Most companies have different goals and metrics across the different departments and often these metrics conflict. A common metric for manufacturing is through-put. They target it increasing year over year which includes customer growth as well as increased efficiencies via Lean Sigma, etc. Then they will also have goals to decrease components or finished good inventory or increased turns while requiring that they never stock out.
These goals often, if not always, conflict with each other. If MFG were to only increase throughout as their metric would drive them to do inventory would go up. Sure that goes along with component or ingredient inventory going down but finish good inventory would go up in a big way. Plus forget about the small jobs, the ones with long difficult setups at least until it comes close to a stick out situation. Then it’s a hot job insert into the schedule!
Let’s flip it and look only at decreasing FG inventory and increasing turns. Increasing turns is increasing the number of times a product is ran/lots in a year. This usually equates to smaller batches in a more JIT (just in time) fashion. This helps keep inventory low and flowing. This means more setups for MFG, smaller batches, more component flow. See the conflict?
Now if you say well I am just a service company and don’t have components or FG inventory, so you are off the hook, think again! The same thing mentioned above exists in your company too but in departamental silos. Each department is a supplier and customer to the other. One department services the part and delivers it to the customer AKA the next step in your internal process. If you looked at your WIP (work in progress) for each of the subsequent services you are looking at FG from the previous step!
Wait isn’t TOC supposed to eliminate these silos and the conflicting metrics? At least that is what I am thinking at this point since I said those words. And yes, and here is how to do it. But let me caution you, getting buying on this and support across departments and typically top management is key for it to succeed as so many changes to metrics and bonus structures will be necessary.
Let’s tackle the, we’ll both of them at the same time. Remember through-put dollar days(TDD)? This is your communizing metric across departments. If each departments has it as what drives their schedules and that number is the same for an order across the board regardless of the steps/servoces involved then each department will have the same priority list. Instantly you are all on the same team working toward the same goal – get the highest TDD job completed and shipped.
That said your real goal is to have a low total of TDD. If you have high TDD after calculating it you are either always late with orders across the board, you have bad pricing or you run a lot of bad parts/products that run slow – low through-put. It’s easy to figure it out just look at each component of TDD individually. But you don’t even have to do that keep it simple and just focus on TDD and getting them down to zero.
Lastly if TDD is what you incentivize again all the conflicting bonus metrics people work toward all align. Remember what behavior is incentivized will result in more of that behavior. When you pick a metric to tie to bonuses make sure you get the intended outcome you were looking for. And if it conflicts with another departments goals it’s not the right metric.