PAGE

2013-2014

MANUFACTURING
METRICS
THAT REALLY MATTER
TABLE OF
CONTENTS

© 2014 MESA International and LNS Research

 2013-2014

MANUFACTURING METRICS
THAT REALLY MATTER

TABLE OF CONTENTS

Section 1: Research Objectives & Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Section 2: Improvements in Financial & Operational Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

Section 3: Key Relationships Between Operational & Financial Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

Section 4: Key Relationships Between Metrics and Software Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

Section 5: Role-Based Performance Dashboards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

Section 6: Anticipated Impacts of Emerging Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32

Section 7: Best Practices for Metrics Program Success . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36

Section 8: Case Study . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39

Section 9: Summary & Recommendations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41

Sponsors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44

lnsresearch.com mesa.org
SECTION 1

Research
Objectives & Overview
 Research Objectives & Overview
The manufacturing industries are experiencing a bit of a renaissance
PAGE FINDING ANSWERS & INSIGHTS
4 these days. As shifts continue to occur in the global economic landscape
around labor and energy costs, supply and demand preferences, regulatory • Which metrics are being used to best understand manufacturing
performance and opportunity areas for improvement?
MANUFACTURING METRICS

considerations, and new applications of automation and information tech-

THAT REALLY MATTER

nologies, we are seeing a resurgence of manufacturing excellence across • How does my company’s performance improvements
both established and emerging regions of the world. compare to industry?
Core to new levels of excellence is a keen focus on continuous im-
• How do we connect operational metrics to financial metrics?
provement programs that go after business and manufacturing process
improvements – supported by the collaborative efforts of people and smart • How can technology help support and impact metrics
technologies. Also, these sayings are absolutely true, “you cannot improve programs and performance?
TABLE OF what you do not measure,” and “what gets measured gets done.” Therefore, • Which metrics are being utilized as part of role-based dashboards?
CONTENTS
effective metrics approaches continue to be key to manufacturing excellence.
SECTION • How frequently should these metrics be measured and utilized?
The focus of this MESA Metrics research, conducted by LNS Research,
1 2 3
was to understand the business impacts of metric programs and Key • What are some of the best practices I can learn from market leaders?
4 5 6
7 8 9 Performance Indicators (KPIs) that are being utilized across a wide range
of manufacturing industries. With so many different metrics that are
possible, it is important for organizations to choose the right metrics
approaches that align to their business and manufacturing processes to
help drive improvements in their organizations.
 Research Methodology
This 2013-2014 MESA Metrics research survey was conducted in part-
PAGE
nership between MESA International and LNS Research from October KEY OBSERVATION:
5
2013 through February 2014. MESA International is a global not-for-profit 66% of survey respondents were knowledgeable about financial
and/or operational metrics improvements in their organizations and
MANUFACTURING METRICS

industry association of manufacturers, producers, industry leaders, and

THAT REALLY MATTER

solution providers. LNS Research is a technology research firm focused on able to provide specific metric performance data.
operational excellence in the industrial space.
A comprehensive online survey was created and conducted by LNS Re-
search with the assistance of the MESA Metrics Working Group, along with
2013-2014 Metrics That Matter
an industry advisory team with members from Aditya Birla, Volvo, and Whirl- 21% Survey - Industries
pool, and also with inputs from the following leading companies that were COLOR BY INDUSTRY
45%
TABLE OF sponsors of the 2013-2014 MESA Metrics research project: Epicor, InfinityQS, 13% Discrete Manufacturing
CONTENTS Batch Manufacturing
Plex Systems, Rockwell Automation and Schneider Electric (Invensys). Process Manufacturing
SECTION
Data analysis and research report creation was done by LNS Research
21% Other
1 2 3
and reviewed by the MESA Metrics Working Group. Valuable insights came
4 5 6
7 8 9 from this team approach, given that this is the fifth generation of MESA
Metrics That Matter research that has been conducted every two years. The
16% 2013-2014 Metrics That Matter
goal was to collectively understand and present new results in context to
Survey - Company Sizes
where the industry has come from, based on previous survey results.
51% COLOR BY COMPANY REVENUE
As part of the data analysis, a number of market leading performers in
financial and operational metrics were identified, and the research team is
33% Small: $0 - $250MM
Medium: $250MM - $1BB
able to share some of their specific case study information. As the graphs Large: $1BB+

indicate, 214 survey respondents from a mix of manufacturing industries,

company sizes, and geographies contributed to this year’s research. Typical
2013-2014 Metrics That Matter
titles of respondents were plant managers, operations managers, manufac- 10%
turing IT leaders, engineering and quality leaders, and continuous improve-
Survey - Geographies
12%
ment team leaders. COLOR BY HQ LOCATION
53% North America
Europe
25%
Rest of the World
Asia / Pacific
 Scope of Metrics Information Provided
Survey respondents were asked about the scope of the annual im- Scope of Overall Metrics
PAGE
6 provement information they were providing. We can see that across all 28
metrics (Overall), that the largest percentage (42%) were providing Corpo-
Corporate Level 42%
rate/Company-Wide information. The next most popular level of informa-
MANUFACTURING METRICS

Business Unit Level 27%

THAT REALLY MATTER

tion that was provided was at the Business Unit and Plant levels – at 27%
each. Production Line level information was typically provided – at 3%. Plant Level 27%
Looking at the subset of Financial and Operational metric categories,
there were some additional insights that can be uncovered from these Line Level 3%
responses. For Financial metrics, almost half (49%) of respondents indicat-
0% 10% 20% 30% 40% 50%
ed that they were providing Corporate level information, and Plant level
TABLE OF Financial metrics were only provided 19% of the time.
CONTENTS Scope of Financial Metrics
Operational metric inputs were dominated by Plant level (36%) and
SECTION
Corporate level (35%) information, followed by Business Unit level infor-
1 2 3
mation, at 23%.
Corporate Level 49%
4 5 6
7 8 9 Business Unit Level 31%
KEY OBSERVATION: Plant Level 19%
The data indicates that most Operational metrics programs are reviewing
a combination of individual Plant level metrics rolling up to a Corporate
Line Level 1%
view. Also, most Financial metrics programs are reviewing Corporate and 0% 10% 20% 30% 40% 50%
Business Unit level metrics. Note that some Machine and Line level met-
rics are required in order to aggregate into Plant level metrics, as well as to
Scope of Operational Metrics
support detailed operator actions.

Corporate Level 36%

Business Unit Level 35%
Plant Level 23%
Line Level 6%
0% 10% 20% 30% 40% 50%
SECTION 2

Improvements in Financial
& Operational Metrics
 Improvements in Financial & Operational Metrics
Based on the most utilized metrics from previous surveys, 28 different
PAGE
8 financial and operational metrics were included in this year’s survey. All re- KEY OBSERVATION:
spondents were also asked about their specific performance levels for three Manufacturers continue to make great strides as this new survey shows
critical metrics – % of On Time Complete Shipments (OTCS), Overall Equip- that the overall average for those who provided metrics was consistently
MANUFACTURING METRICS
THAT REALLY MATTER

ment Effectiveness (OEE), and % of successful New Product Introductions 10% or above for most metric categories.
(NPIs). It is important to note that these three metrics are multi-disciplinary This level of annual performance improvement is unlikely to be occurring
in nature and not fully under the control of the manufacturing operation. across the entirety of the manufacturing industries.
The additional 25 metrics were grouped into the eight categories indicat- Most of the respondents that took this survey are also engaged in continu-
ed by the dials in this figure, and respondents were asked for year-on-year ous improvement activities for manufacturing excellence. In fact, 85% cur-
% performance improvements for each of the metrics within each category. rently have formal process improvement programs in place, such as Lean,
TABLE OF Only those who knew their performance improvements for the specific Six Sigma, ISO 9000/9001, etc. Therefore, many of the learnings that this
CONTENTS
categories were included and evaluated further. report explores can be considered best industry practices.
SECTION
The dials indicate the average annual performance improvement for that
1 2 3
category of metrics. The graph to the right also shows these same categories
4 5 6
7 8 9 of metrics and which were most relied upon to manage operations. Types of Manufacturing Metrics Relied on for Managing Operations
There were very impressive levels of improvements being made by re-
spondents, and these results may provide some inspiration for others on Financial 69%
what is achievable. In the previous Metrics That Matter survey, the analysis
looked at companies that improved metrics by 10% or more versus all others.
Quality 62%

Average Manufacturing Performance Improvements from 2012-2013

Efficiency 53%
Inventory 52%
Reponsiveness 43%
Maintenance 28%
Compliance 27%
Innovation 15%
0% 10% 20% 30% 40% 50% 60% 70% 80%
 Improvements in Financial Metrics
This section takes a closer look at what is behind these categories of average EBITDA is typically used as top-level indication of the current operational
PAGE
9 annual performance improvements, starting with the Financial metrics. profitability of a business.
The graph shows the average improvements for each of 10 individual . Revenue Per Employee – A measure of how much revenue is generated by
Financial/Business oriented metrics, and below is a brief description/defi- a plant, business unit, or company, divided by the number of employees.
MANUFACTURING METRICS
THAT REALLY MATTER

nition of each: A financial measure of productivity.

