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The Three Areas of Your Shop in Numbers
Whether you build, make or stock and ship, you have three key areas of your shop that determine whether you will be profitable and by how much. Lose...
4 min read
This year, we are completely focused on knowing our numbers. We’re going to be talking about it with you, too. Metrics do tell you where you’ve been, what you’ve accomplished, what you’ve done well, and what targets you’ve hit (or missed). These are all lagging metrics and they’re exceptionally meaningful. Why?
First, to run a business, I need to know:
- How much money we’re taking in, where we’re spending it, how much we need and where we’re going to get it.
- Whom I need to get the work done and whether or not they’re available and trained to do the work.
- Where the work is, in process, and
- When it’s supposed to finish.
Further, I have to be able to flex any one or more of those data points and know what will happen. If an operator with a special skill doesn't come to work today, how will you move forward? If you were shorted some materials that you were relying on for work that had to go out the door, what’s the next step?
Manufacturing is such a complex series of interrelated processes that it’s not easy to answer these questions as they happen and even more challenging to plan for all the ways it could go wrong and need your help. So this year, we’re going to break it down one idea or number at a time. For those of you looking at systems or working with one, you can lean into these ideas and see if they’ll work for you.
What's Your Number per X
We track a lot of numbers to assess our own health. Leads. Closure rate. NPS. Open tickets. One that many, if not most, software companies track to is revenue per employee. As a business with an annual revenue stream from licensing, we know that sales must directly track to a minimum revenue per employee in order to be profitable.
For manufacturers, I often see them tracking hours, jobs, dollars or even throughput. What if you could measure actual Y per X in your shop? How relevant would that be for you and how quickly would you need it?
The manufacturing audit
We started working in the aerospace industry, where audits are mandatory. They were looking for traceability of information – making sure they could work their way backward from work completed to the original order to verify completion and acceptance. For manufacturers working with binders of information, they were often struggling to prove that what was written and provided to the operators was true to the original order paper and everything that needed to be done.
If you are not in such a rigorous industry, you still have things you could audit about your work. Think about how you will prove to yourself, if no one else, that you are spending the money you need, and only that, in finishing the goods that you are producing. Is there a measure there, one that you can point to, that you know will tell you that an order is “healthy”?
Could you look to quality and track the number of issues per X things completed? The number of jobs late per hour, day or week (depending on your velocity)? Orders completed per day? For each of you, this may be, will be, different. The individual nature of it very much reflects what’s going on in your shop at any given time.
On paper
We say the words “on paper” to sometimes mean that when you saw it written (theoretical), it seemed to make sense, but when you actually did the work, it didn’t come out as you thought. It’s not always seen as a positive phrase.
Paper seems like a challenge in the manufacturing environment as well. It’s expensive, not easy to track and very much gets in the way when things are moving or changing. However, I’m going to make an argument for paper.
The Database Expert in your house
Almost every manufacturer we meet has someone (or a group of someones) who are responsible for creating one or more interlocking sheets that track performance on some level. For some, this data comes out of the ERP. Generally, it still gets exported to a datasheet in Excel or Access so that you can massage the numbers and do calculations to gauge performance.
These database experts know where the data they need is located. Please note, this doesn’t mean that it was easy to find and you should be careful to understand exactly where the data is coming from so you know how to create that sheet yourself should you need to. They know the patterns they are looking for and how to display the data for your team.
They are an invaluable resource to you.
While they are truly good at what they do, they are also fallible. They are human. If you know that your sheet has a lot of calculations, then you know that the odds of them having at least one thing wrong, one pointer in the wrong place or one calculation off is worrisome.
The number is trending
In the last few weeks, we talked about the importance of knowing your cash. It’s critical. Oxygen for your organization. We discussed the idea of rolling trendlines. These are great for cash to tell you when or if you may run into trouble and need to draw on a credit line to get through. For the purposes of the conversation here, they help as well.
Rolling trendlines normalize data. They look over any anomalies and daily fluctuations and report on overall health. So, if you don’t have a system to tell you exactly how many Y per X you are tracking on any given day or even if you don’t know that the number is right, you have a trendline to tell you what’s happening to it. That thing you’re tracking is increasing or decreasing over time. It’s getting better or worse. Is that a true picture of what is happening?
How reliable are the systems you depend on to provide accurate, timely information? The information critical to measuring production performance and finding ways to improve it. Not great? We can help, just drop us a note at info@cimx.com. Or solve this and many more production problems faster with a Process Gap Analysis of your shop. Either way puts you on the path to discovering Complete Production Control.
Contact CIMx Software to see how a Manufacturing Execution System can improve production control for you.
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