATTER

33

TABLE OF

There are a number of rapidly emerging technologies that are already

is well understood at 39%, along with unburdening the IT organization

having a significant impact on manufacturing performance management

at 37%. Users are anticipating greater speeds of implementation (29%),

approaches. These include cloud, mobile, and big data technologies, and an

as well as making it easier to aggregate performance information across

important research goal was to understand where and how these emerging

multiple plants/facilities in the future (24%).

technologies will be utilized in manufacturing company’s futures.

CLOUD-BASED SOFTWARE

Impact of Cloud-Based Software for Manufacturing Performance Management

IT communities have rapidly embraced cloud-based software applications due to lower total lifecycle costs. Initial capital expenditures on

CONTENTS

hardware, licensing fees, and updates can comparatively make traditional

SECTION

software delivery mechanisms more costly and time consuming. Cloud-

1 2 3 4 5 6 7 8 9

based “software as a service” delivery outsources the hardware and

Lower the total cost of ownership for implementing manufacturing performance software

39%

Don’t know

37%

Unburden IT organizations from having to maintain servers and software updates

37%

software support for the user, is faster and easier to deploy, updates automatically, and allows for nearly unlimited storage space.

Though many business leaders still have reservations about the cloud for manufacturing applications, the space is advancing rapidly to address major concerns around connectivity and security, as well as other issues,

Speed the time it takes to implement manufacturing performance software

29%

while making the benefits of cloud adoption too attractive to ignore. In a separate LNS Research vendor survey, 50% of manufacturing software providers were found to be already offering some cloud-based offerings, and over 90% of were investing in cloud capabilities for future products.

Performance information applications such as Data Historians and OI/ EMI are good examples of cloud-based software in use today with little reservation, since they do not directly control production. There are also cloud-

Enable performance information on mobile devices

24%

Make it easier to compare performance information across multiple plants / facilities

24%

Make it easier to integrate performance information across my different systems

based ERP and MES offerings that are available and proven in manufacturing.

The graph shows the expectations of survey respondents for the impact

Other

19%

3%

of cloud-based software in their operations.

While 37% are still unsure, the lower total cost of ownership message

0%

5%

10%

15%

20%

25%

30%

35%

40%

Anticipated Impacts of Mobile Technologies PAGE

34

The use of Mobile devices and applications has removed the restrictions of needing to be on-site to access performance and other production

Impact of Mobile Technologies on Manufacturing Performance Management

MANUFACTURING METRICS THAT REALLY MATTER

information. Mobile devices have the potential to enable workers from across every level of the enterprise to access the performance and decision

TABLE OF

functions using a mobile device.

CONTENTS

SECTION

1 2 3 4 5 6 7 8 9

support information applicable to their respective roles.

Virtually all of the manufacturing software providers have some mobile application(s) available, and with more on the way.

The graph shows the roles that are expected to benefit from mobile technologies, along with the extent of use expected – ranging from performance information to being able to perform the majority of their job Plant Supervisors (54%) are the top users anticipated to have the ability to have everything they need to do their jobs in the palm of their hands. Plant Managers (53%) are anticipated to have the ability to manage performance in real-time from mobile devices.

Given that most Maintenance professionals have a need to be highly mobile, it was no surprise to see them at 47%, with all the information they need to do their jobs remotely.

Facilitating access to mobile information also holds the promise for an entirely paperless manufacturing environment for 35% of respondents.

Only 25% were unsure of how mobile technologies would impact manufacturing performance management, which implies that mobile applications in manufacturing are better understood than cloud-based software, which was at 37% “Don’t Know.”

54%

Plant supervisors having all the information they need to do their jobs on mobile devices

53%

Plant managers have real-time performance information on mobile devices Maintenance personnel having all the information they need to do their jobs on mobile devices

47% 44%

Executives have real-time performance information on mobile devices Quality personnel having all the information they need to do their jobs on mobile devices

41%

Technical personnel having all the information they need to do their jobs on mobile devices

41% 37%

Plant operators having all the information they need to do their jobs on mobile devices

35%

Creating a completely paperless manufacturing environment Engineering and manufacturing have same design and manufacturing information on mobile devices All personnel have same design and manufacturing information on mobile devices

28% 25%

Don’t know Sharing information with suppliers via mobile devices

22%

Sharing information with customers via mobile devices

22%

0%

32%

10%

20%

30%

40%

50%

60%

The last emerging technology impact we will explore is “big data.” The

of their biggest and most important challenges and objectives. Reinforcing

current buzz-term may be slightly misleading to some. Most manufactur-

this, note that the top nine responses each has a response rate of over 30%.

ers are quite accustomed to having “big,” or some might say huge amounts

A mere 5-6% felt that big data would not have any future use or impact on

MANUFACTURING METRICS THAT REALLY MATTER

Anticipated Impacts of ‘Big Data’ Technologies

of data flowing throughout their organizations, but they have historically

their manufacturing performance improvement personnel.

