las 2014 bill waddell - lean accounting...
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Achieving Focus with Metrics: Linking strategy to KPI’s to shop floor visual controlsg gy p
2014 Lean Accounting SummitOctober 21, 2014
Bill Waddell
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
First ….
METRICS 101
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Always measure your self more harshly than your customers
What the customer thinks: 95%What you think: 98%
On time delivery NOT OK
On time delivery
What the customer thinks: 98%What you think: 95%
OK
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Measure yourself against perfection
l d b h kUsing last year, industry norms or competitive benchmarking as a yardstick stifles improvement
Trends matter, absolute numbers don’t
The fact that we don’t know how to achieve perfection should not be license to alter the metric
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
FINANCIAL NON‐FINANCIAL
No such thing as a non‐financial metric
If it weren’t financial weLabor variancePurchase price varianceBudget variance
Employee turnoverDefect %On time delivery
If it weren t financial we wouldn’t care
There are only those we understand how to express in $ terms, and those we haven’t figured out yet
The importance of a metric should be based on its impact on strategic
bj ihaven t figured out yet
objectives
Not on whether it is easy it is to do the math
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Perfection
96 2%
98.35%
The effort we put into accuracy should be in direct proportion to our
About 90%
93%
96.2%direct proportion to our proximity to perfection
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
If the information only tells you somethingIf the information only tells you something you already knew
Or
If the information isn’t going to have any affect on what you do next
You don’t need the information
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
If you’re not tracking OEE at the constraints you’re not lean
In fact, you’re not even very good
All d t k b t th Th All you need to know about the Theory of Constraints in 5 minutes
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The Theory of Constraints simplified
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
30 minutes 40 minutes 10 minutes
80 minutes to do a complete load of laundry
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
How long will it take to do 2 loads?
120 minutes
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What if we could buy a new washing machine and cut the time from 30 minutes down to 20?
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
cut the time from 30 minutes down to 20?
Our old time for 2 loads was 120 minutes
How long would 2 loads take with a 30 minute washer?
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
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You only save the 10 minutes once – on the first load because the washing machine is not
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
first load because the washing machine is not the constraint
It is not the bottleneck in the process
O th th h d l k t h t h ifOn the other hand, look at what happens if we can save 10 minutes at the constraint –
the dryer
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
10 minutes saved at the constraint translates into 10 minutes saved on every load
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Principle:
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
An hour saved at the bottleneck is an hour saved for the entire process
An hour saved anywhere else is a imirage
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
1 load every 30 minutes
1 load every 40 minutes
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In an 80 hour week …LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
40 minutes
120 loads
10 minutes
480 loads
30 minutes
160 loads
This black box is going to kick out 120 loads – one every 40 minutes
Variations (within reason) at non-constraint operations have little impact on overall cost and output
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
But time lost at the constraint can never be recovered
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Every process has a constraint that should be optimized
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Constraints are not limited to manufacturing machines
Business processes also have a constraint
A b i i i il b h i iA business activity can easily be the constraint in a manufacturing process
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Constraint
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A 10% reduction in output from the constraint results in a 10% increase in the total hours per unit – not just constraint hours
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
A 10% improvement in output from the constraint results in a 10% decrease in the total hours per unit – not just constraint hours
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
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An increase in output anywhere else has no bearing on the total cost per unit ,and a decrease is only significant if it results in a new constraint
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
% Uptime
Minutes actually run/worked ÷
Minutes Available
% RatePieces actually produced while running/working
÷Standard Pieces
% Yield
Good pieces produced ÷Total pieces produced
X X = OEE
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Standard Pieces produced
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
MBO is for losers
MBM is for winners
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
This is a stable process
It consistently delivers 83% +/1 5% output.
Next week it will result in 83% =/‐5%
WHAT IS THE POINTWHAT IS THE POINT IN MEASURING IT?
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
This is an unstable process
It’s results are fairly random
Next week it could result in just about anything
These points represent neither good nor bad performance
They are merely proof that the process is not under control
anything
WHAT IS THE POINT IN MEASURING IT?
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
83%
Without the icon indicating whether the process is stable
83%
the process is stable or not the 83% figures are meaningless
With the icons they 83% yare very significant
numbers
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LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Strategy without a clear statement of how is just a wish list
We’re to grow aftermarket sales by 20% …
By improving on the shelf availability to 99%
By reducing customer returns to <.1%
By reducing cost and prices by 15%
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
Increase Sales and contribution by 20% by improving availability
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LAS 2014 ~ Bill WaddellAchieving Focus With MetricsIncrease Sales and
contribution by 20% by improving availability
Strategy
Value Stream KPI’s
Cell Level Gemba Board
Kanban Fulfillment Rate
Non‐stock Item Cycle Time
LAS 2014 ~ Bill WaddellAchieving Focus With MetricsIncrease Sales and
contribution by 20% by improving availability
Strategy
Value Stream KPI’s
Gemba Board
Machine LevelMachine Level Visual Controls
Set Up Time
OEE
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LAS 2014 ~ Bill WaddellAchieving Focus With MetricsIncrease Sales and
contribution by 20% by improving availability
Strategy
Value Stream KPI’s
Gemba Board
Machine Level Visual Controls
Employee Skills &
Development
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
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LAS 2014 ~ Bill WaddellAchieving Focus With MetricsIncrease Sales and
contribution by 20% by improving availability
Strategy
Value Stream KPI’s
LINKED
Gemba Board
FOCUSED
SIMPLIFIED
Machine Level Visual Controls
Employee Skills &
Development
LAS 2014 ~ Bill WaddellAchieving Focus With Metrics
QUESTIONS ?