25.Performance Metrics

Metrics Drive Behavior

􀂾 Based off of a true story from Continental Airlines after bankruptcy in 1990’s
􀂾 Cost cutting became the major company strategy
􀂾 Airline rewarded pilots for keeping fuel consumption low
􀂾 Behavior - Pilots skimping on air conditioning and flying more slowly
􀂾 Performance - Unhappy customers and behind schedule flights
􀂾 Results - Valuable customers moved on to competitors

Amazon’s Corporate Score-card

Key Goal: Make online shopping preferred mode for all types of goods
Fast and Free shipping for all types of products

Customer
􀂾 Failed Fast Track
􀂾 Order cycle time mean and standard deviation
Cost/Unit
􀂾 Throughput per labor hour
􀂾 Units shipped per labor hour
Quality
􀂾 Inventory Record Defect Rate
Operations
􀂾 Received and Shipped units and backlog
􀂾 Ex (S&OP adherence)
Safety
􀂾 Lost Time Incidents and Rate
􀂾 Record-able Incidents and Rate

Other Financial and Vendor negotiation metrics

Traditional vs. Lean Metrics
Complex, low volume assembly in aerospace

TRADITIONAL

Jobs behind schedule metrics
􀂾 Focus on accountability and individual performance
􀂾 Assumes every job is equally important
􀂾 Assumes individual efficiency drives overall performance

Behavior using traditional metrics
􀂾 Perform “easy” jobs first to improve metric (temporarily)
􀂾 Out-of-sequence work
􀂾 “I completed my work…why should I help someone else”
􀂾 Focus on every problem

LEAN

Flow metrics
􀂾 Focus on global rather thanlocal optimum
􀂾 Assumes some jobs more critical than others
􀂾 Assumes team drives overall performance

Behavior using lean metrics
􀂾 Work jobs in optimal sequence
􀂾 Identify gaps in skills
􀂾 Teamwork
􀂾 Focus only on problems that impact overall performance

Linking Lean Principles and Manufacturing Measurables