TABLE OF

enough that nobody is entirely sure how they will play out in manufactur-

PAGE

35

CONTENTS

lacked the context that gives that data actionable meaning—giving birth to the phrase, “data rich, but information poor.”

And this is where the emerging technological capability referred to as big data is coming into play. The potential for previously unknown correlations to be discovered, and for informational silos to be broken down, is accelerating. But big data concepts are still both nascent and broad ing, although the possibilities are potentially transformative.

SECTION

1 2 3 4 5 6 7 8 9

Impact of Plant and/or Enterprise ‘Big Data’ on Manufacturing Performance Improvement Personnel

The graph shows where survey respondents see this going. Given the importance of production, it is not surprising that better production/ forecasting was the top response at 46%. Here, big data could operate in myriad ways, including identifying correlations between customer data, scheduling, and maintenance, which would have the potential to identify hidden patterns that could enable greater operational efficiency, better anticipate order lead times, shorten asset/machine downtimes, and make materials purchasing and WIP decisions more effectively.

Other top responses, such as being able to understand plant performance across multiple metrics (45% of responses), servicing and supporting customers faster (39%), and real-time alerts based on analyzing

finding ways to overcome informational silos/disparate data sources and maintaining/developing a more customer-driven organization.

It seems clear from these responses that manufacturers today are poised to have their personnel take advantage of big data analytics to attack some

45%

Understand plant performance across multiple metrics

39%

Service and support customers faster Real-time alerts based on analyzing manufacturing data

38%

Correlate manufacturing and business performance information together

36%

Correlate performance across multiple plants

36%

Mine combinations of manufacturing and other enterprise data

31%

Perform predictive modeling of manufacturing data

31%

Improve interactions with suppliers

31% 29%

Don’t know

manufacturing data (38%) are in line with some of the important objectives and challenges that manufacturers are talking about today, such as

46%

Better forecast products / production

Understand customer requirements for new products

6%

I don’t think they will use plant ‘Big Data’

5%

I don’t think they will use enterprise ‘Big Data’

0%

5%

10%

15%

24%

20%

25%

30%

35%

40%

45% 50%

SECTION 7

Best Practices for Metrics Program Success

Best Practices for Metrics Program Success One of the industry best practices that MESA and LNS Research see

Here are the key steps (further explained in the MESA Metrics Guide-

for metrics program success is to take the organization through a strat-

book) to take in a Strategic Decomposition/Goal & Metric Alignment

MANUFACTURING METRICS THAT REALLY MATTER

PAGE

egy decomposition and goal alignment process. By definition, company

Process:

TABLE OF

measures, and how these need to be interpreted into more detailed, but

37

CONTENTS

strategy needs to be a “top down� exercise, but the alignment of strategy, actions, and metrics as they relate to individual areas of the business, de-

1. Understand and Articulate Strategy: Have a clear and universally

partments, and individuals is a cross-functional engagement exercise that

understood manufacturing strategy that is in support of the corporate

ensures that employees can clearly see the relationships between their

business strategy.

work efforts and their contributions toward strategy achievement.

The diagram shows an example of top level strategy, actions and aligned plans across a manufacturing enterprise.

2. Translate Strategy into Specific Goals: Turn that strategy into specific goals for business groups and associated supply chains as well as plants, units, and production lines.

3. Map Goals and Specific Metrics for Success: Use a cross-functional

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team to map each detailed translation across the enterprise.

4. Determine Key Performance Indicators: Develop a set of manufacturing STRATEGY

Vollman Triangle

CORPORATE ACTION

MEASURE

KPIs to measure progress toward goals.

5. Establish Communication Procedures for KPIs: Make sure the right information is getting to the right people in a timely manner.

