" When you can measure what you are speaking about, and express it in numbers, you know something about it; when you cannot express it in numbers, your knowledge is of a meager and unsatisfactory kind."

Lord Kelvin ( 1824-1907 )



Indicators of Performance
 
 in the
 
 Automotive Sector
 
 

Prepared especially for:

Mr. Rocco Cane

Strategic Plans and Control

Fiat Auto S.p.A.

10135 Torino, Italy





 

Contents

2 of 26
   

   



 

Manufacturing

3 of 26
   

   



 

Manufacturing Observations (Property)

4 of 26


PARADIGM WEST JAPAN
  • Lots

    • Lot size on hand


    • Age since previous worked on


    • Supplier within company


    • Supplier affiliated with company


    • Rework and custom fitting


  

100 hours

month

60%

10%

some

  

3-4 hours

1/2 day

30%

60%

none
  • Equipment

    • Scope of worker's equipment


    • Typical set-up time


    • Measurement scope


    • Measurement accuracy


    • Measurement ease of use


    • Duty cycle of equipment


  

narrow

hour

narrow

high

low

high

  

wide

minute

wide

high

high

moderate



 

Manufacturing Observations (People)

5 of 26


PARADIGM WEST JAPAN
  • Employees  
     
    • Variety of work experience


    • Machines operated per day


    • Empowerment to correct


    • Job classifications per plant


    • Loyalty


    
 
small

1

ask

hundreds

union

  

large

several

tell

5-10

company
  • Management

    • Opinion of Workers


    • Meaning of quality (perfection in ... )


    • Business goal (highest possible ... )


    • Manner of communicating


    • Consistency of policies and actions


    • Priority given to learning


  

flawed

product

profits

top down

moderate

low

  

divine

process

alignment

consensus

high

high



 

Manufacturing Outcomes (Qualitative)

6 of 26


WEST QUALITATIVE
 (beliefs driven)		 JAPAN
Low cost part amortization

Large inventory float

Low responsiveness/flexibility

 Scale vs. Scope
 High cost part amortization

Low inventory float

High responsiveness/flexibility
High system cost

 Parts vs. Whole
 Low system cost
Covet information

Focus on part

 Compete vs. Collaborate
 Share information

Focus on system
Occasional improvements

Low innovation

Occasional improvements

 Obedience vs. Empowerment
 Continuous improvements

Low cost

High quality
Few improvements

Low flexibility

Quality degrades

 Rote vs. Learning
 Many improvements

High flexibility

Quality improves



 

Manufacturing Outcomes (Quantitative)

7 of 26


WEST QUANTITATIVE
 (metrics driven)		 JAPAN
 

3%         1%
or         and
3%         1%
or         and
10%         3%

    Learning Curve Rates:

Cost reduction

Reliability

Performance

  

3%         7%
and         or
3%         7%
and         or
5%         12%
$50,000

rising at 2% per year

 Value Added per Employee

 $200,000

rising at 5% per year
100,000 over 6 years

falling at 3% per year

 Break-Even Quantity

 50,000 over 3 years

falling at 3% per year
15

fluctuating

 Inventory Turns per Year

 40

rising at 2% per year

1 or 2
Models Produced per Factory
4



Development

8 of 26
   
   



 

Development Observations (Operational)

9 of 26


PARADIGM WEST JAPAN
  • Teams

    • Size of core team


    • Continuity of membership


    • Power of core team


    • Core team leader's satisfaction


  

900

fragmented

weak

low


  

485

continuous

powerful

high
  • Activities

    • Supplier involvement


    • Extent of concurrency


    • Tradeoff decisions' timing


    • Rigidity of design freeze


    • Role of finance


    • Shared data base


  

late

low

late

low

discipline

no

  

early

high

early

high

measurement

yes



 

Development Observations (Aggregated)

10 of 26


PARADIGM WEST JAPAN
  • Engineers

    • Engineering man-years per car (millions)


    • Typical rotation in career


    • Basis of promotion (contribution to ... )


    • Loyalty to


  

3.0

2 - 3

function

function


  

1.7

5 - 7

project

project
  • Management

    • Loading of resources


    • Design goal


    • Importance of cost


    • Liklihood of senior executive intrusion


    • Interest of the board of directors


    • Priority given to learning


  

late

specifications

paramount

high

low

moderate

  

early

balance

high

low

high

high



 

Development Outcomes (Qualitative)

11 of 26


WEST QUALITATIVE
 (beliefs driven)		 JAPAN
Slow "sure" development

"Mechanistic" designs

 Depth vs. Breadth

("Scale")      ("Scope")

 Rapid development

"Organic" design
Hits cost target

 Parts vs. Whole
 Delights customer
Stale designs

Poor integration

 Compete vs. Collaborate
 Latest technology

Good integration
Occasional improvements

Design for executives

Bland designs

 Control vs. Support
 Continuous improvements

Help from everywhere

Elegant designs



 