. Total Cost Per Unit Excluding Materials – A measure of all potentially . Cash To Cash Cycle Time – The duration between the purchase of a
controllable manufacturing costs that go into the production of a given manufacturing plant or business unit’s inventory, and the collection of
manufactured unit, item, or volume. payments/accounts receivable for the sale of products that utilize that
. Customer Fill Rate/On-Time Delivery/Perfect Order Percentage – This inventory – typically measured in days.
metric is the percentage of times that customers receive the entirety of . Return On Net Assets (RONA) – A measure of financial performance calcu-
TABLE OF their ordered manufactured goods, to the correct specifications, and lated by dividing the net income from a manufacturing plant or business
CONTENTS
delivered at the expected time. This metric is very often utilized by busi- unit by the value of fixed assets and working capital deployed.
SECTION
ness management as it is of top concern to customers and has a strong . Average Unit Contribution Margin – This metric is calculated as a ratio of
1 2 3
correlation to overall financial performance. It is also known as On Time the profit margin that is generated by a manufacturing plant or business
4 5 6
7 8 9 Complete Shipments (OTCS). unit divided into a given unit or volume of production.
. Energy Cost Per Unit – A measure of the cost of energy (electricity, steam,
oil, gas, etc.) required to produce a specific unit or volume of production.
KEY OBSERVATIONS:
The survey showed that the average OTCS was 87.6%.
The top performers achieved OTCS of 95% or better and this represented Types of Manufacturing Metrics Relied on for Managing Operations
21% of the respondents. Top performers’ solutions are explored later in
this eBook. Total cost per unit - excluding materials 13.1%
Customer fill rate/On-time delivery/
. Net Profit Margin – Measures the financial profitability for all investors/ Perfect Order 12.5%
shareholders/debt holders, either before or after taxes, for a manufactur- Net profit margin 10.4%
ing plant or business unit. Manufacturing cost as a % of revenue 10.2%
. Manufacturing Cost as a Percentage of Revenue – A ratio of total manufac- EBITDA 8.6%
turing costs to the overall revenues produced by a manufacturing plant or Revenue per employee 8.0%
business unit. Cash to cash cycle time 7.9%
. EBITDA - Stands for Earnings Before Interest, Taxes, Depreciation, and Return on net assets (RONA) 6.0%
Amortization. This is a calculation of a business unit or company’s earn- Average unit contribution margin 5.0%
ings prior to having any interest payments, tax, depreciation, and amor- Energy cost per unit 3.9%
tization subtracted for any final accounting of income and expenses. 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0%
 Improvements in Operational Metrics – Inventory, Innovation, and Responsiveness
These graphs show the details behind average annual improvements for Even though Engineering Change Order Cycle Time was the only metric
PAGE
10 the Inventory, Innovation, and Responsiveness categories of Operational surveyed for annual improvements in the Innovation category, the % of
metrics. Below is a brief description/definition of each: successful NPIs is also a key measure of a manufacturing company’s ability
MANUFACTURING METRICS

to innovate.
THAT REALLY MATTER

. WIP Inventory/Turns – A commonly used ratio calculation to measure the

efficient use of inventory materials. It is calculated by dividing the cost of
goods sold by the average inventory used to produce those goods. This
KEY OBSERVATION:
was the only metric used in the Inventory category.
Based on the survey results, the average % of successful NPIs was 71.5%.
Therefore, introducing new, ever more complex products to market is an
2012 to 2013 Average Improvements - Inventory Metric
imperfect science. The top 7% performers achieved 90% or greater suc-
TABLE OF
CONTENTS cessful NPIs. Solutions used by these top performers will be explored later.

15.0%
SECTION . Manufacturing Cycle Time – Measures the speed or time taken for manu-
WIP INVENTORY
1 2 3
TURNS facturing to produce a given product from the time the order is released
4 5 6
to production to finished goods.
7 8 9
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% . Time to Make Changeovers – Measures the speed or time taken to switch
a manufacturing line or plant from making one product over to making a
different product.

. Engineering Change Order Cycle Time – A measure of how rapidly design

changes or modifications to existing products can be implemented all the 2012 to 2013 Average Improvements - Responsiveness Metrics
way through documentation processes and volume production.

2012 to 2013 Average Improvements - Innovation Metric MANUFACTURING

CYCLE TIME 10.7%
ENGINEERING
CHANGE ORDER
CYCLE TIME
7.8%
REDUCING TIME TO
MAKE CHANGEOVERS 9.3%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
 Improvements in Operational Metrics – Efficiency and Quality
These graphs show the details behind average annual improvements
PAGE
11 for the Efficiency and Quality categories of Operational metrics. Below is
a brief description/definition of each:
KEY OBSERVATIONS:
The survey showed that the average OEE was 70.7.
MANUFACTURING METRICS
THAT REALLY MATTER

The top performers achieved an OEE of 80 or better, representing 11% of

. Production Output/Throughput – Measures how much product is
the of the respondents. Solutions used by these top performers will be
being produced on a machine, line, unit, or plant over a specified
explored later.
period of time.
. Production/Schedule Attainment – A measure of what percentage of time
. Customer Rejects/Return Material Authorizations/Returns – A measure of
a target level of production is attained within a specified schedule of time.
how many times customers reject products or request returns of prod-
. Capacity Utilization – Indicates how much of the total manufacturing
ucts based on receipt of a bad or out-of-specification product.
TABLE OF output capacity is being utilized at a given point in time.
CONTENTS . Supplier Quality Incoming – A measure of the percentage of good quality
SECTION materials coming into the manufacturing process from a given supplier.
2012 to 2013 Average Improvements - Efficiency Metrics
1 2 3 . First Pass Yield – Indicates a percentage of products that are manufactured
4 5 6 correctly and to specifications the first time through the manufacturing
7 8 9
17.6%
INCREASED PRODUCTION / process, without scrap or rework.
THROUGHPUT

2012 to 2013 Average Improvements - Quality Metrics

PRODUCTION /
SCHEDULE ATTAINMENT 17.3%
CUSTOMER REJECTS /
INCREASED 15.0%
CAPACITY
UTILIZATION
16.1% RMA / RETURNS

SUPPLIER QUALITY
15.0% 15.5% 16.0% 16.5% 17.0% 17.5% 18.0%
INCOMING 13.3%
In addition to these three efficiency oriented metrics, OEE is another
related and popular metric that contains multiple dimensions. FIRST PASS YIELD 12.9%
. OEE – A multiplier of Availability x Performance x Quality, and can be used
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0%
to indicate the overall effectiveness of a piece of production equipment
or an entire production line.
 Improvements in Operational Metrics – Maintenance and Compliance
These graphs show the details behind average annual improvements . Reportable Environmental Incidents – A measure of the number of
PAGE
12 for the Maintenance and Compliance categories of Operational metrics. health and safety incidents that were recorded as occurring over a
Below is a brief description/definition of each: specified period of time.
MANUFACTURING METRICS
THAT REALLY MATTER

