Tuesday, November 30, 2010

Are you hunting the Big 5?

In 2008, I spent nearly three weeks in Africa with my brother. It was an incredible trip where we traveled the entire continent from Cairo to Cape Town. One of the best experiences was seeing all of the “African Big 5”. The big 5 refers to the five most dangerous animals in Africa: the lion, elephant, buffalo, leopard, and rhinoceros.

It gave me the idea for what I now call the “big 5 of process statistics”. All managers are accountable for measuring and quantifying business performance. To that end, I’ve found it very useful to focus on the following five types of key measurements:

1. Productivity
Productivity statistics measure the sheer volume of work being completed by enumerating the level of produced goods, services, and/or process outputs. They should also quantify the amount of work-in-process (WIP), as well as the ratio between inputs and output (throughput / yield). Productivity statistics serve as the basis for other metrics and management analysis ratios.

2. Quality
Quality statistics measure the instances of defect or nonconformity. Any violation of a known customer requirement and/or product specification should be classified as a defect. Depending on the level of variation, the quality statistic can be reported as a percentage of total outputs or as the number of defects per million opportunities (DPMO).

3. Time
Time statistics measure process start times, end times, and internal task times. Standard time metrics include: 1) lead/cycle – the time between customer request (input) and final delivery of the product (output); 2) processing – the actual time spent performing work; 3) value – the time spent on value-add tasks; 4) delay – the time that work waits in queues; and 5) takt – the task completion rate required to meet demand.

4. Customer Satisfaction
Customer satisfaction statistics measure the quantifiable feedback from customers. These measurements should stem directly from an established voice of customer program (VOC), and must be aggregated to provide insight into generalized beliefs and potential behaviors. Customer satisfaction can be calculated at the following levels: 1) overall brand loyalty; 2) satisfaction levels by product; and 3) experiences with recent process interactions.

5. Cost Efficiency
Cost efficiency statistics measure internal process costs, resources, and productivity elements. The measurements should factor any fixed and/or variable process expenditure that is used to produce the process output, such as raw materials, resource costs, overhead, equipment, etc. Efficiency statistics should be reported in relationship to total outputs so that management can assess the incremental cost per piece / output.

Anyone who is serious about process improvement should get real good at “hunting” for these big 5 measurements. They will serve as the basis for operational review, strategic management, and lean six sigma improvement projects.

No comments:

Post a Comment