Why Measuring Efficiency Is Anti-Lean

Lean companies make time for improvements as well as production

Published: Thursday, March 30, 2017 - 12:02

The measurement of people’s efficiency has a long history in manufacturing industries. Design and production engineers calculate the time required to manufacture a product or batch of products. Each time the product is made, the “actual time” is measured and recorded. The efficiency of the production people (or the process) is calculated by dividing the standard time by the actual time.

If the actual time is faster than standard, the efficiency will be greater than 100 percent. When the actual time is longer than standard, the efficiency is less than 100 percent.

The purpose of measuring efficiency is to monitor if the people and the process are running at the right speed so that the right number of units are made according to the production schedule, and the needs of the customers. When the efficiency measurement is significantly less than 100 percent, an investigation is made so that the shortfall can be caught up and the reasons for the problem identified.

Traditional approaches to manufacturing find these measurements helpful. The measurements were designed to support the “scientific management” developed by Frederick Taylor (and others) during the 1920s, when modern industrial methods were first standardized. These clever and innovative engineers and entrepreneurs based their methods on a few key paradigms:
• Operations people in a manufacturing plant have “separation of duties.” The people should not make the whole product but each have specialized skills. The products pass through several workstations, from fabrication to finished products.
• The plant must maximize the use of the operators’ time. Operators are an expensive resource, and every minute needs to be used productively.
• Making large batches of products optimizes the production time and productivity.

The outcome of these assumptions is that the factory makes products all the time, builds finished-goods inventory, serves the customers effectively by having available product, and minimizes the product costs. The underlying philosophy of manufacturing management is that we need to maximize the “economies of scale” and produce as many products as possible, and to harness the production operators 100 percent of the time.

None of this thinking works in a lean organization. Overproduction is one of the famous seven wastes articulated by Shigeo Shingo.

1. Lean companies do not want their people working all the time making the products. The people need time to work on improvements in their work areas. These improvements are not large kaizen events; they are continuous improvements. Hundreds of small improvements initiated by the people in the work cells or other work areas. These many small improvements lead to huge benefit as the small improvements add up to significant change, and the people making the changes are the people with the most knowledge.

2. If the company emphasizes production efficiency, then the people will work to create maximum efficiency. One way to achieve this is to shortcut the standardized work required to make the product, or other tasks people are doing. This may lead to short-term “efficiency,” but violating standard work compromises quality and consistency.

3. Making larger batches increases the efficiency measurement of production but violates single-piece flow, which is fundamental to lean manufacturing.

4. Another way to increase efficiency is to change the sequence of products being made so as to minimize such things as changeover or materials handling. In many cases the production sequence is important to providing the right products to the customers, and leads to shortages or delayed delivery of all the products the customer needs today.

5. A more important issue is that process problems are overlooked and hidden when people are driven by efficiency. Lean companies identify problems immediately by stopping the process and solving (or at least fixing) the problem so that it will not happen again. This is an important aspect of continuous improvement.

If efficiency is anti-lean then what do we measure?

A common way to measure the production process in a lean organization is to use the day-by-the-hour chart.

Figure 1: A day-by-the-hour chart. Click here for larger image.

The production quantities for each hour are shown in the Schedule column. The quantities completed are shown in the Actual column, and the problems are recorded in the right-hand column. This visual board is posted in the work area and kept up to date each hour. The board controls the production quantities, initiates problem solving, and ensures that the right products are made at the right time and in the right sequence.

Different versions of the day-by-the-hour chart are used in office, warehouse, design, and other areas to create control of the work processes.

About The Author

Brian Maskell

Brian Maskell is president of BMA Inc., providing consulting on the accounting and management system changes needed for companies pursuing lean manufacturing and other lean methods. These changes include lean performance measurements, value-stream accounting, “plain English” financial statements, and lean-approach decision making to sales, production, procurement, supply chain, product development, and administrative processes. Maskell is an author, speaker, and trainer, presenting in videos and at venues worldwide. He’s authored many articles published in business journals and eight books including Practical Lean Accounting (Productivity Press, 2011), Making the Numbers Count (Productivity Press, 2009), and The Lean Business Management System (BMA Press, 2007).