. Downtime in Proportion to Operating Time – This ratio of downtime to . Non-Compliance Events – A measure of the number of times a plant or
operating time is a direct indicator of asset availability for production. facility operated outside the guidelines of normal regulatory compli-
ance rules over a specified period. These non-compliances need to be
. Planned Versus Emergency Maintenance Work Orders – This ratio fully documented as to the specific non-compliance time, reasons, and
metric is an indicator of how often scheduled maintenance takes resolutions.
place, versus more disruptive/un-planned maintenance.
TABLE OF . Reportable Health and Safety Incidents – A measure of the number of
CONTENTS
health and safety incidents that were either actual incidents or near
SECTION
2012 to 2013 Average Improvements - Maintenance Metrics misses that were recorded as occurring over a specified period of time.
1 2 3
4 5 6
7 8 9
DOWNTIME IN PROPORTION
TO OPERATING TIME 15.8% 2012 to 2013 Average Improvements - Compliance Metrics

PLANNED VS. EMERGENCY

MAINTENANCE WORK ORDERS 14.0% REPORTABLE
ENVIRONMENTAL INCIDENTS 19.9%
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0%
NON-COMPLIANCE
EVENTS 18.5%
REPORTABLE
HEALTH & SAFETY
INCIDENTS
17.1%
15.5% 16.0% 16.5% 17.0% 17.5% 18.0% 18.5% 19.0% 19.5% 20.0%
 Impact of Changing Manufacturing Business Conditions
In order to further understand shifts in the manufacturing business
PAGE
13 landscape, a multiple choice question was asked that was consistent with Changing Manufacturing Business Conditions - 2012 to 2013
previous Metrics That Matter surveys, “Please indicate if your business has
undergone any of the following shifts over the past 18 months.” The graph
MANUFACTURING METRICS

Increased the
71%
THAT REALLY MATTER

shows the results by indicating the % of respondents that experienced Number of products,
SKUS, or variants
specific business shifts.
As global and regional manufacturing goes through continual changes, Increased
the job of manufacturing businesses is more challenging than ever. There-
volatility of
customer demand
66%
fore, there were some specific metric improvement correlations based on
these changing business conditions.
64%
Introduced more
TABLE OF complex products
CONTENTS

SECTION Customers
1 2 3 KEY OBSERVATIONS: demanding increased
traceability 54%
4 5 6 documentation
7 8 9 The number of product variants/SKUs has increased to 71% of respon-
dents over the last survey, which was 62%. This indicates a greater level Shortened the time
of challenges in getting new products to market along with the need for
for new product
introduction
45%
increased flexibility within manufacturing operations.
Increased the
amount of work sent
Those who improved the % of successful NPIs appear to also be doing a out as sub-contract-
ing or out-sourcing
42%
better job at OTCS, at an average annual improvement of 19.1% versus an
overall annual OTCS improvement average of 12.5%. This makes sense, Taken on new
given that effective management of new product processes would carry business as a sub-
contractor to others
41%
forward into ongoing customer deliveries.

Those who introduced more complex products appeared to have a more Created or moved

difficult time managing Inventory turns, with an average annual improve-

a manufacturing
facility
39%
ment of only 4.1% versus an overall annual improvement average of 7.8%.
Undertaken a

35%
This also made sense, since carrying larger inventory buffers can make up merger, or acquired
another company
for unplanned or unexpected activities that can be associated with complex or facilities
products. 0% 10% 20% 30% 40% 50% 60% 70% 80%
SECTION 3

Key Relationships
Between Operational and
Financial Metrics
 Key Relationships Between Operational and Financial Metrics
There should be no surprise that one of the key relationships that was (10% of Respondents for each) had average Financial improvements of 14%.
PAGE
15 uncovered in this year’s survey was positive correlations between average
Conversely, those who did not improve any of these same Efficiency met-
annual Operational metric improvements or Operational metric perfor-
rics by 10% or more (17-19% of respondents) only had average annual Fi-
mance, and improvements in average annual Financial metrics. This has
MANUFACTURING METRICS

nancial improvements of 6%.

THAT REALLY MATTER

been true in every MESA Metrics Survey since 2006. It stands to reason
that the converse is also true. Those who had lower Operational metrics or Those who increased Production Throughput/Output by 10% or more also

improvement percentages also had lower Financial metric improvements. had 15% annual improvements in Cash to Cash Cycle Time versus an aver-
age of 7.9% overall.

Additionally, those who increased Capacity Utilization by 10% or more

KEY OBSERVATIONS: had 24% annual improvements in Net Profit Margin % versus an average
TABLE OF Average annual Financial improvements were 8.6%; however, top Opera- of 10.4% overall.
CONTENTS
tional metric performers did significantly better:
SECTION OEE
1 2 3 SUCCESSFUL NPIs Those with OEE of 80 or better (11% of Respondents) had average Financial
4 5 6 Those with Successful NPIs of 90% or better (7% of respondents) had av- improvements of 14%.
7 8 9 erage annual Financial improvements of 16%.
They also had 20% annual improvements in Revenue per Employee/Pro-
They also had 32% annual improvements in Customer Fill Rate/On Time ductivity versus an average of 8% overall.
Delivery/Perfect Order versus an average of 12.5% overall.

Additionally, they had 17% annual improvements in RONA versus an aver-

age of 6% overall.

Lastly, they also had 14% annual improvements in Average Unit Contribu-
tion Margin versus an average of 5% overall.

WIP/INVENTORY
Those with annual Inventory WIP Improvements of 10% or better (7% of
respondents) had average annual Financial improvements of 12%.

EFFICIENCY
Those who had top annual improvements in Efficiency metrics such as In-
creased Production Throughput/Output by 10% or more, or Increased Capacity
Utilization by 10% or more, or Improved Schedule Attainment by 10% or more
 More Relationships Between Operational and Financial Metrics

PAGE
16 RESPONSIVENESS
Those who had top improvements in Responsiveness and improved Man-
MANUFACTURING METRICS

ufacturing Cycle Time by 10% or more (7% of respondents), had average

THAT REALLY MATTER

Financial improvements of 14%.

Those who had top improvements in improved Manufacturing Cycle Time

by 10% or more also had 22% annual improvements in Manufacturing Costs
as a % of Revenue versus an average of 10.2% overall.

TABLE OF QUALITY
CONTENTS
Those who had top annual improvements in Quality metrics such as Im-
SECTION
proved First Pass Yield by 5% or more, or Increased Supplier Quality Incom-
1 2 3
4 5 6 ing by 5% or more, or Reduced Customer Rejects by 5% or more (10-11% of
7 8 9 respondents for each) had average Financial improvements of 14%.

Conversely, those who did not improve any of these same Quality metrics
by 5% or more (21-22% of respondents) only had average annual Financial
improvements of 6%.

Those who had top improvements in Supplier Quality Incoming of 5% or

more also improved Total Cost Per Unit – Excluding Materials by 24% versus
an average of 13.1% overall.
SECTION 4

Key Relationships Between

Metrics and Software Use
 Key Relationships Between Metrics and Software Use
One of the key relationships that was uncovered in this year’s survey Manufacturing Software Applications Currently Implemented and Plans
PAGE
18 was the correlations between average annual metric improvements and/or
market leading metric performance and the use of software technologies
17%
in support of these improvements.
MANUFACTURING METRICS

ERP Software 9%
THAT REALLY MATTER

The graph shows the categories of manufacturing software that are 74%
either currently implemented, planned within one year, or not planned by
survey respondents. Planning, Schedul- 30%
Reflecting on changes in adoption of these technologies since the last ing & Dispatching 17%
software
survey, there are some interesting trends that were uncovered. 53%

TABLE OF Quality 31%

CONTENTS Management 22%
software
SECTION 47%
1 2 3 KEY OBSERVATIONS:
4 5 6 Document 30%
7 8 9 The most deployed applications by all respondents were Enterprise Re- Management 23%
source Planning (ERP); Planning, Scheduling & Dispatching; Quality Man- software
47%
agement; Document Management; Data Historians; Manufacturing Execu-
tion Systems (MES); and Asset Management Software. 41%
Data
In comparison to previous Metrics That Matter survey respondents, com- 17%
Historian(s)
panies had more manufacturing software applications implemented. Key 42%
examples include ERP, which grew from 67% to 74% adopted, Data Histori-
39%
ans, which grew from 39% to 42%, and MES, which grew from 35% to 40%. Manufacturing
20%
Execution System(s)
There were many more, as well as much stronger (up to 2x) correlations 40%
between the use of software technologies and improvements in Financial
and Operational metrics in this year’s survey. Asset 48%
Management 14%
software
38%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Not Planned Planned within 1 year Currently implemented

 To put software use in perspective, it is important to note that 85% of The next key correlation to discuss is average annual improvements in
survey respondents also have process improvement programs in place Net Profit Margin.
PAGE
19 such as ISO 9000/9001, Lean Manufacturing, Six Sigma, Operational Ex-
cellence, etc. So software in and of itself is not magically creating these
differences; however, software is being used to support, accelerate, and KEY OBSERVATIONS:
MANUFACTURING METRICS
THAT REALLY MATTER

sustain process and metrics improvements.

