Finding the right measurement

“You can’t improve what you can’t measure and you can’t measure what you can’t see” is an old industry axiom, but at the end of the day, manufacturers’ profitability, and future, depends on how well they measure financial and operational performance.
It all comes down to finding the proper metrics to measure and then execute and plants should become more efficient. Manufacturing Enterprise Solutions Association (MESA) International and Industry Directions Inc. released Tuesday at MESA’s Second Annual Plant to Enterprise Conference in Orlando, Fla. the results of a study entitled “Metrics that Matter,” which shows manufacturers using technology to share key performance information between operations and finance have an advantage over those who don’t. The study also shows a small number of manufacturers that responded said they have those effective links for measuring performance.
Part of finding the correct metrics is about collaboration throughout the enterprise.
“The collaboration issue is not going away so the quicker people get their arms the better off they will be,” said Julie Fraser, principal at Industry Directions. “There is a disconnect between operations and finance,” Fraser said, “and most manufacturers can’t afford to be in that position today.”
The study shows manufacturers that improved the most have metrics linking operations to finance, and the metrics also speed up data collection and feedback to the operation, and they also utilize plant software. The study also found the top two manufacturing applications planned for investment in the next 12 months are plant dashboards and manufacturing execution systems (MES).
Some of the survey highlights are:
• One in three respondents plan to buy plant dashboards in the next 12 months, and 29% plan to buy MES, making them the top investments planned for the year, out of 18 software technologies in the survey.
• Respondents using MES are over twice as likely to have improved over 1% annually on average in the past three years in upside production flexibility, energy cost per unit of production and market share.
• Respondents using plant dashboards are over twice as likely to have improved significantly in cash-to-cash cycle times and total inventory on hand.
• More respondents achieved ROI in under two years on broad functionality software – ERP, MES and EAM – than other applications.
MESA will make two documents available to members on its web site (www.mesa.org). The first is the “Metrics that Matter: Uncovering KPIs that Justify Plant Improvements” document gives the findings of an on-line and telephone survey of 135 manufacturers, surveyed this summer. “Metrics that Matter Guidebook & Framework” describes how to develop a sound system of performance metrics and provides guidance for managers and teams developing performance metrics and IT systems to track and display performance.