How Operations Teams Reduce Waste with Unified Performance Metrics

Before understanding the sources of waste within organizations, it is essential to consider how all areas of an organization operate under different metric systems or work  on different versions of reality. As a result, excess inventory, idle time, defects, rework, and inefficiencies quietly diminish margins.

An excellent example of this phenomenon is illustrated to show how Tata Motors, Bharat Electronics Limited (BEL) and ITC Limited have developed a single set of defined performance metrics for every area's operation as opposed to each being independent of one another. The key benefit of developing a unified performance metric for each of these companies is that it allowed each operational department the ability to work towards the same results which, ultimately, would allow them to work more efficiently than the traditional systems.

The Real Problem

Operations departments usually monitor a variety of KPIs. Examples of KPIs used include: production output, defect rate, downtime, inventory levels, and lead time. However, using differing definitions among departments makes waste difficult to detect.

For instance, one department may measure production in order to maximize output, another may measure production in order to reduce defects, and yet another may measure inventory separately from either of the previous two departments. If each department does not have a common metric for measuring success, efficiencies gained in one area will be of no use.

The creation of a unified set of performance metrics provides a common definition of success among departments and will guarantee that each will optimize its efforts towards the desired outcome.

Tata Motors

Across all of its manufacturing plants, Tata Motors has used Six Sigma processes in order to correct the repeating quality and production processes. They developed common metrics between teams such as Defects Per Million Opportunities (DPMO) and Process Capability that created a common language for all teams and provided a shared goal of working together. Each team worked toward the same measurable defects or production efficiency. By using these metrics all in a unified approach, Tata Motors was able to greatly improve the quality of their products and decrease the amount of defects that were produced. Thus, they improved production efficiency and reduced wastes caused by rework or failure due to poor quality.

Bharat Electronics Limited (BEL)

Bharat Electronics Limited (BEL) implemented Six Sigma strategies in order to enhance operational performance at their locations.

They aligned cross-functional teams to have common performance measures based on defect rate, process efficiency, and cost control. BEL had decreased manufacturing defects by 65% after 18 months and achieved significant cost savings, which demonstrate how alignment through unified metrics can impact both the operational waste and the financial results.

BEL's use of consistent definitions across departments for tracking performance provided a means to eliminate the misaligned objectives and inconsistent reporting that causes inefficiencies among the departments.

ITC Limited

ITC Limited has a complex supply chain encompassing multiple businesses such as FMCG (Fast Moving Consumer Goods), agricultural products, and product manufacturing. To effectively manage this large-scale operation requires the integration of procurement, production, and distribution.

In order to improve their efficiency, ITC brought together all of their metrics for the entire supply chain to use the same metrics for inventory, demand forecasting, and production planning under one consolidated performance framework.

When the sales department, manufacturing, and supply chain departments are all working towards common goals based on the same metrics, the organization will eliminate excess inventory, reduce stock outs, lessen manufacturing and supply chain discrepancies.

By implementing these shared metrics throughout the organization, ITC is reducing waste at the individual department level, but also the various processes within its total organization.

The Common Pattern: Metrics Drive Behavior

The single most important principle found across these organizations is that everything is measured, and everything is improved. Unified performance metrics benefit operations teams by being able to:

• Quickly spot areas of inefficiency
• Remove conflicting priorities within teams
• Decrease the amount of rework and defects
• Minimize idle time
• Improve coordination between different functions
• Promote ongoing improvement at a large scale

Where DataSense Fits In

Most businesses realize how vital having clear metrics is but they do not always know what metrics should be used to gauge success. The confusion caused by inconsistency across dashboards, tools, and teams creates problems for those who rely on metric reports to make decisions.

DataSense solves these problems by creating a consistent set of definitions that apply to all the departments of an organization. DataSense consolidates operational data from multiple sources and provides organizations with an accurate and consistent calculation method. With DataSense organizations can:

• Track performance consistently across all departments in the organization
• Identify and eliminate waste by having access to real-time information
• Improve communication among the operations, supply chain and leadership groups
• Predict waste if the past data is given

Instead of having to wait until report production to react, your team will have ongoing performance visibility which will allow them to eliminate waste prior to its occurrence.

Final Words

The operations of most businesses experience waste due to unclear goals or lack of alignment rather than due to an employee's poor performance. Companies such as Tata Motors, Bharat Electronics Limited (BEL) and ITC Limited are proving that when an entire organization aligns itself regarding measurable performance, it is possible to achieve enormous savings through waste reduction, increased efficiency and improved outcomes.

Today's definition of operational efficiency has expanded beyond just the shop floor. The beginning of effective operation starts well before the production begins.