The average annual Net Profit Margin improvement for those who DID NOT
One of the key correlations uncovered was exceptional annual perfor-
use ERP software was only 2% versus 10.4% for all respondents.
mance improvements in making product cost reductions by companies
that use either Operational Intelligence/Enterprise Manufacturing Intelli- Average annual improvement in Net Profit Margin was 19.4% for users of a

gence (OI/EMI) or MES and software applications versus all respondents. Comprehensive Suite of Manufacturing Operations Management (MOM)
software versus 10.4% for all respondents.

TABLE OF ERP systems are clearly a fundamental tool of most manufacturers today.
CONTENTS
ERP systems are the most adopted software application for many good
SECTION
KEY OBSERVATIONS: reasons. They enable consistent business and financial practices and typ-
1 2 3
ically contain the master data for customers and products alike. They also
4 5 6 Average annual improvement in Total Cost Per Unit Excluding Materials was
7 8 9 perform the overall manufacturing resource planning of what will be pro-
24.1% for users of OI/EMI software, versus 13.1% for all respondents.
duced, when, and where.
Average annual improvement in Total Cost Per Unit Excluding Materials
When survey respondents referred to a Comprehensive Suite of MOM
was 22.5% for users of MES software versus 13.1% for all respondents.
software, they were indicating a combination of real-time, in-process
These relationships stand to reason. OI/EMI software specifically helps us-
management software tools that included combinations of MES, OI/EMI,
ers to aggregate and contextualize data coming from multiple information
Quality Management, Document Management, Workflow, Asset Manage-
sources or applications and uncover correlations between operational and
ment, etc. Sometimes these capabilities are all available in a single, pre-in-
financial performance. MES software enforces operational procedures
tegrated software package, and other times it takes a suite of real-time
and provides traceability of, among other things, all steps and procedures,
applications to cover all required functionality. It certainly stands to rea-
labor, quality, and other in-process performance of sub-assemblies and
son that companies that have a comprehensive set of real-time process
completed products. These two software applications make for a power-
management applications in place would have their processes and quality
ful combination of tools for manufacturers who are looking to carefully
in control for greater profitability.
monitor and improve product costs by allowing users to look across all of
the steps and procedures in the manufacturing value chain that are under
manufacturing’s control. Typically, material and component selection is in
the control of engineering departments. That is why this metric excludes
material costs.
 More Relationships Between Financial Metrics and Software Use
The next key set of financial correlations was related to average annual The percentage of use of these applications by this group is in line with data
PAGE
20 improvements to OTCS. from all respondents; however, the role that these applications can play in
OTCS related initiatives will be explored further.
It has been established that ERP is fundamental to managing and planning
MANUFACTURING METRICS
THAT REALLY MATTER

KEY OBSERVATIONS: production on behalf of customers. The use of Quality Management software
Average OTCS performance was 87.6%—with the top 21% of respondents to ensure consistent in-process quality as well as the handling of non-confor-
having OTCS of 95% or better. mances can also be key to ensuring customer deliveries are being met.
Planning, Scheduling & Dispatching software is often utilized at both the en-
Average annual improvement in OTCS was 22.0% for users of MES soft-
terprise level and at the plant level of organizations to deal with the dynamics
ware versus 12.5% for all respondents.
of supply and demand and ensure that the best possible plans are being put
TABLE OF
Average annual improvement in OTCS was 19.1% for users of Product Life- into action to meet customer deliveries. MES ensures production procedures
CONTENTS
cycle Management (PLM) software versus 12.5% for all respondents. happen according to those plans and Asset Management systems can help
SECTION
Average annual improvement in OTCS was 20.4% for users of Quality Man- ensure that equipment and other production assets are properly maintained
1 2 3
agement software versus 12.5% for all respondents. Conversely, the average and available.
4 5 6
7 8 9 annual OTCS improvement for those who DID NOT use Quality Management PLM systems have traditionally been used by engineering organizations to as-

software was only 7% versus 12.5% for all respondents. sist with managing new product designs into production. However, more and
more, these systems are integrating with real-time plant workflows and bi-di-
Those who use Quality Management software had an average OTCS of
rectional information from MES and Quality Management applications in order
91.0%, and those who DID NOT use Quality Management software only
to speed time-to-market for engineering changes, while receiving direct feed-
averaged 85.2%.
back on production issues and quality in order to improve future designs.
Quality Management Software Use and Average % OTCS
Applications Used by Companies with OTCS of 95% or Better
USING Quality
Management software 91.0%
NOT USING Quality ERP 68.0%
Management software 85.2%
Quality Management 45.0%
75.0% 80.0% 85.0% 90.0% 95.0% 100%
Planning, Scheduling & Dispatching 45.0%
The top manufacturing applications used by companies that had OTCS of
Document Management 41.0%
95% or better are shown in the graph. When looking at the top perform-
ers that had OTCS of 95% or better, ERP; Quality Management; Planning,
Asset Management 32.0%
Scheduling & Dispatching; MES; PLM; and Asset Management are the top MES 32.0%
applications used by this group. 0% 10% 20% 30% 40% 50% 60% 70% 80%
 Key Relationships Between Operational Metrics and Software Use

PAGE
21 The following are key relationships identified between Innovation and The top manufacturing applications used by companies that had NPI suc-
Efficiency related Operational metrics. cess rates of 95% or better are shown in the graph below. ERP; Planning,
Scheduling & Dispatching; and Document Management use was signifi-
MANUFACTURING METRICS
THAT REALLY MATTER

cantly higher than that of all survey respondents.

KEY OBSERVATIONS:
Average % of Successful NPIs was 71.5%, while the top 7% of respondents Going beyond ERP, it makes sense that effective use of the below set
had 90% or better. manufacturing applications could also be contributing to the success-
ful lifecycle of new product introductions, as these collectively support
Those who use ERP software had an average of 75.4% Successful NPIs, and
both the business planning and the manufacturing reality dimensions.
those who DID NOT use ERP software only averaged 59.9%.
TABLE OF
CONTENTS
Those who use Quality Management software had an average OTCS of Applications Used by Companies with OTCS of 95% or Better
SECTION 91.0%, and those who DID NOT use Quality Management software only
1 2 3
4 5 6
averaged 85.2%. ERP 93%
7 8 9
Planning, Scheduling
ERP Software Use and the Average % of Successful NPIs & Dispatching 67%

Document Management 60%

USING ERP software 75.4%
Quality Management 53%
NOT USING ERP software 59.9%
Process Management /
Workflow / EWI 47%
0% 10% 20% 30% 40% 50% 60% 70% 80%

