"Using Strategic Performance Measurements to Accelerate Lean Performance"

Bruce Baggley

Cost Management

January/February 2006, pp. 36-44

The author of this article argues that traditional performance measures do not work in a lean setting because those measures were designed to support mass production. "Lean" performance measures should reflect the principles of lean thinking, drive improvement of value stream results, control adherence to standards in cells, and link cell and value stream strategies and goals to corporate strategies and goals.

The article provides a "Starter Set" of lean measures that can be tailored by individual companies:

• Cell Level measures that "enable the cell team to get done during a shift what has to be done during that shift". Cell Level measures include Day-by-the-Hour reports, Work-in-Process to Standard Work-in-Process, First Time Through Quality, and Operational Equipment Effectiveness.
• Value Stream measures that "calibrate how well the value stream is doing in proceeding towards the performance targets designed into the future state map…They serve as a means of calibrating the effectiveness of ongoing continuous improvement measures and of designing future improvement initiatives." Value Stream measures include Sales Per Person, On Time Delivery, Dock-to-Dock Time, First Time Through Quality, Average Cost Per Unit, and Accounts Receivable Days Outstanding.

The following work plan is suggested for a kaizen event to implement these new measures:

1. Pick a value stream and cell to pilot the measures
2. Decide whether the starter set will be used as is or tailored
3. Teach all people in the company about the new measurements and measurement philosophy
4. Design the measurements, measurement boards, data collection methods, and improvement methods
5. Place the measures and new methods in the value stream and cell
6. Run the value stream and cell for one month using the new methods, discontinuing all other performance measures for those areas
7. At the end of the month, review results of the test, modify measures, and implement

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