How wrong representation of problem can hamper your improvement journey?

Many organizations are perusing Six Sigma as an organization philosophy to improve process performance. One of our clients, a leading manufacturer of the plastic processing machineries was interested in understanding and perusing Six Sigma. So they called many consultants for discussion including our consulting company. We proposed to conduct a gap assessment before deciding the road map. We sent across a list of questions to be answered by different stake holders of the company. One of the key questions for production function was “What is your On Time Delivery performance?”

When we went there, production head said its 100% on time, so we don’t have any issue with that business metric. We asked: How do you measure it? We measure committed delivery date to customer and actual delivery date of the machine, replied the Production Head.

Delivery is the Issue

In our subsequent meeting with the Managing Director we asked: What the major strategic challenge your organization is facing? He replied it’s our DELIVERY PERFORMANCE. We were shocked because just before an hour production head told us that it’s 100% and is not a problem.

New Managing Director further explained; see our sales / marketing personnel commit 6 to 7 weeks delivery to our customers (that’s our current lead time to manufacture). But our competitors are able to deliver the machine in 3 to 4 weeks. Because we are in capital goods manufacturing business, many times we lose orders because we cannot commit delivery in 3 to 4 weeks.

When we did analysis of lost order for past one year in marketing department, the value of orders lost because the company was not able to commit 3 to 4 weeks was $ 10 billion, more than the current annual sales.

This was an important revelation of information for Production Head because all production staff was believing that   On Time Delivery was the strength, was actually was major weakness of the company.

Key indicator for this organization should be Lead Time to manufacture and not On Time Delivery. This clearly shows how wrong measurement of metric can lead you to overlook major opportunity for improvement.

Conclusion:

Many times organizations copy key metrics to from other organizations and paste in to their systems. But this can drastically hide major problems within the organization.

Also there is strong need to review key metrics over period of time and revise the metrics.

Clarity is required on why this metric is important, how it wil be will be measured and presented.