Lean reporting & control

1. Performance Measurements Lean reporting & control

2. Lean Performance Measurements • Measurements that motivate people to lean improvement. • Measurements that provide excellent operational control. • Measurements that reflect the business strategy of the company at every level. • Measurements that are lean themselves & can be gathered and reported simply and easily.

3. Use Measures for Learning and Problem Solving Traditional Use Lean Use • Results oriented • Top-down control; authority oriented • Hides problems • One shot image of success in reaching target—no feedback • Focus on control of resources, people and results • Concerned with results and the process of getting those results • Responsibility oriented, derives from role • Reveals problems, so that they can be fixed and kept from recurring • Feedback loops to drive problem solving, measure improvement and foster learning • Focus on checking the process, control of resources and development of people; results derived from adhering to process standards

4. Customer Value is Deployed and Managed Continuously Customer Needs Technology Changes Stakeholder Needs Strategy Changes Hoshin Strategy Deployment Sales & Operations Planning Value Stream Measurements Cell Level Measurements

5. Three Levels of Performance Measurements Cell Measurements Enable the cell teams to monitor and control their own production activities. Value Stream Measurements Guide the continuous improvement team in their “pursuit of perfection” activities. Plant Measurements Enable senior managers of the company to monitor the achievement of strategic goals & initiate strategy changes.

6. Increase Cash Flow Increase sales & market share Continuous improvement culture Provide Customer value “Starter Set” of Performance Measurements for Lean Mfg. STRATEGIC ISSUES STRATEGIC MEASURES VALUE STREAM MEASURES CELL/PROCESS MEASURES Sales Growth Cash Flow from Operations Inventory Days On-Time Delivery Customer satisfaction Sales per Employee Sales per Person On-Time Delivery Dock-to-Dock Time First Time Through Average Cost per Unit Day-by-the-Hour Production WIP-to-SWIP First Time Through Operational Equipment Effectiveness

7. Performance Measurement Linkage ChartOrder Fulfillment Value Stream

8. Performance Measurement Linkage Chart This picture shows a linkage chart developed during an actual kaizen; post-it notes are used on paper. This makes repositioning and changing chart components flexible and easy.

9. Plant or Division Measurements • Sales Growth • Cash Flow from Operations • Are we generating enough cash? • Inventory Days • General indicator of lean improvement • On-Time Delivery • Measurement of control and meeting customer delivery needs • Customer Satisfaction • Direct feedback from the customers • Sales per Employee • Overall productivity

10. Typical Production Value Stream Performance Measurements • Sales per Person • Productivity of everyone in the value streams • On-Time Shipment • Can we ship on-time? • Are our processes under control? • Dock-to-Dock Days • Rate of material flow through the value stream • Raw material, WIP, finished goods • First Time Thru • Quality & standardized work for the entire value stream • Average Cost per Unit • Are we reducing costs and making improvement? • Supporting measurements • Safety cross • Cross training matrix • Continuous improvement projects

11. Value Stream Continuous Improvement Board Productivity Process Control Quality Material Flow Cost Sales or Units per Person On-Time Shipment First Time Through Dock-to-Dock Days Average Cost Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Pareto Chart (or other analysis) Improvement Projects Improvement Projects Improvement Projects Improvement Projects Improvement Projects Current Value Stream Map Future Value Stream Map Transition Plan BOX SCORE Value Stream Income Statement

12. Value Stream Performance Measurements Board Business Opportunity Charts Hoshin Kaizen Action Plan Value Stream Maps

13. Value Stream Board“Business Opportunity Chart” Four Charts in One Performance Measurement, Pareto Chart, Data, Action Plan

14. Value Stream Performance Measurements Board

15. Value Stream Continuous Improvement • The primary purpose of the weekly reporting is to guide the value stream manager and his/her team towards continuous improvement. • Tools • Value stream performance measurement boards • Value stream income statement • Box Score • Pareto charts • Continuous improvement projects

16. Typical Cell Performance Measurements • Day-by-the-Hour • Focus on making to takt time • Linearity of production • First Time Thru • Focus on making perfect quality without scrap or rework • Focus on standardized work • WIP-to-SWIP • Work-in-process inventory compared to standard work-in-process inventory • Focus on consistency of flow • Focus on the pull process • Operational Equipment Effectiveness • Focus on machines making to takt time • Bottleneck operations • Supporting measures or reporting • Safety cross • 5S audit • Cross-Training matrix • Daily improvement projects

17. Support Measurements • In addition to the primary measurements many companies also collect some supporting information at the cell. • Safety Cross • Cross-Training Chart • 5S Audit or Self-Audit • Number of Continuous Improvement Projects Completed

18. The Key to Effective Cell Performance Measurement Managers and support people frequently visiting the cells and solving problems. The focus must be on the value-creating processes. Making what the customers want, on-time & perfect quality.

