Measure and Evaluate Lean Techniques

In order to fully evaluate the impact of lean techniques and methodologies it is necessary to undertake, where possible, a quantitative assessment of their impact and assign calculable values. The following provide some simple ideas on how these can be assessed:

• Inventory - Work-in-progress (WIP) turns; e.g. annual costs of goods sold / average on-hand WIP. This is a measure of the speed at which work-in-process moves through a plant.

• Material and parts availability, stock outs, inventory service level; e.g.:
• % of occasions that purchased materials or parts are available when required or,
• % of occasions that manufactured materials or parts are available when required or,
• Average number of stock outs in a given period or,
• Average elapsed time between stock outs or,
• Inventory Service Level (% of occasions demand for materials, parts, finished products etc. can be supplied from the inventory available). This is a measure of the availability of materials, parts and components that are used to produce finished products.

• Inventory - Total turn rate e.g. No. of Inventory turns per year. This measure provides an indication of how many times the total volume or value of stock normally carried at any one time, is used over a 12 month period. For example, if an organisation holds $10,000 worth of stock at any one time, and over a year uses $40,000 of stock, this would indicate a turn rate of 4.0.

• Inventory turnover – Cost e.g. cost of goods sold as a % of total inventory value. This measure provides an indication of total value of stock used over a period, this could used for instance when considering expansion, introduction of new product lines, or new types of supplier relationships. This measure Indicates how efficiently managers are limiting excess inventory value.

• Inventory - Level variance e.g. the difference between highest level and lowest level of stock retained over set period. Taken regularly, this measurement provides an indication of stock variation and usage.

• Cycle time – Manufacturing; e.g. the time taken to manufacture a product through to completion, or
• The length of time from the start of production and assembly operations for a particular (finished) product to the completion of all manufacturing, assembly, and testing for that product or specific customer order. This is a measure of manufacturing lead time.

• Cycle time - Service (request); e.g. time taken from customer call or request for service repairs to the system or product back up and running. This is a measure of customer down-time, a key indicator of service quality.

• Cycle time - Order assembly; e.g. time taken to assemble finished products in a satisfactory condition in readiness for delivery. This measure provides an input to the analysis of efficiencies in the related department.

• Cycle time - Order processing; e.g. time taken from receipt of order to when the order is referred for scheduling, or to suppliers. This measure provides an input to the analysis of efficiencies in the related department.

• Supplier/contractor waste recycling rate e.g.
• % of raw materials supplied with recycled content per year or,
• Amount and type of wastes generated by suppliers during the previous period or,
• Number of waste minimisation initiatives implemented by or in cooperation with suppliers per year during the previous period. This measure tracks the progress of suppliers or supplier related initiatives in reducing waste or supplying more environmentally friendly products, materials, or services

• Waste reduction e.g. % of total waste (in tonnes) reduction per unit of production during previous period or,Level of waste stream reductions in production processes per quarter or year during previous period. This measure tracks progress in reducing waste

• Waste streams e.g. No of waste streams. This measure is useful in the analysis of waste in an organisation. Before a policy to reduce overall waste can be effective, all waste streams need to be identified. Progress is measured by the number of streams either reduced of dammed up. Waste streams are found in all processes, for instance, handling losses; cleaning losses; process losses; storage; materials handling; pumping; treatment, and even management waste related to decision cycle times and production delays.

• Takt time e.g. working time available/ Production demand capacity. This is a measure of planned time between completion of units in a production system. Many organisations utilising just-in-time/continuous-flow manufacturing systems use this measure for rocess planning analyses.

• Product quality - First pass ratio e.g. % of product passing all quality requirements without rework. First-pass ratio measures the percentage of product passing all quality requirements without rework. With a high first pass ratio costly rework is reduced, allowing production staff to focus on generating product, not fixing product or finding the causes of imperfections. Organisations with a high first-pass ratio often have relatively lower overheads, since they can generate more product out of the same equipment before shifting to a new manufacturing setup.

• Cost of Quality - Internal labour costs e.g.
• % of direct labour spent on internal failure issues or
• % of quality staff direct labour spent on internal failure issues or
• % of non-quality staff direct labour spent on internal failure issues
• This is a measure that provides a quantitative indication of the impact of internal quality failures on direct labour.

• Product quality – Perceived e.g. quantification of survey results. A measure of the customers perception of the quality of the product or service.

• Product/service quality e.g. no of orders not meeting agreed product or service specification as a % of total no. of orders. This measure indicates the effectiveness of the quality system.

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