SME Speaks: Performance Benchmarking Service
By Kevin McCormick
Member and Industry Relations Manager (Canada)
In the last five years, I have been very fortunate to work with many manufacturing, processing and producing organizations in every sector imaginable. During this time, I have watched the majority struggle with where to focus their continuous improvement activities.
Prior to joining SME, I was a continuous improvement manager for an automotive manufacturer, working with its executive staff to determine what the focus of the continuous improvement activities should be, which was often easier said than done. As is often the case, each manager wants to focus on areas that will help the performance of their particular area or group. While there is no question that improving one particular area is good for the business, the real question is whether or not that area will reap the highest return on investment versus another area.
What I have learned over the years is that to improve your organization, you must first know your strengths and weaknesses. This requires a little digging and data collection, getting down in the weeds and pulling the correct information, and then knowing how to utilize that information. It’s amazing how many organizations struggle to measure or track the metrics that are important to the success of the facility.
Having studied the Toyota Production System quite extensively, I have learned that OEE (Overall Equipment Effectiveness) is a critical metric. There are also a number of other metrics you can use to determine the overall “health” of your organization. Each one of these metrics will tell you how you are doing in a specific area, but what metrics warrant your focus? If you decide to tackle one of these metrics, how do you know if you are getting the biggest financial gain for your efforts? Did your efforts in improving the metrics warrant the effort? While OEE is basically a measurement of how a particular machine or area is performing, there are more than 30 other metrics that are important to the organization, but arguably, perhaps these are the most important:
- Health and safety;
- Running hours as percent of available;
- On-time deliveries;
- Inventory turns;
- Days receivables;
- Premium freight;
- Scrap and rework;
- Employee turnover; and
- Schedule bumping.
I am a firm believer that to plan the right improvement projects, you need to know your strengths and weaknesses. You need to understand how you stack up internally and externally. Once you understand this, then you need to know where/what area of the organization is hurting the most and will provide you with the biggest ROI to focus your efforts.
Two things an organization needs to recognize to improve:
1. Understand its current state internally and in the marketplace (compared to the competition).
2. Understand what to focus continuous improvement efforts on to bring home the biggest cost savings and have the biggest impact.
In Canada, SME has cultivated a relationship with government agencies and the MMTC (Michigan Manufacturing Technology Center) to offer a Performance Benchmarking Service and a transformation tool to Canadian industry. If you are in an organization in one of these manufacturing, processing or producing sectors, you can benefit from the Benchmarking Service:
- Industrial facilities (any plant);
- Plastics and rubber processing;
- Makers of dies, molds or one-off machined products;
- Machine building;
- Machined parts and assemblies;
- Process industries;
- Electrical and electronic assembly;
- Finishing services (i.e., plating, anodizing, coating); and
- Community hospitals.
So why benchmark? Benchmarking can help satisfy customer requirements, clarify where one stands in relationship to competitors, identify areas of improvement and maintain some quality certifications by collecting the required data.
Once you understand how you compare, you can start to plan your continuous improvement strategy by using the Transformation Planner. The Transformation Planner is the ideal tool for charting your company’s journey to achieve lower costs and higher profitability. It starts by benchmarking your data to show 12 key metrics in comparison to other companies within your industry sector.
Once final targets have been established, the planner calculates the potential onetime and recurring annual financial benefits of reaching those targets. A main benefit to achieving those targeted improvements is the increase in available manufacturing capacity. The Transformation Planner allows companies to model how much capacity can be made available by implementing/achieving production improvements. It estimates the resulting opportunity for growth—growth that can occur with no additional investment in machinery and with no increase in production hours.
If you are a Canadian organization in any of the sectors listed above, and would like to take advantage of the Performance Benchmarking Service and Transformation Planner, please feel free to contact me at email@example.com. ME
Applicants Needed for 2014 SME Election
Applicants are currently being sought for the 2015–16 SME Board of Directors and Member Council. The Board of Directors and Member Council are elected by the entire voting membership of SME.
The SME Board of Directors is made up of industry and academic leaders whose diverse backgrounds represent years of experience from a wide array of manufacturing disciplines. Acting as the governing body of SME, it has the power to establish business policy for SME, order and conduct professional meetings, and guide its member units. The Member Council is responsible for assisting SME in recognizing and meeting the needs of its membership in a rapidly changing environment, building on the long-term SME strategic goals, strengthening local activities and formulating recommendations relative to SME membership recruitment, retention and engagement.
SME members interested in being considered for a seat on the SME Board of Directors and/or Member Council should submit their applications by February 15, 2014. Applications can be downloaded at www.sme.org/structure.
This article was first published in the September 2013 edition of Manufacturing Engineering magazine. Click here for PDF.