These measures of performance vary significantly across manufacturers, yet lean manufacturing initiatives share a common basis in core areas of measurement. These common areas of measurement to evaluate the performance of lean manufacturing initiatives include company-specific, Sales, Quote and Order, Customer Service, and Warranty & Returns (Hallgren, Olhager, 978, 979). Depending on the intersection of lean manufacturing process and level of product customization as defined by to-order strategy a subset of the metrics shown in Table 3: Comparison of Lean Manufacturing Metrics and Performance are often used.
Table 3: Comparison of Lean Manufacturing Metrics and Performance
Areas of Measurement
Baseline: What is Measured
Project costs and expenses
Use as a baseline for defining ROI
Number of orders per year
Determine configuration’s impact on inventory turns
Current inventory and costs
Inventory turn savings
Lifetime cost per customer; avg. deal size by customer
Order cycle time
Order cycle times reduction of 37% or more recorded with mftrs contacted
Cost of Sales
Days Sales Outstanding reduction from 54 to 24 days on average
Cross-sell and up-sell revenue
Increase of 47% on aggregate
Average sales price per order
Increase from 6% to 31%
Quote and Order
Average costs to complete an order
89% reduction in cost per order
Special Pricing Requests
Over 90% ROI on automating Special Pricing Requests
Bad or incomplete orders
Incomplete order reductions of 36%
Number of customer complaints
82% reduction in cost of simple requests
Revenue lost to churn
69% when cross-selling is used with quote-to-order
Number of calls on order status
Median level of 16,000 per week to 100
Warranty and Returns
Reduction in warranty cost on customized products
13% reduction at a minimum
Labor cost reductions
Decrease order re-work from 17% to 2%
The use of lean manufacturing strategies inducing Six Sigma is successfully being used for the continual improvement of mass customization, build-to-order, configure-to-order, and engineer-to-order strategies in manufacturers globally (Reidenbach, Goeke, 49). The integration of Six Sigma-based lean techniques into the PLM strategies of companies also is showing significant potential for the development of metrics-based reporting that ties performance to lean process improvement outcomes (Hallgren, Olhager, 998). The development of mass customization strategies that seek to be agile enough to respond to customers’ needs on the one hand yet stable enough to deliver financial gains in performance is critically important during economically turbulent economic periods. For manufacturers to attain the levels of performance shown in Table 1: Financial Impact of Lean Manufacturing Applied to Build-to-Order Workflows it is also critically important for the Six Sigma methodologies of DMAIC to be engrained into core process areas over time. The consistent use of lean manufacturing approaches can deliver exceptional financial performance, yet without consistency and a continual focus on driving out variability from the production strategies shown in Table 2, Definition of Mass Customization Production Strategies. The continual efforts to achieve exceptional performance in production also need to be gated by metrics that can capture how customers’ perceptions are changed . The metrics shown in Table 3: Comparison of Lean Manufacturing Metrics and Performance illustrate represent metrics used often in scorecards to measure the impact of lean manufacturing over time.
Financial Impact of Lean Manufacturing Applied to Build-to-Order Workflows
Sources: (Cavusoglu, Cavusoglu, Raghunathan, 12 — 28) (Hallgren, Olhager, 976 — 999) (Kumar, Craig, 194 — 214) (Sharma, LaPlaca, 476 — 486)
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Hallgren, Mattias, and Jan Olhager. “Lean and agile manufacturing: external and internal drivers and performance outcomes.” International Journal of Operations & Production Management 29.10 (2009): 976-999.
Kumar, Sameer, and Sarah Craig. “Dell, Inc.’s closed loop supply chain for computer assembly plants.” Information Knowledge Systems Management 6.3 (2007): 197-214.
Kumar, Sameer, and James Wellbrock. “Improved new product development through enhanced design architecture for engineer-to-order companies.” International Journal of Production Research…