MES 47%
Comprehensive
MOM suite 47%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
 PAGE
22 KEY OBSERVATIONS:
Average OEE was 70.7, while the top 11% of respondents had OEE of 80 or The top manufacturing applications used by companies that had OEE of
better. 80 or better are shown in the graph below. The percentage of use of
MANUFACTURING METRICS
THAT REALLY MATTER

these applications by this group is in line with what the data showed for
Those who use Quality Management software had an average OEE of 73.5, and
all respondents.
those who DID NOT use Quality Management software only averaged 67.7.
Since driving higher OEE requires a combination of ensuring production
uptime and availability, along with ensuring consistent high quality, it
Quality Management Software Use and Average OEE
was no surprise to see that high OEE performers are using ERP and Plan-
ning, Scheduling & Dispatching on the planning and management side,
TABLE OF USING Quality
CONTENTS
Management software 73.5 along with Quality Management, MES, and MOM to support both the
quality and production dimensions.
SECTION
NOT USING Quality
1 2 3 Management software 67.7
4 5 6
7 8 9 60 62 64 66 68 70 72 74 76 Applications Used by Companies with OTCS of 80 or Better

ERP 67%
Planning, Scheduling
& Dispatching 67%
Quality Management 58%
Document Management 54%
Asset Management 50%

MES 46%
Comprehensive
MOM suite 42%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
 More Relationships Between Operational Metrics and Software Use

PAGE
23 The following are key relationships between Compliance related Op- These key observations make a strong case for the powerful combina-
erational metrics. tion of Document Management and Quality Management applications in
support of compliance initiatives.
MANUFACTURING METRICS
THAT REALLY MATTER

All of these initiatives require diligent monitoring and documentation

KEY OBSERVATIONS: of procedures as well as enforcement to specified actions surrounding
Average annual improvement in Reportable Health & Safety Incidences was any type of incident – whether the incident is related to Health & Safety,
23.8% for users of Quality Management software versus 17.1% overall. Environmental, or Industry Regulations. Document Management software
Conversely, the average annual improvement in Reportable Health & Safety solutions capture and track the lifecycle of documents such that only the
Incidences for those who DID NOT use either Document Management or most up-to-date and valid document is in use and only authorized per-
TABLE OF Quality Management software was only 6%. sonnel can access or modify documents. They also support team collab-
CONTENTS
oration around documentation. Given that documented proof is required
SECTION Average annual improvement in Reportable Environmental Incidences was
in support of compliance activities, Document Management is a natural
1 2 3 27.6% for users of Quality Management software versus 19.9% overall.
supporting fit.
4 5 6
Average annual improvement in Reportable Environmental Incidences was It is also clear that today’s Quality Management software solutions
7 8 9
23.9% for users of Document Management software versus 19.9% overall. are being used not only to focus on ensuring that quality procedures are
Conversely, the average annual improvement in Reportable Environmental being followed, but also compliance related procedures as well. All related
Incidences for those who DID NOT not use either Document Management actions are enforced and recorded in these systems. And most of them
or Quality Management software was only 7%. include a Document Management capability and/or can work directly with

Average annual improvement in the Number of Non-Compliance Events was a separate Document Management system.

24.6% for users of Document Management software versus 18.5% overall.

Conversely, the average annual improvement in the Number of Non-Compli-
ance Events for those who DID NOT use either Document Management or
Quality Management software was only 7%.
SECTION 5

Role-Based
Performance Dashboards
 Role-Based Performance Dashboards

PAGE
25 As part of corporate-wide and manufacturing metrics programs, com- One goal of this year’s survey was to understand how the use of dash-
panies have been on a path over the last decade to bring greater visibility boards continues to evolve in relation to the previous survey. And more
of key performance indicators to their employees so they can take decisive specifically, to understand how people were tailoring dashboards to suit
MANUFACTURING METRICS
THAT REALLY MATTER

improvement actions. As part of these initiatives, there have been many specific roles, as well as to look at the timeliness of role-based information.
lessons learned, including how to do this “right,” with “right” meaning: Related to this is the associated automated versus manual data capture, and
the dashboard technologies and functionality being deployed in support
. Ensuring that the only the right/appropriate/correct information of metrics programs.
is presented

. Delivering this right information only to those individuals who

TABLE OF
CONTENTS need it, such that people are not distracted or overloaded with
informational noise
KEY OBSERVATION:
SECTION
1 2 3 Operational dashboard use did not change from an overall usage perspec-
. Delivering this right information in the right/timely fashion, so
4 5 6 people have what they need to take action while there is still time
tive (38%) from respondents of the previous Metrics That Matter survey.
7 8 9 However, there were a number of shifts in how they are being used and
to impact a situation
these will be explored further in this section.
. Ensuring that the right information is delivered in context with the
right/correct rationale, so that people are clear about why they are
receiving the information and what they need to do about it Operational Dashboards in Use

. Ensuring that the right actions are being taken and the right processes
and procedures are being followed for a given situation

A number of these “right” things are addressed by today’s performance

dashboard software applications. Some of these applications are intended
to be more enterprise/business focused, such as Business Intelligence (BI)
38%
dashboards. Others are more directly focused on manufacturing opera-
tions, such as OI/EMI. In addition, there is some blending/integration of
62%
business and manufacturing operations information on dashboards seen
No Yes
in the marketplace.
 Operations Use of Performance Dashboards
Timelines of Performance Dashboard Information -
PAGE
As part of the survey, respondents were asked about the timeliness of Operators & Supervisors
26
information being delivered on performance dashboards that are currently
in use in support of the needs of a wide number of manufacturing organi-
MANUFACTURING METRICS

7%
THAT REALLY MATTER

zation roles. Responses are organized into three groupings – Operators & 12%
Supervisors, Technical Staff, and Management. 8%
Supervisors 29%
The graph shows the existing timeliness/frequency of performance dash-
10%
board information for different levels of Operators, as well as Supervisors. 21%
14%

18%
TABLE OF
13%
CONTENTS
KEY OBSERVATIONS: 9%
SECTION Operators and Supervisors are seeing more performance information in Plant level
23%
operators
1 2 3 real-time than respondents of the previous Metrics That Matter survey. 7%
4 5 6 In the previous survey, the percentage was approximately 17%, and this
15%
7 8 9 15%
is now up to 26% of Machine Level Operators seeing their performance
information in real-time, and 19% of Line/Area Level operators are as well. 21%
11%
Seeing performance information within a shift has increased from the pre- 9%
Line / Area
vious survey average of approximately 13% for Line/Area and Plant Level level operators 19%
Operators to 15% in this new survey. 5%
15%
Plant Level Operators and Supervisors appear to be the sweet spot for us- 19%
ing high frequency performance dashboard information in manufacturing
25%
operations. 11%
6%
The overall trend is toward faster visibility of performance metrics for Machine level
operators 18%
manufacturing operations. 4%
9%
26%

0% 5% 10% 15% 20% 25% 30%

Rarely / Never Monthly Weekly Daily

End of Shift Within a Shift Real-Time (Seconds, Minutes)

 Technical Staff Use of Performance Dashboards

PAGE Timelines of Performance Dashboard Information - Technical Staff

27 The graph on this page shows the existing timeliness/frequency of per-
formance dashboard information for different manufacturing technical
10%
roles, including Maintenance, Engineering, Process Improvement, IT/Busi-
MANUFACTURING METRICS

17%
THAT REALLY MATTER

ness Analysts, and Quality personnel. 15%

Quality
30%
The graph shows that daily information is most typical for use by techni- personnel
6%
cal staff. Maintenance and IT/Business Analysts are not using performance 11%
10%
dashboard information as much as other roles that are more reliant, such as
23%
Quality, Process Improvement, and Engineering.
26%
It was not surprising to see that in general, Technical Staff are less IT / Business 15%
analysts 21%
TABLE OF engaged in using performance dashboards than Plant Level Operators or
CONTENTS 2%
Supervisors according to the survey, showing that more of the Technical 5%
SECTION 8%
Staff rarely/never use them. Operations have more opportunities to make
1 2 3 13%
day-to-day impacts on performance.
4 5 6 18%
7 8 9 Process / 17%
Improvement 28%
staff 3%
12%
8%

15%
17%
10%
Plant / Control
28%
engineers
6%
12%
12%

22%
15%
10%
Maintenance
29%
personnel
8%
14%
13%

0% 5% 10% 15% 20% 25% 30%

Rarely / Never Monthly Weekly Daily

End of Shift Within a Shift Real-Time (Seconds, Minutes)

