Measurements add value to the parts you manufacture. That may not be a widely accepted position, because the act of measuring is an additional step in the manufacturing sequence, and every step has a cost associated with it. With pressure to reduce costs and improve productivity, some might think that eliminating the measuring steps would do just that. If they could only make their manufacturing process accurate and consistent enough, measuring would be unnecessary and, therefore, not measuring would lower their total costs. How valuable are the measurements you make? Cost of measuring
If you follow the latest business management articles you’ll notice that the emphasis is on measurement. You can’t tell how effective a new initiative is unless you measure it. For example, a company may decide to reduce its lead times. That is a worthy objective probably driven by customer feedback (or complaints and order cancellations). The company knows it has a problem with lead times, but it needs a measurement methodology in order to do something about it. There are costs associated with measuring lead times, but the payback could easily offset those costs.

In this instance, the cost implications are related to customer satisfaction, or dissatisfaction. The costs of lost orders add up. On the other hand, shorter lead times might generate additional, incremental business if lead times become a competitive advantage. If you are selling a product with a price of $5,000, ten lost or canceled orders equal $50,000. Ten new orders mean $50,000. The potential payback is $100,000, much greater than it would cost to do the necessary measurements. And that does not take into account the value of the company’s improved reputation.

This simple example of measuring lead times shows an important characteristic of measurements in general—the cost of the measurement is typically much less than the value derived from that measurement.

How does this relate to a manufacturer? Let’s say you measure holes in small parts with a plug gage. That helps with size, but the holes might be out of round, which could affect how a mating part might wear. Now consider changing the way you measure the holes. You might invest in a video machine that can measure the entire circumference of each hole. Yes, the costs of a plug gage and a video machine are quite different, but if the wear rate improves, the product lasts longer, and the costs of scrap and rework decline, those costs can quickly exceed the price of the new measuring system.

Benchmarking
Prior to measuring, you need to determine what to measure. In the lead-time example there are external indications that something is wrong—customer feedback, order cancellations, lost business. Lead times are not meeting customer expectations. Knowing that, you choose what to measure.

To get started, the company needs to benchmark where it is today. That benchmark is some measure of current lead times, which requires processes for monitoring and collecting information on actual shipments. You need to determine how large a sample of shipments to monitor and for how long. For example, if lead times vary greatly from shipment to shipment, a longer period of data collection may be required than if the variance is small. If there aren’t very many shipments, a long data-collection period may be required. Some level of skill is involved in this part of the analysis.

Which specific parameters of lead times are going to be measured? Are we looking for the average lead time? Or are we looking at the variation in lead times? It’s possible to measure the wrong thing. Take the plug gage example. If out-of-roundness is critical, measurement is required; go/no-go gaging of diameter is not adequate. If the goal is to reduce average lead times, adjusting manufacturing processes to decrease that average value may help solve only part of the problem. This is because two very different ranges of lead times can have the same average. You can reduce the average lead time and still have products that ship days, weeks, or months beyond that average, and you can still have a problem.

The value of measurements
The value of the measurement in the lead-time example relates directly to customer satisfaction. Satisfied customers buy more, cost less, and increase business. Failure to measure and fix the problem could end up costing your company as customers go elsewhere to get better deliveries. By understanding the problem, identifying specifically what to measure, measuring, and using those data to fix the problem, you can cut losses and improve business. The investment in the time and cost of doing the measuring can lead to improved customer satisfaction meaning more orders, fewer cancellations, and new customers.

A skeptic might say measuring lead times makes no difference, that the quality and value of the product is most important. When there is only one source for a product that might be true. But as soon as there is competition, measuring how well you are doing can pay off. Sticking with business as usual—not measuring—can end up costing more.

How does all this relate to measuring in manufacturing?
As manufacturers know, customers usually don’t care about what you measure or how you measure it. They care about how the product that embodies all those measured parts works, feels, performs, and lasts. As a manufacturer, measure enough to ensure customer satisfaction without incurring needless costs. The most expensive route is not to measure anything! Sure, manufacturing costs might be lower initially, but other costs will be higher, and customer satisfaction will drop. Understand your product, processes, and customers’ expectations well enough to know what to measure and how to measure it. The value of those measurements will greatly exceed their costs and provide healthy returns.

Until next time, yes, measurement matters.