Metrics…every company has them. Not all metrics are created equal, and quite frankly, some metrics can derail a Lean transformation.
I was with the CEO and CFO of a rather large industrial manufacturing company, and I learned that they measured their plant management on Machine Efficiency. When asked why, the CFO responded: “we paid a lot of money for these machines, and we want to make sure we fully utilize them”. What he didn’t know was that his plant management was reluctant to do changeovers and TPM on the equipment for fear that their “utilization” would be compromised. This all resulted in excess and obsolete inventory, and machines that were constantly breaking down.
I asked the CFO if he would take his brand new car and drive it around the block 100 times each day to get “utilization” out of his expensive purchase. He indicated “No!” and proceeded to tell me what a foolish idea that would be. I challenged him and told him that if you wouldn’t do it in your personal life, why would you do it for your business? He had no answer.
So beware of traditional metrics such as machine utilization, absorption accounting, purchase price variance, direct and indirect ratios, etc. These traditional measures could put your Lean transformation in jeopardy.