Development Outcomes (Quantitative)

12 of 26


WEST QUANTITATIVE
 (metrics driven)		 JAPAN

60 months
falling at 5% per year
Time To Develop A Car


48 months
falling at 1% per year

4 months
falling at 5% per year
Car Start-up Time
(quality to quality)
1 month
falling at 5% per year

($900)
not meaningful
Margin per Car (factory)
$450
rising at 2% per year

12,000
falling at 1% per year
Break-Even Quantity
13,000
rising at 2% per year



 

Benchmarking

13 of 26
   
   



 

Benchmark (Single Company)

14 of 26

 


 

Benchmarks (Archetypes)

15 of 26

 


 

Benchmarks (Analysis)

16 of 26

 



 

Changing Outcomes

17 of 26
   
   



 

Change Terminology

18 of 26


TERM DEFINITION CHARACTERIZATION ACTIVITY
Beliefs Notions held dearly, change by generation, influence decisions and actions in many, tiny ways every day, and includes: foundations of culture, ideals, visions, sense of identity. Executive responsibility, 10-20 year time horizon, very high impact, and nearly impossible to manage. Lead orgainzaion adaptation of a coherent set of beliefs. Communicate the rationale and vision of the future. It must be desirable and feasible.
Structures Method expeditors which are consistent with beliefs and includes: policies, facilities, infrastructure, equipment, habit, relationships and targets. Management's responsibility, 2-5 year time horizon, substantial impact and difficult to manage. Devise, adjust and promulgate structures in support of methods and beliefs; must be viewed as helpful, not hurtful, and desirable.
Methods The procedures and processes that the business executes and includes: instructions, recipe's, and accumulated know-how. Supervision's responsibility, 3 month to 1 year time horizon. Essential, but stable, positive impact and not difficult to manage. Train and refine line workers with particular attention to start-up. Give feedback on above and share with below.
Behaviors The decisions, motions and conduct of workers in response cumulative effects of the above and their personal capabilities and proclivities. Line worker responsibility, 1 minute to 1 day time horizon. The culmination of the above and requires little management. Participate in and learn about the above, give feedback and suggestions.



 

Agenda Map

19 of 26


Program ® COMPARISON IMPROVEMENT
 (gains of 10-20%)		 STEP CHANGE
 (gains of 100-200%)
Level ¯         = Driver
Executive
  • Authorize benchmarking and data gathering


  • Decide if findings warrant step change.
  • Commit to sustained effort and constancy of purpose


  • Support systemic improvement despite short term costs.
  • Design coherent set of beliefs
  • Get concensus at all levels at site
  • Finance pilot adequately
  • Allow 1 year for results
  • Legitimize trial and error.
Managerial
  • Decide on performance metrics for benchmarking
  • Set schedule for data gathering
  • Present findings to executives.
  • Adopt Deming's methods
  • Dismantle disabling structures
  • Commit to educating
  • Set clear, actionable overall goals.
  • Present contrasting beliefs of others to executives
  • Insulate pilot site from "old beliefs"
  • Pick basis of measurement
  • Encourage trial and error.
Supervisory
  • Comment on metrics and schedule
  • Supervise data gathering
  • Decide on delivery medium and format of data
  • Check consistency.
  • Commit to Deming and worker actualization
  • Become educated in above
  • Make and hear suggestions
  • Promote teamwork.
  • Suggest specific business needs
  • become educated in "new ways"
  • Hear suggestions
  • Allow trial and error.
Line
  • Gather data
  • Make suggestions
  • Offer explanations
  • Annotate and keep raw data.
  • Become educated in Deming and SPC
  • Work in teams and try technical and social improvement ideas
  • Measure, measure, measure.
  • Commit to "new beliefs"
  • Become educated in "new ways"
  • Made suggestions
  • Try and learn from errors.


 

Metrics Map

20 of 26


Program ® COMPARISON IMPROVEMENT
 (gains of 10-20%)		 STEP CHANGE
 (gains of 100-200%)
Category ¯
Beliefs
  • Longitudinal performance of competitor
  • Productivity of labor and capital
  • Cycle time of re-invention / re-engineering.
  • Productivity of labor and capital


  • Standing among competitors.
  • Philosophy regarding: Customers, Suppliers, Employees, Partners, Investors and Society


