Manufacturing Success Linked To Use Of Performance Measurement Systems

MESA study reveals that information sharing between operations and finance are key to manufacturer's survival.

Manufacturers who use technology to share performance information between operations and finance are more successful, according to a new industry study, Metrics that Matter, released Tuesday from the Manufacturing Enterprise Solutions Association (MESA) International and Industry Directions Inc., an industry analyst company.

Although the results of the research project indicate that manufacturing success is highly dependent on how manufacturers measure financial and operational performance, very few of the manufacturers surveyed have effective systems for measuring performance. 

The research was unveiled at MESA's Plant2Enterprise Conference taking place in Orlando, FL.

“What we’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 revealed 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.

Other study results showed that the top two manufacturing applications planned for investment over the next 12 months are plant dashboards and manufacturing execution systems (MES). Manufacturing companies that are now using these two applications show a significant improvement in both operations and business metrics over other companies.
Highlights of the Metrics that Matter research project include: 

     •  Eighty percent of Business Movers who improved significantly against financial metrics also improved performance significantly on operations Key Performance Indicators (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

     •   Over 70 percent of respondents measure on-time delivery, OSHA-reportable incidents per year, and manufacturing cycle time in their operations 

     •   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

     •   One in three respondents plan to buy plant dashboards in the next 12 months, and 29 percent plan to buy MES, making them the top investments planned for the year, out of 18 software technologies in the survey

    •    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.

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