6. Set Processes for How to Act on KPI Information: Determine best practices for individuals from the shop- to top-floor to interact with KPIs. 7. Match Performance Incentives to Aligned Goals: Reinforce the effectiveness of measuring KPIs by incentivizing progress.

When everyone across an organization is aligned with their respective individual, group, and company goals and metrics, and everyone has the information they need to do their jobs efficiently, truly great things can happen at an accelerated pace.

Production Process Source: Dr. Peter G. Martin

Getting Executives and Operations on the Same Page PAGE

38

One of the specific challenges that was discussed at length at the 2013

Operational Metrics that Executives Believe have the Biggest Financial Impact

MESA “unConference” session on Metrics That Matter was the organizaEfficiency

plant operations. “Business-speak” and “manufacturing-speak” are very

Responsiveness

different languages, and there was a sense that if executives could better

Inventory

understand “manufacturing-speak” and the potential impact that manu-

Don’t know

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approach” questions were asked. The first graph shows which categories of

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facturing can have on business success, then this two-way understanding could accelerate many more manufacturing initiatives to move forward.

on financials. The top four responses were Efficiency (33%), Quality (31%), Responsiveness (26%) and Inventory (21%), with 18% indicating that they didn’t know, and these responses represent the extent of the disconnect.

Next, respondents were asked about what approaches have been taken in the past to successfully bridge this gap by educating executives on manufacturing business improvement potential.

21% 18% 8% 6% 6%

Compliance Innovation

0%

provements that were uncovered in the survey, two related “attitude and

5%

10%

15%

20%

25%

Executive business review meetings

29% 28%

Manufacturing tours Real-time dashboards contain financial impacts

24%

Don’t know

23%

turing strategy as part of the overall business planning process. This is con-

Participation in industry associations

20%

Balanced scorecard training

20%

multiple responses, along with simple review meetings and plant tours.

MESA and LNS Research recommend that you consider employing a number of these approaches to get executives and operations on the same page. This will facilitate a greater two-way understanding of both challenges and opportunities and likely cut down on some frustrations.

40%

35%

Plant reports contain financial impacts

communication opportunity, at 40%. Next, at 35% was including manufac-

Manufacturing performance dashboards and reporting came up in

35%

40%

Manufacturing strategy part of annual businesses

23%

sistent with the Strategic Goal Alignment best practice discussed earlier.

30%

Approaches Taken to Successfully Educate Executives on Manufacturing Business Improvement Potential

Manufacturing peer review meetings

The graph shows that executive business review meetings were the top

33%

26%

Maintenance

Therefore, in addition to the specific Operational and Financial im-

Operational metrics that executives already believe have the biggest impact

31%

Quality

MANUFACTURING METRICS THAT REALLY MATTER

tional and understanding related gaps that exist between executives and

16%

Manufacturing program training

10%

Trade publications Participation with industry analysts

9%

Participation in peer councils

7%

No actions taken in this regard

5% 3%

Skip level meetings

1%

Other actions taken

0%

5%

10%

15%

20%

25%

30%

35%

40%

SECTION 8

Case Study

CASE STUDY Murata Power Solutions PAGE

MANUFACTURING METRICS THAT REALLY MATTER

40

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Headquartered in Mansfield, MA, Murata Power Solutions is a leading global supplier of converters, power supplies, and related products. The

deliver, the company is moving forward with further integration of its MES

company operates in a highly competitive industry—requiring rapid prod-

and ERP systems, as well as intensifying efforts to speed its new product

uct development, stringent quality standards, and high customer respon-

introduction process and reduce costs by incorporating FMEA (Failure

siveness to both maintain and elevate its market position.

Mode and Effects Analysis) initiatives into additional manufacturing phases - beginning with design. Additionally, the company is implementing a Six

With a strong continuous improvement company culture to build from, the company has recently added Project Management (PM) software to its operations and integrated its formerly disparate MES system and reporting methods.

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Spurred on by the metrics improvements these initiatives have helped

The addition of this PM software has fostered additional inter-departmental collaboration, and the company’s software initiatives around MES and Quality Management software have shown valuable operational correlations that have helped the company improve in several operational areas over the past year.

Murata has recorded significant annual performance improvement metrics, such as:

Customer fill rate/on-time delivery: Annual improvement of 80%, versus survey respondents’ annual improvement average of 12.5%.

First Pass Yield: Annual improvement of 50%, versus survey respondents’ annual improvement average of 12.9%.

