Why Measuring Efficiency is Anti-Lean

The measurement of people’s efficiency has a long history in manufacturing industries. The 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%. When the actual time is longer than standard, the efficiency is less than 100%.

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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 need’s of the customers. When the efficiency measurement is significantly less than 100% an investigation is made so that the shortfall can be caught up, and the reasons for the problem identified.

Traditional approaches to manufacturing finds these measurements very helpful. The measurements were designed to support the “scientific management” developed by Frederick Taylor (and others) in the 1920’s when modern industrial methods were first standardized. These clever and innovative engineers and entrepreneurs based their methods on a few key paradigms.

  • One was that the 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 work stations from fabrication to finished products.
  • A second paradigm is that the plant must maximize the use of the operators time. Operators are an expensive resource and we need to make sure that every minute is used productively.
  • A third is that 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 minimizing the product costs. The underlying philosophy of manufacturing management is that we need maximize the “economies of scale” and produce as many products as possible, and to harness the production operators 100% 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 the large “kaizen events”; they are “continuous improvements”. Hundreds of small improvements initiated by the people in the 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 the 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 change-over 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 the 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.

Slide023

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 processes to create control of the work processes.

bmaskell@maskell.com

This entry was posted in Cautionary Tales, Continuous Improvement, Industry, Lean Accounting, Management Accounting, Performance Measures, Process Control, Team Work, Uncategorized and tagged , , , , , , , . Bookmark the permalink.

10 Responses to Why Measuring Efficiency is Anti-Lean

  1. Hi Brian,

    Enjoyed reading your post. For me it illustrates the misuse of metrics. While very few metrics do well all by themselves there are a few that even balanced with others will still drive the wrong behaviors. Holding people to efficiencies will more likely have an affect on how important other aspects of the business are viewed; safety, maintenance, cleanliness, etc.

    When trying to use efficiency as a metric it’s difficult to “nail down” an appropriate standard. The more complex the operations the more creative the industrial engineers seem to get in devising a formula for establishing a standard. I am a proponent of making labor a fixed cost over a longer period of time. Any company should know if the month/quarter/year is not going well as it is happening. Besides, Do the people creating value every really cause less demand for the product or service?

  2. Perrin says:

    Great article Brian.
    I wrote two articles on my blog a few months ago that bring complementary ideas. The first one is about a frequent misunderstanding about SMED and the pursuit of change over time reduction : http://www.consulting-xp.com/blog/?p=363
    The second one is about a frequent misunderstanding of the muda of waiting and overproduction : http://www.consulting-xp.com/blog/?p=546
    Xavier

  3. You're my Lean Consultant says:

    Rubbish. Efficiency is simply a measurement that you take to see if the operators are slacking. We operate lean (within reason) and that’s what we use if for. Also we use it to bonus our people if they work harder, they get a kickback of the savings. You do not have to use it for anything else, but you absolutely HAVE TO know what your performance is. I don’t care what anyone says. For us, it doesn’t say anything about stashing product all over the place to keep operators busy. You can use a different tool for that, and if the floor has too many people? Bingo, that’s it. You’ve got the idea.

    • Mike Clayton says:

      As usual, “it depends.” If the production operation can create reliability problems if standard work is changed or cheated to meet quotas or bonus you will get problems that may end up in court as customers are injured (as in automotive products.)
      If you are picking grapes manually that’s another story.
      Do you want to develop shop floor TEAMS that cooperate on improvements or shop floor wars where “rate busters” are punished. The stopwatch people were banned or all work stopped if they looked at their watches in many union shops as I remember, so the unions were destroyed by “right to work” laws in retaliation. Sweat shops get very high efficiencies but usually with high turnover, so if job requires training if can be costly to “punish slackers.”

  4. Robert Redanz says:

    I’d there a meaningfull relation between production rate and change over time. The longer your Chang overs the larger your campaigns have to be.

  5. Debbie says:

    Lean helps us to identify system problems and effectiveness of the systems and processes based on evidence and best practices. Hence Lean is not just about efficiency but it is also about effectiveness. In healthcare people take a long time to come to terms about lean because of the much emphasis on efficiency and without considering effectiveness .

  6. Marcus Haugen says:

    Brian~! Hope this finds you well! The true believers know you speak the truth!

  7. Marcus Haugen says:

    Brian…. hope this finds you well! I have a client in WI going through this paradigm right now! The true believers know you speak the truth!

  8. Mr Maskell says:

    How to implement a Day-By-The-Hour chart?, another questions, how measure the accuaracy to inventory? what tools use it?
    Thank you, regards

  9. Marc Bach says:

    Dear mr. Maskell,

    Very interesting and helpful post. I hope to see sth similar one day in a construction site.

    Marc Bach

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