 Management Use of Performance Dashboards
Timelines of Performance Dashboard Information - Management
PAGE
28 The graph on this page shows the existing timeliness/frequency of per-
formance dashboard information for different management roles, including
9%
C-Level Executives, Business Unit Managers, Plant Managers and Opera-
MANUFACTURING METRICS

50%
THAT REALLY MATTER

tions Managers. 16%

C-level
executives
13%
1%
5%
5%
KEY OBSERVATIONS:
7%
Management roles are not seeing as much performance information in re- 31%
TABLE OF 23%
CONTENTS al-time as other roles (5% to 12% of managers are depending on role/level).
Business unit
27%
managers
SECTION However, a good portion of management roles are seeing performance in- 1%
1 2 3 formation within a day or sooner (27% to 65% are depending on role/level). 4%
4 5 6 7%
7 8 9 Operations Managers are in the highest category of seeing/utilizing per-
formance information within one day or sooner at 65%, and this is almost 6%
15%
double when compared to the last Metrics That Matter survey.
16%
Plant
This indicates a stronger engagement and involvement of Operations Man- 40%
managers
3%
agers in the overall manufacturing performance management process.
7%
12%

4%
11%
19%
Operations
managers
37%
6%
10%
12%

0% 10% 20% 30% 40% 50% 60%

Rarely / Never Monthly Weekly Daily

End of Shift Within a Shift Real-Time (Seconds, Minutes)

 The State of Data Collection for Metrics

PAGE
29 Another section of the survey asked where companies were on their Financial & Operational Metrics - Data Collection Methodologies
journey towards more automated data collection techniques in support of
Partially automated 55%
MANUFACTURING METRICS

their manufacturing performance metric programs.

THAT REALLY MATTER

The graphs show the spectrum of manual to automated data collection Keyed into spreadsheets 25%
in three different views. The first is overall/across both the Financial and Fully automated 11%
Operational metrics. The second view is just for the Financial metrics and
Manually recorded 10%
the third is just Operational metrics. The goal was to see if there were
0% 10% 20% 30% 40% 50% 60%
differences in the levels of information automation for these groupings.

TABLE OF
CONTENTS
Financial Metrics - Data Collection Methodologies

SECTION 52%
KEY OBSERVATIONS: Partially automated
1 2 3
4 5 6 The graphs show there is more automated data collection occurring for
Keyed into spreadsheets 34%
7 8 9 Operational metrics than Financial metrics, whereby a total of 67% have Fully automated 8%
Operational metrics that are partially or fully automated versus a total of Manually recorded 6%
60% for Financial.
0% 10% 20% 30% 40% 50% 60%

There were no significant movements seen in going to fully automated data

collection methodologies, when compared to respondents from the previ-
Operational Metrics - Data Collection Methodologies
ous Metrics That Matter survey. Progress in this area appears to be a longer
journey in spite of the fact that the amount of available manufacturing in- Partially automated 55%
formation is rapidly increasing as more intelligent devices and systems are
Keyed into spreadsheets 23%
being deployed.
Fully automated 12%
Manually recorded 10%
0% 10% 20% 30% 40% 50% 60%
 Software Functionality of Performance Dashboards

PAGE
30 The next area that was explored in relation to role-based performance Operational Dashboards - Deployed Functionality
dashboards was the specific functionality that has been deployed to date.
MANUFACTURING METRICS

Some of the functionalities go to the heart of delivering on the needs

69%
Covers a
THAT REALLY MATTER

that were discussed earlier as being “right.” single plant

The graph indicates that most Operational Dashboards cover a single
plant – at 69%. However, 43% of respondents also indicated that their Purely electronic,

dashboards are covering multiple plants. Multiple selections were allowed

rather than
print outs
57%
in the survey.
At 57%, most have purely electronic/visual displays. It is relatively
43%
Covers
TABLE OF common to be able to drill down on dashboard displays to get to root multiple plants
CONTENTS
causes and more detailed information at 40%, while 35% have the capabil-
SECTION Allows drill down
ity to proactively alert users based on conditions/rules.
1 2 3
A recorded 40% have Operations performance information rolling up
to find
root causes
40%
4 5 6
7 8 9 to Enterprise dashboards/scorecards. This is consistent with the trend de-
scribed earlier towards more high frequency engagement by Operations Operations data rolls

Management in plant performance activities.

up to an enterprise
scorecard
40%
Can create an
escalation or alert
based on rules
35%
KEY OBSERVATIONS:
0% 10% 20% 30% 40% 50% 60% 70% 80%
In comparison to respondents of the previous Metrics That Matter study,
only 31% had dashboards that could escalate/alert based on rules, versus
35% in this new study.

Previously, only 30% rolled up to an enterprise scorecard; now it is 40%

on average. This indicates further sophistication in the use of dashboards,
along with higher transparency of manufacturing information going up the
enterprise.
 Technologies for Performance Dashboards

PAGE
31 The last area of exploration in relation to role-based performance Operational Dashboards - Software Packaging
dashboards was to understand the different software technologies and
MANUFACTURING METRICS

packages that are being utilized. Part of a plant

32%
THAT REALLY MATTER

Historian software
The graph clearly shows that there is a broad range of manufacturing package
and business applications being utilized to support metrics programs with
visual performance dashboards. Part of an ERP
software package 31%
Part of a BI
software package 30%
TABLE OF
CONTENTS
KEY OBSERVATIONS:
Part of a MOM /
SECTION There is no clear single approach/package being used, and many compa- MES software
package
30%
1 2 3 nies are using multiple different software applications to meet their over-
4 5 6 all needs. Part of a Quality
7 8 9 Management
software package
28%
The percentage of companies using the performance dashboard function-
ality provided with MOM/MES and Quality Management software packag-
es appears to be higher than the portion of companies using the ERP based
Part of an EMI / OI
software package 17%
performance dashboards.
0% 5% 10% 15% 20% 25% 30% 35%
This can be concluded from comparing the percentages of manufacturing
software deployed by survey respondents (in Section 4), versus the associ-
ated use of the operational dashboards of those same software packages.
For example, ERP is the most used manufacturing software application at
74%, but ERP operational dashboard use is only 31%.
SECTION 6

Anticipated Impacts
of Emerging Technologies
 Anticipated Impacts of Emerging Technologies

PAGE
33 There are a number of rapidly emerging technologies that are already is well understood at 39%, along with unburdening the IT organization
having a significant impact on manufacturing performance management at 37%. Users are anticipating greater speeds of implementation (29%),
MANUFACTURING METRICS

approaches. These include cloud, mobile, and big data technologies, and an as well as making it easier to aggregate performance information across
THAT REALLY MATTER

important research goal was to understand where and how these emerging multiple plants/facilities in the future (24%).
technologies will be utilized in manufacturing company’s futures.

Impact of Cloud-Based Software for

CLOUD-BASED SOFTWARE Manufacturing Performance Management
IT communities have rapidly embraced cloud-based software appli-
Lower the total cost of ownership for implementing
TABLE OF
cations due to lower total lifecycle costs. Initial capital expenditures on
manufacturing performance software 39%
CONTENTS hardware, licensing fees, and updates can comparatively make traditional

SECTION software delivery mechanisms more costly and time consuming. Cloud-
1 2 3 based “software as a service” delivery outsources the hardware and
Don’t know 37%
4 5 6 software support for the user, is faster and easier to deploy, updates auto-
7 8 9 matically, and allows for nearly unlimited storage space. Unburden IT organizations from having to
maintain servers and software updates 37%
Though many business leaders still have reservations about the cloud
for manufacturing applications, the space is advancing rapidly to address
Speed the time it takes to implement
major concerns around connectivity and security, as well as other issues, manufacturing performance software 29%
while making the benefits of cloud adoption too attractive to ignore. In
a separate LNS Research vendor survey, 50% of manufacturing software Enable performance information
providers were found to be already offering some cloud-based offerings, on mobile devices 24%
and over 90% of were investing in cloud capabilities for future products.
Make it easier to compare
performance information across
multiple plants / facilities
24%
Performance information applications such as Data Historians and OI/
EMI are good examples of cloud-based software in use today with little res- Make it easier to integrate

ervation, since they do not directly control production. There are also cloud-
performance information across
my different systems 19%
based ERP and MES offerings that are available and proven in manufacturing.
The graph shows the expectations of survey respondents for the impact Other
3%
of cloud-based software in their operations.
While 37% are still unsure, the lower total cost of ownership message 0% 5% 10% 15% 20% 25% 30% 35% 40%
 Anticipated Impacts of Mobile Technologies

PAGE
The use of Mobile devices and applications has removed the restric- Impact of Mobile Technologies on
34 tions of needing to be on-site to access performance and other production Manufacturing Performance Management
information. Mobile devices have the potential to enable workers from

54%
Plant supervisors having all the information they need to do
MANUFACTURING METRICS

across every level of the enterprise to access the performance and decision
their jobs on mobile devices
THAT REALLY MATTER

support information applicable to their respective roles.

