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Part Four
Improvement
Table 20.1 Some typical partial measures of performance
Performance objective
Quality
Speed
Dependability
Flexibility
Cost
Some typical measures
Number of defects per unit
Level of customer complaints
Scrap level
Warranty claims
Mean time between failures
Customer satisfaction score
Customer query time
Order lead time
Frequency of delivery
Actual versus theoretical throughput time
Cycle time
Percentage of orders delivered late
Average lateness of orders
Proportion of products in stock
Mean deviation from promised arrival
Schedule adherence
Time needed to develop new products/services
Range of products/services
Machine changeover time
Average batch size
Time to increase activity rate
Average capacity/maximum capacity
Time to change schedules
Minimum delivery time/average delivery time
Variance against budget
Utilization of resources
Labour productivity
Added value
Efficiency
Cost per operation hour
The balanced scorecard
approach brings together
the elements that reflect
a business’s strategic
position
with which it converts materials, the productivity of its staff, the ratio of direct to indirect
staff, and so on. All of these measures individually give a partial view of the operation’s cost
performance, and many of them overlap in terms of the information they include. However,
each of them does give a perspective on the cost performance of an operation that could be
useful either to identify areas for improvement or to monitor the extent of improvement.
If an organization regards its ‘cost’ performance as unsatisfactory, disaggregating it into
‘purchasing efficiency’, ‘operations efficiency’, ‘staff productivity’, etc. might explain the root
cause of the poor performance. Table 20.1 shows some of the partial measures which can be
used to judge an operation’s performance.
The balanced scorecard approach
Generally operations performance measures have been broadening in their scope. It is now
generally accepted that the scope of measurement should, at some level, include external as
well as internal, long-term as well as short-term, and ‘soft’ as well as ‘hard’ measures. The
best-known manifestation of this trend is the ‘balanced scorecard’ approach taken by Kaplan
and Norton.
‘The balanced scorecard retains traditional financial measures. But financial measures tell the
story of past events, an adequate story for industrial age companies for which investments in
long-term capabilities are customer relationships were not critical for success. These financial
measures are inadequate, however, for guiding and evaluating the journey that information
age companies must make to create future value through investment in customers, suppliers,
employees, processes, technology, and innovation.’ 5