Rethinking Manufacturing Performance
How manufacturers can achieve meaningful production and business performance improvements
Michael I. Frichol, CPIM

Do traditional manufacturing performance measures really help companies improve performance? Do these traditional performance measures really support the production and financial goals of a manufacturing company or do they obfuscate the fundamental problems that obstruct meaningful production performance improvements?

Everyone is familiar with the traditional manufacturing performance measurements of Utilization, Efficiency and Productivity. We were taught these measures in college, APICS certification and other manufacturing related training. These three performance measures have been the cornerstone of manufacturing performance for many decades. Many companies and practitioners use these traditional performance measures without fully comprehending the fundamental assumptions and relationship to the type of production performance these measures do and don't provide.

It is my contention that while these traditional performance measures may have been appropriate for a previous era when global demand exceeded production capacity, they are fundamentally flawed for the circumstances and challenges that manufacturers face today and will increasingly face in the future.

This article will review the traditional performance measures, explore alternative performance measures proposed by the Theory of Constraints and attempt to provide a holistic approach to measuring manufacturing performance relative to the superordinate manufacturing and financial goals of the business.

Traditional Performance Measures - What they do and why they don't improve performance
Connecting manufacturing performance to business performance
Correlating manufacturing and financial performance
Recommendations for practical manufacturing performance measurement and management

Hopefully this article has provided some insights and provoked some thoughts and questions about how you currently measure manufacturing performance and how you could implement more pragmatic measures that are more closely aligned with the overall business financial goals while being more aligned and supportive of manufacturing improvement initiatives such as Lean, TOC, Six Sigma, etc.

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