Measurements Bring Value
Why measure? In my experience, You improve what you measure and you measure what you want to improve. Measurements energize progress. They communicate what we wish to buy or offer for sale. They quantify goals and how we’re doing. They verify specifications are met and quality issues are resolved. Measurements allow people with different experiences and opinions to follow the facts and move forward together. They quantify reporting to others and they light the path for us. Measurements spark innovation to reach the next plateau. Measurements are of interest to all of us, but all measurements do not interest everybody.
Steven Covey says, “The main thing is to keep the main thing the main thing.” The “main thing” is to accomplish our mission and follow our vision to deliver value to our customers and stakeholders. Each desired outcome has “drivers” that have the most impact (effect). Measurements of both the drivers and the outcomes establish cause and effect. Think of selecting and measuring ingredients of a recipe to bake a better cake.
Covey also introduces four quadrants of time management – Q1 urgent/important, Q2 not urgent/important, Q3 urgent/not important, and Q4 not urgent/not important. It is the Q2 mindset that a better way exists and that we can make headway against our problems and difficulties. With this mindset, we probe, analyze, compare, and continuously improve our processes and capabilities. Measurements quantify current processes and capabilities to assure consistency and help us improve them.
Reliance on Measurements People resist measurements they doubt, misunderstand, or can’t do anything about. They get nervous when they feel under suspicion or someone’s thumb. They want measured data to be accurate, complete, and pertinent. They have a need to trust the measuring instrument and the person recording and reporting the measurement.
Measurements are meant to accurately represent a current condition – not to favor an individual or cause. Without integrity, we can’t rely on measurements. Measurements do not lie, but liars measure and change results or omit unfavorable results. Measurements do not argue, but competing individuals or groups can project very different results from the same data.
When driving a car, we rely on the odometer, gas gauge, and oil pressure light. When fueling, we rely on the pump displays of gallons and price. Whether we receive from or give a colleague information, we want all parties to rely on measurements, analysis, filtering, and reporting. If it doesn’t seem right, we respectfully question whether we should measure it again perhaps with a different person taking it or using a different instrument. When we understand and trust the measurement, we are more eager to learn what doesn’t work in search of what does.
Scope of Measurements Measurements are used in every product, product grouping, and business unit/function, and company-wide.
- Company-Wide Measurements InSource’s annual plan covers goals, strategies, budgets, initiatives, and company-wide measurements. A five year long range plan keeps us on track. Monthly reports include company-wide measurements such as * customer returns ($defects/$shipped in ppm), * total manufacturing defects (defects/standard hour), * parts to standard ($paid/$valued at standard price), * labor to standard ($actual labor cost/$labor cost at standard), * on-time shipping ($on-time/$shipped in %), * average daily inventory ($inventory/$last month’s parts usage), * MCT (manufacturing critical-path time in days), * supplier performance (composite), and * liabilities to equity ($liabilities/$equity on balance sheet). Our Vision Our customers consider us essential and their most responsive supplier drives eight of them.
- Measurement in point – liabilities to equity. Our bank was unhappy in 2002. Our year-end debt to equity was 5.09 and liabilities to equity was 6.30. They said healthy companies have debt to equity 1.0 or lower and very healthy companies have liabilities to equity 1.0 or lower. We set out to track and improve these ratios. Debt to equity has been consistently under 1.0 since 2008 and was 0.20 year-end 2019. Liability to equity has been consistently under 1.0 since 2014 and was 0.40 year-end 2019. The graph below tracks progress. Building projects in 2007, 2013, and 2018 caused an uptick.
- Local Measurements Each business unit and function sets goals and strategies to support the annual plan. They break down company-wide measurements as applicable to them and set appropriate measurements for individual products, product groupings, processes and capabilities. New measurements are added as they innovate and add new products, processes, and capabilities. Much of the value of the measurements is in the analyses and discussions of what they mean in light of the Q2 mindset highlighted in paragraph 3 of this article.
- Measurement in point – SMT placement accuracy. The Controls business unit started making circuit boards in 2010. An important measurement of process capability is surface mount (SMT) component placement accuracy in defects per million placements (dpm). Six months after start-up, our baseline 2010 dpm measurements failed to meet industry norms. After cataloging the defects, a Pareto analysis identified the top four issues – microprocessor pins shorting, misplacement due to tubed components, tombstoning of components, and board support during placement. By improving each of these issues, training operators, and tweaking here and there over the next 2 years, SMT placement dpm was ¼ of baseline 2010. We purchased more accurate and much faster SMT placement equipment in 2013 and have continuously updated equipment and processes since then. Circuit boards today are a lot more complicated and we place components at twice the speed we did eight years ago. Currently SMT placement dpm is 1/16 of baseline 2010.
- Measurement in point – Harness Mfg MCT. The company-wide measurement MCT includes sales order processing time, parts order processing time, and parts lead time. Mfg MCT is the equivalent to shop order work-in-process (WIP). It is the time from when a shop order is released and available to build until it is completed. The harness business unit adopted quick response manufacturing (QRM) in 2016 and initially concentrated on build time which was cut in half in the first year. It wasn’t until 2018 when the measurement parameter was shifted to Mfg MCT that real progress was made to reduce lead time. Improvements in average Mfg MCT tracked as follows:
2016 16.3 days 2017 15.6 days 2018 12.4 days 2019 8.2 days
Wrap-up: The “main thing” is to accomplish our mission and follow our vision to deliver value to our customers and our stakeholders. Measurements have provided the basis to set our goals and strategies, to cooperate and coordinate our efforts, to track our progress, and to communicate our results. In the here and now, measurements verify we meet customers’ specifications and form the basis to sell our capabilities. Measurements convey, first to us and then to others, that what we do and how well we do it matters. Measurements reveal truth about our strengths and weaknesses. As we look to the future, we can use measurements and the Q2 mindset (a better way exists and that we can make headway against our problems and difficulties) to probe, analyze, compare, and continuously improve. We must treat measurements with integrity so others can rely on them. You improve what you measure and you measure what you want to improve.