I think it's fair to say we all have data fatigue with more information and metrics we could possibly use.
With all the noise, clutter, and volatility, it is challenging to make sense and decisions from all this information — especially when it’s challenging to put a finger on where the underlying problems even are in our manufacturing businesses.
I’ve found the iconic business book, High Output Management by tech pioneer Andy Grove to be useful in helping me frame what signals to look at and levers to use in order to make effective business and operational tradeoffs. In manufacturing, we all need to perform at higher-than-ever standards, and this can only come from focusing on the right things.
Manufacturing KPIs are the answer when it comes to objectively understanding your operations and making sound judgement calls. While the ultimate bottom line and P&L statements are your long-term output metrics, they are lagging indicators that are not actionable on a daily basis.
However, having a clear set of leading indicators—or meaningful manufacturing KPIs—can impact your ultimate financial goals by allowing you to measure your daily performance and make improvements as you go.
Data is a window into your factory
Andy Grove's example of a Breakfast Factory demonstrates how studying your data can give you transparency into your business.
Think of your factory as a black box. Imagine walking outside of this opaque building—you’re outside the shop floor and all the noise.
Now, imagine a few windows into this building. In one window you can see your machines, in another your shipping dock, and another of your raw material. Grove illustrated this in his book, High Output Management (Souvenir Press, 1983, pg. 20) shown here:
Not only does this give you a look at the health of your operations, but it gives you a look at the future. Your leading indicators—your necessary manufacturing metrics—tell you what's going to happen, so you can course correct.
What makes a good “window”?
When it comes to choosing what windows to study, look for manufacturing KPIs that:
Are directly tied to the business and customer outcome: You want to measure aspects that directly affect the happiness and success of your customer in the value stream. One helpful exercise: map the flowchart of the steps in your business that your customers value you for, and then choose an impactful metric in the critical path. Naturally, this should be quantifiable and something you can set a goal around.
Modulate regularly: Metrics that can vary on a daily or weekly basis through your actions are ideal, since they allow you to have fast learning cycles and easily recognize the cause and effect of your work. On the flip side, choosing manufacturing KPIs that change once every year or are completely outside your control are not actionable.
Know your root causes or correlations: When goals are exceeded or missed, the path to improvement is unlikely to simply "work harder.” Knowing your set of underlying root causes allows you to identify the 80/20 of root causes, so you can focus on solving the disease and not just the symptom.
Are automated and sustainable: While we all love the idea of being data-driven, it is not easy when there is a tremendous amount of manual data entry and "policing" to simply collect this information. This is why in order for continuity to be data-driven, it requires a high-degree of automation in core data collection.