  • Views about risks, success, learning, identity.
Structures
  • Paradigms & beliefs organizing structures
  • Performance of system vs. parts.
  • Alignment of initiatives & direction
  • Alignment of personnel policies
  • Defecting customers, suppliers, & disaffected employees
  • Plant location & layout.
  • Configuration of suppliers, factory, machines
  • Empowerment of supervisors and workers
  • Decision making "point of view"
  • Clarity of thought.
Methods
  • Cycle times: Set-up, quality to quality, product variation, ...
  • Introduction times: Lags on technology, product, capacity.
  • Time & motion data & trends
  • Defects and warranty work
  • Grumbling & suggestions
  • Diffusion & adoption of Deming
  • System thruput & cost
  • Trends in quality
  • Responisveness to change & variety
  • Diffusion & adoption of "new ways"
Behaviors
  • Availability of tools, supplies, support, education, benefits, ...
  • Contributions beyond call of duty
  • Conditions & influences at work.
  • Defects & personal productivity, actual & expected
  • Outdated policies, infrastructure & tools
  • Ideas for improvement.
  • Defects & personal productivity, actual & expected
  • New policies, infrastructure & tools
  • Ideas for improvement
  • Amount of education received.


 

The Change Model

21 of 26

 




 

Recommendations

22 of 26
   
   



 

Agility & Edge

23 of 26


Agility

( Measure of micro-adaptability to changing markets )		 Inventory Cycle Time

( in days )

The Inventory Cycle Time is defined as 365 Days / Inventory Turns. It measures the mass of production. The less the mass, the more agile the production. If models fall into or out of favor based on uncontrollable fads, production can respond accordingly, if it has low mass. Going from Detroit's 20 days to Japan's 10 days requires a Step Change.
Change Over Time

( in days )

The Change Over Time is defined as the number of days it takes to go from producing a high quality model on a line until that line produces a different model of comparable quality. Discovering how Japan got this to be 1/4 of Detroit is best done by first benchmarking Japan's processes.
Edge

( Measure of macro-adaptability to changing markets )		 Development Cycle Time

( in months )

The Development Cycle Time is defined as the number of months it takes from the first major expenditure on a new car design until that car first enters production. It's the latest possible "vintage" of the whole car and indicates the limit of responsiveness to new styles and major fads (e.g., minivan).
Commercialization Lag

( in months )

The Commercialization Lag is defined as the number of months since a technology first appeared on a production car until that technology appears on your car. This should be viewed separately subsystem by subsystem (e.g. brakes).



 

Productivity & Learning

24 of 26


Productivity

( Measures of yield from labor )		 Direct Labor / Car

( in hours & Lira )

Direct Labor / Car is the total direct manufacturing labor (including subcontracted) required to make a car including sub-assemblies down to components. A class of buy versus make information derives from this metric.

Wasted Labor / Car
( in hours & Lira )

Wasted Labor / Car is the total direct manufacturing labor which does rejects and corrections to product. (( Direct - Waste ) / Direct ) is Labor Yield and can be done for time and Lira.
Learning

( Measure of progress in a demanding world )		 Improvements / Employee

( / year )

Improvements / Employee / year is an indicator of the extent of learning that is taking place. The Japan Management Association has published an English book, Forty Years, Twenty Million Ideas - The Toyota Suggestion System.

Satisfaction Index

( / 100 cars )

The Satisfaction Index is the number of complaints per 100 cars produced. It captures the cumulative effect of learning and provides the essential tension to all the other metrics as a balancing force to excesses.



 

Benchmarking & Change

25 of 26


Benchmarking Make Metrics Specific

Generate your own specific metrics by applying the 4 dimensions of manufacturing metrics ( Agility, Edge, Productivity, & Learning ) against your existing structures ( systems, subsystems, factories, lines ) and such other refinements you decide.
Get Benchmark Data

Prescribe a data gathering effort aimed at setting improvement targets where they are attainable (under 30% improvement) and desirable. Longitudinal (3-5 years) will expose learning rates and future performance.
Define Step Change

Use data to define specific Step Change targets ( those areas where a 50% to 200% gains are necessary ).

Step Change
 Commit to & Execute Exemplar

Step Change begins with an exemplar with a clear and contained purpose, a unifying strategy with some external intervention.

Diffuse Results

Step Change results are replicated by a different process than repeating the exemplar (e.g. they're lead by a "fast tracker," not a "maverick).
Repeat Above

Every company has instances, but very few can repeat Step Change methodically. We have focussed, refined and practiced Step Change to the point of repeatability.




 

Concluding Remarks

26 of 26


          Messages we want to leave with you:
  • Comparisons across structures can misdirect incremental improvement efforts.


  • Metrics varying by more than 2x to 3x are probably operating under different structures.


  • Incremental improvement is structurally different than Step Change.


  • Any model of Step Change needs to span across Beliefs, Structures, Methods & Behaviors.


  • Business metrics need to capture their position and their rate of change (often that's learning).


          
 
Thank you for this opportunity to address you on metrics - Indicators of Performance!
  


 

 

http://www.cha4mot.com/works/sc_fiat.html as of January 20, 1998

Copyright © 1992 by James E. Cook