19. Cell Measurement Board

20. Cell Measurement Cube

21. Cell Measurement Board

22. Example Day-by-the-Hour Board

23. How Do Performance Measurements Apply in Support & Administration? We use similar measurement methods in the office & administrative processes. • Administrative Process Measures • Productivity of the process • On-Time Delivery (to internal customers • Rate of Flow of information through process • First Time Thru of the process • Average Cost per Unit • Administrative Cell Measures • Day-by-the-Hour • First Time Thru • WIP-to-SWIP of the cell • Operational Equipment Effectiveness of machines in the cell

24. Sales/Marketing Value Streams Measurements STRATEGIC MEASUREMENTS VALUE STREAM GOALS VALUE STREAM MEASUREMENTS STRATEGIES Sales Growth Sales Growth Increase Sales & Profitability Increase Sales & Market Share Customer Satisfaction Cash from Operations Increase Number of Customer Order to Cash Days Customer Satisfaction Match Sales to Value Stream Capabilities Increase Cash Flow & Reduce Debt Profitability of Order Fulfillment Value Streams Inventory Days or Turns Improve Productivity Value Stream Cost per Sales $ Sales per Employee Collect Cash Quickly Accounts Receivable Days Create Culture of Continuous Improvement Suggestions per Person # People on Improvement Teams Increase CI Project Participation % People Engaged in Improvement Cross Training per Person Provide Advancement for Employees Maintain Stable & Educated Workforce Annual Employee Survey Eliminate Accidents & Injuries Number of Accidents & Injuries

25. Sales/Marketing Value Stream: Quote Process VALUE STREAM MEASUREMENTS CELL CRITICAL SUCCESS FACTORS PROCESS MEASUREMENTS CELL GOALS Sales Growth Understand Customer Value Increase quote success by understanding needs Quote Success Rate % Maximum market price based on value Customer Satisfaction Meet or Exceed Customer Expectations Financial Contribution of the Orders Provide quotes quickly & to customer format Order to Cash Days Fast & Effective Processes Linearity of Sales Orders Effective visual management Profitability of Order Fulfillment Value Streams Obtain orders matching capacity & mix First Time Through% Standardized work for quote processes Value Stream Cost per Sales $ Eliminate waste Average Quote Response Time Eliminate variability Accounts Receivable Days Track Improvement Projects # People on Improvement Teams Increase CI Project Involvement Empowered continuous improvement 5S Audit Cross Training per Person Increase Training & Cross Training Widespread Cross Training Cross Training Chart

26. Strategic and NPD Value Streams Measurements STRATEGIC MEASUREMENTS VALUE STREAM GOALS VALUE STREAM MEASUREMENTS STRATEGIES Sales Growth Sales from New Products Introduce High Value Products Increase Sales & Market Share On-Time Design Projects Cash from Operations Short & Reliable Product Design Processes Customer Satisfaction with New Products Customer Satisfaction Match Products to Value Stream Capabilities Increase Cash Flow & Reduce Debt Profitability of Order Fulfillment Value Streams Inventory Days or Turns Improve Productivity Value Stream Cost per New Product Sales $ Sales per Employee Create Unique & Innovative Products Number of Patents & Innovations Create Culture of Continuous Improvement Suggestions per Person # People on Improvement Teams Increase CI Project Participation % People Engaged in Improvement Cross Training per Person Provide Advancement for Employees Maintain Stable & Educated Workforce Annual Employee Survey Eliminate Accidents & Injuries Number of Accidents & Injuries

27. Value Stream Measurement Boards Watlow Controls, Winona MNDoug Kuchta, Value Stream Manager

28. Wrap up: the lean performance measurements “challenge:” • Replace the traditional cost accounting measurements with performance measurements that are designed to motivate and monitor lean behavior. • Develop a set of measurements throughout the organization that thoroughly reflect the company’s strategy and goals. • As people work to improve the measurement results, they will be actively working to achieve the company’s strategic goals.