Wednesday, October 11, 2006

Metrics Matter I'm in Orlando at the MESA International Plant2Enterprise conference. Most of yesterday was occupied with the release of the major "Metrics that Matter" research project report. The study found, not surprisingly, that manufacturing professionals who link plant metrics to financial objectives plus achieve speed and frequency of information updates show the most overall success. Research lead Julie Fraser, principal of analyst firm Industry Directions, led discussions both for the attendees and a special session for editors. The gist of the press release is below and has much food for thought. Manufacturers' success rests largely on how effectively they measure financial and operational performance, according to a groundbreaking industry study.  Manufacturing Enterprise Solutions Association (MESA) International and Industry Directions Inc. unveiled the results of the "Metrics that Matter" research project, which indicates that manufacturers that leverage technology to share key performance information between operations and finance more frequently have demonstrated clear advantage over those who don't. At the same time, the study reveals that only a fraction of manufacturers who responded report having those effective links for measuring performance. "What we[base ']re talking about is manufacturers' survival," said Julie Fraser, Principal of Industry Directions Inc. "If operations and finance aren't on the same page at the same time, you have a company at cross-purposes. And most manufacturers can't afford to be in that position today." The study shows that manufacturers who improved the most against financial performance metrics--the Business Movers--have a metrics framework that links operations to finance, speeds data collection and feedback to the operation, and leverages plant software. The study also reveals that the top two manufacturing applications planned for investment in the next 12 months are plant dashboards and manufacturing execution systems (MES). A larger percentage of the companies currently using these two applications have improved significantly against both operations and business metrics than others. The study found that 80 percent of Business Movers who improved significantly against financial metrics also improved performance significantly on operations KPIs. Only 3 percent of study respondents report very effective links between operations KPIs and business metrics; this means that most companies' management does not have views that accurately represent progress and plant contribution. On-time delivery to request is a more common KPI than on-time to commit, indicating great progress in demand-driven and supply chain metrics. Respondents using MES are over twice as likely to have improved over 1 percent annually on average in the past three years in upside production flexibility, energy cost per unit of production and market share. Respondents using plant dashboards are over twice as likely to have improved significantly in cash-to-cash cycle times and total inventory on hand. More respondents achieved ROI in under two years on broad functionality software--ERP, MES and EAM--than other applications. The MESA Metrics that Matter research team was headed up by Industry Directions Principal Julie Fraser, independent analyst and consultant David Caruso, and Industry Directions Principal William Brandel. The Industry Council that guided the process included Scott Daugherty, plant manager of Cormetech; John Plassenthal, project manager, Strategic Integration, Enterprise Applications IT of International Truck and Engine; John Moore, quality program manager of KLA Tencor; Neil Crew, group IT director of Princes Ltd.; and Brian Leinbach, MES Deployment Team lead of a leading pharmaceutical company. The consultants who developed the Guidebook include representatives of each sponsor plus EnteGreat and Invensys. Lead sponsors for the Metrics that Matter research and educational program are: Apriso Corporation (www.apriso.com), Camstar Systems Inc. (www.camstar.com), GE Fanuc Automation (www.gefanuc.com), IBM Corporation (www.ibm.com), OSIsoft (www.osisoft.com), Rockwell Automation (http://www.rockwellautomation.com) and Siemens Energy & Automation (www.sea.siemens.com/mes).  Acumence LLC (www.acumence.com) is a supporting sponsor of the research effort. 7:51:15 AM    comment []