Virtually all of the manufacturing software providers have some mobile ap- Plant managers have real-time performance
information on mobile devices 53%
plication(s) available, and with more on the way.
The graph shows the roles that are expected to benefit from mobile Maintenance personnel having all the information they
need to do their jobs on mobile devices 47%
technologies, along with the extent of use expected – ranging from per-
formance information to being able to perform the majority of their job Executives have real-time performance
information on mobile devices 44%
TABLE OF functions using a mobile device.
CONTENTS

SECTION
Plant Supervisors (54%) are the top users anticipated to have the ability to Quality personnel having all the information they
need to do their jobs on mobile devices 41%
have everything they need to do their jobs in the palm of their hands. Plant
1 2 3
4 5 6
Managers (53%) are anticipated to have the ability to manage performance Technical personnel having all the information
they need to do their jobs on mobile devices 41%
7 8 9 in real-time from mobile devices.
Given that most Maintenance professionals have a need to be highly Plant operators having all the information they
need to do their jobs on mobile devices 37%
mobile, it was no surprise to see them at 47%, with all the information they
need to do their jobs remotely. Creating a completely paperless
manufacturing environment 35%
Facilitating access to mobile information also holds the promise for an
entirely paperless manufacturing environment for 35% of respondents. Engineering and manufacturing have same design
and manufacturing information on mobile devices 32%
Only 25% were unsure of how mobile technologies would impact manu-
facturing performance management, which implies that mobile applications
in manufacturing are better understood than cloud-based software, which
All personnel have same design and man-
ufacturing information on mobile devices 28%
was at 37% “Don’t Know.” Don’t know
25%
Sharing information with
suppliers via mobile devices 22%
22%
Sharing information with
customers via mobile devices

0% 10% 20% 30% 40% 50% 60%

 Anticipated Impacts of ‘Big Data’ Technologies
The last emerging technology impact we will explore is “big data.” The of their biggest and most important challenges and objectives. Reinforcing
PAGE
35 current buzz-term may be slightly misleading to some. Most manufactur- this, note that the top nine responses each has a response rate of over 30%.
ers are quite accustomed to having “big,” or some might say huge amounts A mere 5-6% felt that big data would not have any future use or impact on
their manufacturing performance improvement personnel.
MANUFACTURING METRICS

of data flowing throughout their organizations, but they have historically

THAT REALLY MATTER

lacked the context that gives that data actionable meaning—giving birth to
the phrase, “data rich, but information poor.” Impact of Plant and/or Enterprise ‘Big Data’ on Manufacturing
And this is where the emerging technological capability referred to as Performance Improvement Personnel
big data is coming into play. The potential for previously unknown cor-
relations to be discovered, and for informational silos to be broken down, Better forecast products / production 46%
is accelerating. But big data concepts are still both nascent and broad
TABLE OF enough that nobody is entirely sure how they will play out in manufactur-
Understand plant performance across multiple metrics 45%
CONTENTS
ing, although the possibilities are potentially transformative.
SECTION
Service and support customers faster 39%
1 2 3
4 5 6
The graph shows where survey respondents see this going. Given the Real-time alerts based on analyzing manufacturing data 38%
7 8 9 importance of production, it is not surprising that better production/
Correlate manufacturing and business
forecasting was the top response at 46%. Here, big data could operate in performance information together 36%
myriad ways, including identifying correlations between customer data,
scheduling, and maintenance, which would have the potential to identify
Correlate performance across multiple plants 36%
hidden patterns that could enable greater operational efficiency, better Mine combinations of manufacturing and
other enterprise data 31%
anticipate order lead times, shorten asset/machine downtimes, and make
materials purchasing and WIP decisions more effectively.
Perform predictive modeling of
manufacturing data 31%
Other top responses, such as being able to understand plant perfor-
mance across multiple metrics (45% of responses), servicing and sup-
Improve interactions with suppliers 31%
porting customers faster (39%), and real-time alerts based on analyzing Don’t know 29%
manufacturing data (38%) are in line with some of the important objec-
Understand customer
tives and challenges that manufacturers are talking about today, such as requirements for new products 24%
finding ways to overcome informational silos/disparate data sources and
maintaining/developing a more customer-driven organization. 6% I don’t think they will
use plant ‘Big Data’

It seems clear from these responses that manufacturers today are poised
5% I don’t think they will
use enterprise ‘Big Data’
to have their personnel take advantage of big data analytics to attack some
0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%
SECTION 7

Best Practices for Metrics

Program Success
 Best Practices for Metrics Program Success

PAGE
37 One of the industry best practices that MESA and LNS Research see Here are the key steps (further explained in the MESA Metrics Guide-
for metrics program success is to take the organization through a strat- book) to take in a Strategic Decomposition/Goal & Metric Alignment
egy decomposition and goal alignment process. By definition, company Process:
MANUFACTURING METRICS
THAT REALLY MATTER

strategy needs to be a “top down” exercise, but the alignment of strategy,

actions, and metrics as they relate to individual areas of the business, de- 1. Understand and Articulate Strategy: Have a clear and universally
partments, and individuals is a cross-functional engagement exercise that understood manufacturing strategy that is in support of the corporate
ensures that employees can clearly see the relationships between their business strategy.
work efforts and their contributions toward strategy achievement.
2. Translate Strategy into Specific Goals: Turn that strategy into specific
The diagram shows an example of top level strategy, actions and
goals for business groups and associated supply chains as well as
TABLE OF measures, and how these need to be interpreted into more detailed, but
CONTENTS plants, units, and production lines.
aligned plans across a manufacturing enterprise.
SECTION 3. Map Goals and Specific Metrics for Success: Use a cross-functional
1 2 3 team to map each detailed translation across the enterprise.
4 5 6
7 8 9 4. Determine Key Performance Indicators: Develop a set of manufacturing
STRATEGY KPIs to measure progress toward goals.
CORPORATE Vollman Triangle
5. Establish Communication Procedures for KPIs: Make sure the right
ACTION MEASURE
information is getting to the right people in a timely manner.

6. Set Processes for How to Act on KPI Information: Determine best practices
for individuals from the shop- to top-floor to interact with KPIs.

7. Match Performance Incentives to Aligned Goals: Reinforce the effec-

tiveness of measuring KPIs by incentivizing progress.

When everyone across an organization is aligned with their respective

individual, group, and company goals and metrics, and everyone has the
information they need to do their jobs efficiently, truly great things can
happen at an accelerated pace.

