We’ve previously discussed the benefits of dashboards for job shops.
We now want to examine what are the 4 key metrics that should be on your dashboard to help you assess the operational performance of your job shop. It’s likely that many of these example operational metrics are new to you or viewed in a different light when compared to traditional measures.
The first metric is Due Date Performance. For such a simple metric, there exists a wide range of definitions and viewpoints on the matter.
Due Date Performance is the measure of your shop’s reliability. Having a highly reliable shop is a great attribute that can be utilized to increase sales as many customers desire a highly reliable supplier.
We define Due Date Performance as delivering what the customer wanted based on when you committed to deliver.
This would mean the delivery of all parts, components, etc. of an order on the customer’s requested due date.
While Due Date Performance is a useful measure, it’s a lagging measure and doesn’t actually provide you with information that’s actionable. Knowing your Due Date Performance is below 100% does not necessarily tell you what actions to take to improve the measure.
If you want to know how to improve your Due Date Performance, see our article on How to measure Due Date Performance so you CAN improve it!.
Throughput-Thinking: Your Due Date Performance should be 100% if you have not oversold capacity and have a properly prioritized schedule. With Velocity Scheduling System (VSS) it is not uncommon for a company’s Due Date Performance to go from a very poor level (less than 60%) to an outstanding level (>95%) in a very short period of time.
The faster your jobs flow through your shop the better. Velocity is the measure of how fast a job flowed through your shop. When most folks think of Velocity, they begin to think of traditional notions of Velocity such as decreasing takt times or increasing unit volume.
The problem is the existing metrics (takt time and unit volume) do not fit job shops nor take into account the special circumstances job shops encounter on a day to day basis. For instance, it’s difficult to track and monitor takt times on jobs because every job is different and job shops are such a high mix, low volume environment. Furthermore, how do you begin to assess what the takt time should be on a job if it’s the first and last time you’ll ever make it?
The thought of measuring and increasing unit volume also falls short. Some jobs have very few units and are completed in a short period of time. Others have a large number of units and take a long time to complete.
These facts alone aren’t so bad, but as a job shop owner you know you also have the opposite in your shop: jobs with very few units which take a long time to complete and jobs with many units that are completed quickly.
How can you possibly measure how many units your shop should be completing when the number of units and the time to produce a unit is different on every job? Couple this information with the fact that your mix of business is constantly changing, and you can see why most attempts to measure Velocity at a job shop end in frustration. (Check out this list of job shop scheduling challenges.)
If you have not been through Dr. Lisa’s Velocity Scheduling System, the data needed to measure Velocity are unavailable. A great aspect of VSS is that it provides you the necessary data so you can measure Velocity and also set expectations for jobs in terms of what their Velocity should be.
Throughput-Thinking: Although jobs vary in size, complexity, number of units, and hours to complete, you can establish expectations for job Velocity and manage your jobs such that your Velocity is always improving. Check out Velocity Scheduling System to see how you can better manage Velocity at your shop.
Productivity – Hours Completed vs Clocked hours
Many shops look at efficiency on an individual, one-off basis, whether at the job, employee, machine, or department level.
We take a different view and look more holistically by viewing the performance of the shop as a whole.
Instead of examining a worker or machine’s efficiency, we want to know the overall effective use of our shop as a whole by comparing Hours Completed to Clocked Hours.
Hours Completed are the hours of the jobs completed for a particular period of time (day, week, month, etc.). Clocked hours are the hours that were “clocked” into your payroll system – the hours you paid people to work.
As Dr. Lisa says, “We want to get more done with the same people and resources”. The way to know if we are doing this is to see if we are actually completing more work (in terms of hours) relative to the amount of clocked hours over the course of time.
KPI for Operations Team
Although there are a few other metrics we may utilize, depending on the special circumstances of your shop, these are 3 of the 4 key operational metrics that need to be on your dashboard.
You might be wondering what the 4th key operational metric on the VSS and Velocity Pricing System dashboards is, but that one, we save as a competitive advantage for our clients 🙂
In our next installment, we’ll look at financial metrics for an effective dashboard in job shops and machine shops.
Wishing you success from the Science of Business TEAM:
- “Dr Lisa” Lang, Chief TOC Expert, Job Shop Whisperer, TOCICO Certified
- Brad Stillahn, Pricing Expert, CIPM, CIRM, TOCICO Certified, Certified Exit Planner
- Beau Ganas, Throughput Accounting Guru, CPA, CMA, CFE, CIA, CISA and TOCICO Certified
Blah, blah, blah – who cares? The key is that our clients get results! Ask us about paying based on YOUR results!
P.S. If you’re ready to go beyond looking at data, and are ready to IMPROVE, check out Velocity Scheduling System to improve lead-times, improve due date performance and reduce chaos!
P.S.S. If you ready to understand how you really make money and take your profits to the next level, check out our Velocity Pricing System (it’s more than just pricing)! It’s the ultimate jobs shop costing system – understand how, where, why you make money (or not). Understand your capacity and resources so that you can quote fast and ensure profitability.
P.S.S.S. This is Part 2 of a 5 Part series. Read the entire KPIs and Dashboards series.
Copyright Science of Business, Inc. All rights reserved worldwide.