Most people have heard of a mission statement, but a vision statement is typically less well known. While there is some overlap, there is a distinct difference between the two. To put it simply, a mission statement describes what a company is doing to achieve its goals today, and a vision statement describes what a company wants to achieve in the future.
The Visual South team works with hundreds of manufacturers with varying manufacturing modes. Many of our customers fall in the “to order” category. That means they are mostly make-to-order; and within that category they are either engineer-to-order, configure-to-order, assemble-to-order, project based, and mixed mode (they build some sub-assemblies to stock that can be used as a component part, finished good, or replacement part). The predominant costing method for “to order” companies is actual costing.
A KPI (key performance indicator) is a measurement of value that can be quantitative or qualitative in nature. Manufacturing companies typically use and track KPIs to determine how a particular area of operations is performing. KPIs are ideally presented in dashboard format, giving decision makers the ability to quickly answer the questions like, “How are we are doing?” and “What is causing performance issues?” Think of KPIs as a company or department’s scoreboard for how the team is playing the game.
Every organization should have an ongoing plan for continuous improvement. In a competitive environment, any chance to improve upon a process can provide the edge a company needs to survive—and ultimately thrive. A good Business Process Review (BPR) template is a valuable first step in that plan.
What we do in a Business Process Review (BPR) is pretty straight forward, and we perform several for our clients over the course of a typical year. In the review, we observe how the ERP processes have been built to manage the business. Then, we make recommendations to streamline and improve the processes and procedures related to the flow of data in the company. For example, how to use the ERP to alert procurement of projected material shortages, as opposed to having them look for shortages in a spreadsheet – usually after it was manually updated. In essence, an ERP business process review is a gut check on how things are working, and what can be done to make them better.
Managing a shop floor is no easy task. Your employees make mistakes, equipment breaks, rush orders slip in, jobs ship late, and days are long. On top of that, there is the constant demand to reduce costs and increase quality. It’s a real pressure cooker.
I’m a big believer in measuring what you want to improve. Measuring gives you data and you’ll see trends (good or bad) emerge. Figure out what is causing the good trends and keep doing that. Maybe you can even find ways to make the good trends better. Figure out what is causing the bad trends and find ways to stop doing that; or at least, minimize it.
These two manufacturing modes are just what you’d assume. Make-to-stock manufacturing is where finished goods are built to inventory. The demand associated with make-to-stock is typically driven by a forecast. Additionally, a mix of forecasting, inventory quantities driven by planning policies, and actual demand can drive planning and scheduling for make-to-stock manufacturers.
Before I get into the best costing methodology for a work-order-driven manufacturing company, let me define both methods. With standard cost versus actual cost, the discussion centers around how the ERP system values an inventory or labor transaction. Here is how the different costing methods calculate the value of the transactions.
There are many opinions as to what key performance indicators (KPIs) should be monitored at a small to medium-sized manufacturing company, but the on-time delivery (OTD) KPI is on everyone’s list. It doesn’t matter if the company is build-to-stock, a job shop, or something in-between; there are many steps in coordinating the production of a product and OTD is a nice summation of manufacturing performance.