Production Process

Source: Dr. Peter G. Martin

 Getting Executives and Operations on the Same Page
One of the specific challenges that was discussed at length at the 2013 Operational Metrics that Executives Believe have the Biggest Financial Impact
PAGE
38 MESA “unConference” session on Metrics That Matter was the organiza-
Efficiency 33%
tional and understanding related gaps that exist between executives and
Quality 31%
MANUFACTURING METRICS

plant operations. “Business-speak” and “manufacturing-speak” are very

Responsiveness 26%
THAT REALLY MATTER

different languages, and there was a sense that if executives could better Inventory 21%
understand “manufacturing-speak” and the potential impact that manu- Don’t know 18%
facturing can have on business success, then this two-way understanding
Maintenance 8%
Compliance 6%
could accelerate many more manufacturing initiatives to move forward.
Innovation 6%
Therefore, in addition to the specific Operational and Financial im-
0% 5% 10% 15% 20% 25% 30% 35% 40%
provements that were uncovered in the survey, two related “attitude and
TABLE OF approach” questions were asked. The first graph shows which categories of Approaches Taken to Successfully Educate Executives on Manufacturing
CONTENTS
Operational metrics that executives already believe have the biggest impact Business Improvement Potential
SECTION
on financials. The top four responses were Efficiency (33%), Quality (31%), Executive business review
1 2 3 meetings 40%
Responsiveness (26%) and Inventory (21%), with 18% indicating that they
4 5 6 Manufacturing strategy
35%
part of annual businesses
7 8 9 didn’t know, and these responses represent the extent of the disconnect.
Plant reports contain
financial impacts 29%
Next, respondents were asked about what approaches have been taken
Manufacturing tours 28%
in the past to successfully bridge this gap by educating executives on man-
Real-time dashboards
ufacturing business improvement potential. contain financial impacts 24%
Manufacturing peer
The graph shows that executive business review meetings were the top review meetings 23%
communication opportunity, at 40%. Next, at 35% was including manufac- Don’t know 23%
Participation in industry
turing strategy as part of the overall business planning process. This is con- associations 20%
sistent with the Strategic Goal Alignment best practice discussed earlier. Balanced
scorecard training
20%
Manufacturing performance dashboards and reporting came up in Manufacturing
16%
program training
multiple responses, along with simple review meetings and plant tours. Trade publications 10%
MESA and LNS Research recommend that you consider employing a Participation with
industry analysts 9%
number of these approaches to get executives and operations on the same Participation in
peer councils 7%
page. This will facilitate a greater two-way understanding of both challeng-
No actions taken
es and opportunities and likely cut down on some frustrations. in this regard 5%
Skip level meetings 3%
Other actions taken 1%
0% 5% 10% 15% 20% 25% 30% 35% 40%
SECTION 8

Case Study
 CASE STUDY
Murata Power Solutions

PAGE
40
Headquartered in Mansfield, MA, Murata Power Solutions is a leading Spurred on by the metrics improvements these initiatives have helped
global supplier of converters, power supplies, and related products. The deliver, the company is moving forward with further integration of its MES
MANUFACTURING METRICS
THAT REALLY MATTER

company operates in a highly competitive industry—requiring rapid prod- and ERP systems, as well as intensifying efforts to speed its new product
uct development, stringent quality standards, and high customer respon- introduction process and reduce costs by incorporating FMEA (Failure
siveness to both maintain and elevate its market position. Mode and Effects Analysis) initiatives into additional manufacturing phases
- beginning with design. Additionally, the company is implementing a Six
With a strong continuous improvement company culture to build Sigma program at its main facility and selecting specific individuals for belt
from, the company has recently added Project Management (PM) soft- training in this program.

TABLE OF ware to its operations and integrated its formerly disparate MES system
CONTENTS
and reporting methods.
SECTION
1 2 3 The addition of this PM software has fostered additional inter-de-
4 5 6
partmental collaboration, and the company’s software initiatives around
7 8 9
MES and Quality Management software have shown valuable operational
correlations that have helped the company improve in several operational
areas over the past year.

Murata has recorded significant annual performance improvement

metrics, such as:

Customer fill rate/on-time delivery: Annual improvement of 80%,

versus survey respondents’ annual improvement average of 12.5%.

First Pass Yield: Annual improvement of 50%, versus survey respon-

dents’ annual improvement average of 12.9%.

Supplier Quality Incoming: Annual improvement of 25%, versus survey

respondents’ annual improvement average of 13.3%.
SECTION 9

Summary &
Recommendations
 Summary & Recommendations
To conclude, here is a summary of some key answers to questions
Average Manufacturing Performance Improvements from 2012-2013
PAGE
42 posed in the introduction:
MANUFACTURING METRICS

Q. Which metrics are being used to best understand manufacturing

THAT REALLY MATTER

performance and opportunity areas for improvement?

A. The top 10 Financial metrics and top 18 Operational metrics are listed
and highlighted in Section 2.

Q. How does my company’s performance improvements compare to

industry?
TABLE OF
CONTENTS
A. You can compare with the average annual improvements achieved by
SECTION others for metrics categories are shown in the dials. Additionally:
SUCCESSFUL NPIs
1 2 3
4 5 6 The average % of successful NPIs was 71.5% and the top performers Those with Successful NPIs of 90% or better had average annual Financial
7 8 9 averaged 90%. improvements of 16%.

The average OTCS was 87.6% and the top performers achieved 95% WIP/INVENTORY
or better. Those with annual Inventory WIP Improvements of 10% or better had

The average OEE was 70.7 and the top performers achieved 80 or better. average annual Financial improvements of 12%.

OEE
Q. How do we connect operational metrics to financial metrics?
Those with OEE of 80 or better had average Financial improvements of 14%.
A. There were many positive correlations between average annual Oper-
RESPONSIVENESS
ational metric improvements or Operational metric performance,
Those who improved Manufacturing Cycle Time by 10% or more had
and improvements in average annual Financial metrics highlighted
average Financial improvements of 14%.
in Section 3. Average annual Financial improvements were 8.6%;
however, top Operational metric performers did significantly better. QUALITY
Examples follow. Those who had top annual improvements in Quality metrics such as
Improved First Pass Yield by 5% or more, or Increased Supplier Quality
Incoming by 5% or more, or Reduced Customer Rejects by 5% or more,
all had average Financial improvements of 14%.
 Summary & Recommendations (Continued)
Q. How can technology help support and impact metrics programs and 27-65% of Management are seeing performance information
PAGE
43 Financial performance? within a day or sooner depending on role/level.

A. The most deployed applications by all respondents were ERP;

Q. What are some of the best practices I can learn from market leaders?
MANUFACTURING METRICS

Planning, Scheduling & Dispatching; Quality Management; Data

THAT REALLY MATTER

Historians ; and MES. Additionally: A. One of the industry best practices that MESA and LNS Research see
for metrics program success is to take the organization through a
Average improvement in Total Cost Per Unit Excluding Materials
strategy decomposition and goal alignment process (Section 7) to
was 24.1% for users of OI/EMI software, and 22.5% for users of MES
ensure that the right metrics are being applied and evaluated across
software versus 13.1% overall.
the business. This is one focus of the MESA Metrics Guidebook. Also,
Average improvement in Net Profit Margin was 19.4% for users of a helping executives and manufacturing personnel to better under-
TABLE OF Comprehensive Suite of MOM software versus 10.4% overall. stand each other and the potential impact that manufacturing can
CONTENTS

Average improvement in OTCS was 22.0% for users of MES software, have on business success can accelerate many more manufacturing
SECTION
1 2 3 and 20.4% for users of Quality Management software, and 19.1% for initiatives in the future.
4 5 6 users of PLM software versus 12.5% overall.
7 8 9
Q. Which metrics are being utilized as part of role-based dashboards and
how frequently should these metrics be measured and utilized?

A. The top 10 Financial and top 18 Operational metrics that are being
utilized by respondents are detailed in Section 2. Most Operational
metrics programs are looking at a combination of individual Plant
level metrics rolling up to a Corporate view. Most Financial metrics
programs are looking at Corporate and Business Unit level metrics.
The overall trend is toward faster visibility of performance metrics for
manufacturing operations. Examples follow.

26% of Machine Level Operators and 19% of Line/Area Level

Operators are seeing their performance information in real-time.

15% of Line/Area and Plant Level Operators are seeing perfor-

mance information within a shift.
 Sponsors

PAGE
MESA International and LNS Research would like to thank the sponsors of
44
this 2013-2014 MESA Metrics research project. Development and distribu-
tion of this valuable information was made possible by:
MANUFACTURING METRICS
THAT REALLY MATTER

TABLE OF Presented by:

CONTENTS

SECTION
1 2 3
4 5 6
7 8 9

Author:
Mark Davidson, Principal Analyst
[email protected]

© MESA International and LNS Research.