Measurement Needed if Supply Chains are to Improve
March 1, 2012
Companies improving on multi-faceted metrics such as overall equipment effectiveness (OEE) and forward-looking metrics such as portion of orders booked within schedule freeze period are more likely to improve their financial performance.
This is just one finding from Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics the research findings report released today by Manufacturing Enterprise Solutions Association (MESA) International and industry analyst and consulting firm Cambashi. The report also includes information on what metrics are most commonly used, and which operational metrics correlate most closely to improving earnings, net profit, and manufacturing cost as a percentage of revenue.
“There’s an element of demand forecasting that we explore here, too,” said Julie Fraser, principal industry analyst and president, Cambashi, Inc. “But in the end, it’s the ‘make area’ of the supply chain that still deserves the attention.”
This is the fourth primary research study in the MESA Metrics that Matter series, started in 2006. As in the original Metrics that Matter study, the respondents who improved significantly on business metrics over the past three years are considered “Business Movers.”
While some of the “Business Movers” are in fast-growing industries, as with previous studies, the size, region, and industry profile of the Business Movers is not a major factor. The consistent differences are in how they measure performance. They are far more likely than others to have improved on metrics that are not only multi-faceted and predictive, but also focused on minimizing non-value-added time, supplier performance, and they translate operations results into financial terms. They also provide line-level performance metrics to operators and supervisors more consistently and effectively.
This primary research revealed that significant improvements in financial performance are the result of a multi-faceted effort in the areas of plant performance metrics programs, improvements, and IT applications. Based on a survey of 305 individuals from a wide range of manufacturing and production companies, the results illustrate the approach, business processes, and software technologies used today and how they correlate to dramatic business performance improvement.
This research also shows that over a third of responding companies are piloting or planning to buy manufacturing execution systems or manufacturing operations management systems (MES/MOM) and operational dashboard software, also called operational intelligence (OI) or enterprise manufacturing intelligence (EMI). Those using MES/MOM and operational dashboards are more likely to have made greater business performance improvements than others.
The comprehensive report, Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics, for MESA Premium Members has extensive charts and graphs to illustrate findings, along with quotes from Industry Leaders who participated in telephone interviews. This report also offers best practice advice on crafting an effective performance metrics program similar to how the Business Movers gauge and accelerate improvement. It is available in MESA’s Resource Library now at http://conference.mesa.org/en/featuredpick.asp.
The public report, Pursuit of Performance Excellence: Business Success through Effective Plant Operations Metrics Summary Report is available to all interested parties from http://www.mesa.org/metrics, Cambashi, or the study sponsors. The six co-sponsor companies who underwrote and helped to guide the study are: Premium sponsors: Rockwell Automation (http://www.rockwellautomation.com), SAP AG (http://www.sap.com), Solarsoft Business Systems (http://www.solarsoft.com) and Tata Consultancy Services (http://www.tcs.com). Camstar (http://www.camstar.com) is a premium sponsor for semiconductor and medical device industry verticals. IQity Solutions (http://www.iqitysolutions.com) is a supporting sponsor. These companies have sponsored this research in an effort to improve manufacturers’ and producers’ understanding of the role plant performance and operations metrics play in business success and financial performance improvement.
Subscribe to Supply Chain Management Review magazine
cutting supply chain costs and case studies in supply chain best practices. Start Your Subscription Today!