Supplier Quality Incoming: Annual improvement of 25%, versus survey respondents’ annual improvement average of 13.3%.

Sigma program at its main facility and selecting specific individuals for belt training in this program.

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Summary & Recommendations

Summary & Recommendations To conclude, here is a summary of some key answers to questions

PAGE

MANUFACTURING METRICS THAT REALLY MATTER

42

Average Manufacturing Performance Improvements from 2012-2013

posed in the introduction: Q. Which metrics are being used to best understand manufacturing performance and opportunity areas for improvement?

A. The top 10 Financial metrics and top 18 Operational metrics are listed and highlighted in Section 2.

Q. How does my company’s performance improvements compare to industry?

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A. You can compare with the average annual improvements achieved by

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others for metrics categories are shown in the dials. Additionally:

1 2 3 4 5 6 7 8 9

The average % of successful NPIs was 71.5% and the top performers

SUCCESSFUL NPIs Those with Successful NPIs of 90% or better had average annual Financial

averaged 90%.

improvements of 16%.

The average OTCS was 87.6% and the top performers achieved 95%

WIP/INVENTORY

or better.

Those with annual Inventory WIP Improvements of 10% or better had

The average OEE was 70.7 and the top performers achieved 80 or better.

average annual Financial improvements of 12%.

Q. How do we connect operational metrics to financial metrics?

A. T here were many positive correlations between average annual Operational metric improvements or Operational metric performance, and improvements in average annual Financial metrics highlighted in Section 3. Average annual Financial improvements were 8.6%;

OEE Those with OEE of 80 or better had average Financial improvements of 14%.

RESPONSIVENESS Those who improved Manufacturing Cycle Time by 10% or more had average Financial improvements of 14%.

however, top Operational metric performers did significantly better.

QUALITY

Examples follow.

Those who had top annual improvements in Quality metrics such as Improved First Pass Yield by 5% or more, or Increased Supplier Quality Incoming by 5% or more, or Reduced Customer Rejects by 5% or more, all had average Financial improvements of 14%.

Summary & Recommendations (Continued) PAGE

Q. How can technology help support and impact metrics programs and Financial performance?

MANUFACTURING METRICS THAT REALLY MATTER

43

A. The most deployed applications by all respondents were ERP; Planning, Scheduling & Dispatching; Quality Management; Data Historians ; and MES. Additionally:

Average improvement in Total Cost Per Unit Excluding Materials was 24.1% for users of OI/EMI software, and 22.5% for users of MES software versus 13.1% overall.

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Q. What are some of the best practices I can learn from market leaders?

A. One of the industry best practices that MESA and LNS Research see for metrics program success is to take the organization through a strategy decomposition and goal alignment process (Section 7) to ensure that the right metrics are being applied and evaluated across the business. This is one focus of the MESA Metrics Guidebook. Also, helping executives and manufacturing personnel to better understand each other and the potential impact that manufacturing can

users of PLM software versus 12.5% overall.

Q. Which metrics are being utilized as part of role-based dashboards and how frequently should these metrics be measured and utilized?

A. The top 10 Financial and top 18 Operational metrics that are being utilized by respondents are detailed in Section 2. Most Operational metrics programs are looking at a combination of individual Plant level metrics rolling up to a Corporate view. Most Financial metrics programs are looking at Corporate and Business Unit level metrics.

The overall trend is toward faster visibility of performance metrics for manufacturing operations. Examples follow.

26% of Machine Level Operators and 19% of Line/Area Level Operators are seeing their performance information in real-time.

15% of Line/Area and Plant Level Operators are seeing perfor-

within a day or sooner depending on role/level.

Comprehensive Suite of MOM software versus 10.4% overall.

and 20.4% for users of Quality Management software, and 19.1% for

Average improvement in Net Profit Margin was 19.4% for users of a

Average improvement in OTCS was 22.0% for users of MES software,

1 2 3 4 5 6 7 8 9

27-65% of Management are seeing performance information

mance information within a shift.

have on business success can accelerate many more manufacturing initiatives in the future.

Sponsors PAGE

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44

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MESA International and LNS Research would like to thank the sponsors of this 2013-2014 MESA Metrics research project. Development and distribution of this valuable information was made possible by:

Presented by:

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Author: Mark Davidson, Principal Analyst mark.davidson@lnsresearch.com Š MESA International and LNS Research.