Return on Investment (ROI)
Best Practices are a technique used in benchmarking. The technique measures similar items, activities or services and is used as a measurement or performance standard. Defining best practices is often used in continuous improvement to set new standards or improve on current practices.
Return on Assets (ROA)
Hard Savings are the tangible and identifiable savings as opposed to that realized from not spending. If we look at hard savings from a project perspective it can be defined as those savings that allow the organization, team or department to do "more" or the "same" amount of work with the same or less resource use.
Examples of Hard Savings:
Question: What is one other type of hard savings that you can think of? Have you ever had to document hard savings?
**Place answers in the comments tab.**
Soft savings are the intangible benefits that result from projects or initiatives. Soft savings are much harder to quantify than hard savings.
Examples of soft savings:
Soft savings can often be made harder. While the savings are hard to quantify soft savings can often add up and if all the dots are connected correctly and your audience can understand, they sometimes can be as valuable as hard savings.
A supplier is any party that provides or supplies goods or services. Suppliers can be both internal, meaning that the supplier is upstream of your process step or external like in the case of a contractor, subcontractor or vendor. Suppliers provide specialized inputs or deliverables to downstream process steps.
John makes valve covers and passes them onto Bill who then polishes the valve covers. Bill then sends the valve covers to Martha who packages the valve covers and ships them from Valves Made Easy to Valve's R' Us. Who are the Internal Suppliers in this process and who is the External Supplier in the Process?
**Place answers in the Comments Box Below**
Master Production Schedule (MPS)
The Master Production Schedule (MPS) is best defined by The Apics Dictionary, which is cited below.
A line on the master schedule grid that reflects the anticipated build schedule for those items assigned to the master scheduler. The master scheduler maintains this schedule and material requirements planning. It represents what the company plans to produce expressed in specific configurations, quantities and dates. It is not a sales item forecast that represents a statement of demand. It must take into account the forecast, the production plan and other important considerations such as backlog, availability of material, capacity and any other management policies and goals.
Door to Door Value Stream
The door to door value stream refers to a value stream map or value stream process of internal operations/activities as they pertain to an organization. The door to door value stream stretches from the very first process step to the last activity within the organization.
Organizations will generally start their lean journey or identification process from the door to door level. This is because the organization has more influence on internal activities than they do at any other level of the value stream.
What is the very first step within your organization? What is the very last step within your organization?
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Enterprise Resource Planning (ERP)
Enterprise resource planning (ERP) is a software that gives organizations to define, standardize and manage business processes. ERP is used to support planning and control of information throughout an organization so that they can use internal knowledge to achieve external advantage. ERP systems track resources such as: Cash, materials, capacity, orders, purchase orders and payroll.
Examples of ERP Systems:
For more information on ERP systems check out the book ERP, by: MHE. Apics is another organization that provides extensive knowledge in materials management and supply chain management. You can visit their website here: Apics
**For more information on streamlining and optimizing your erp system message us below.**
Dashboards allow the appropriate party to see at a glance, Key Performance Indicators (KPI's).
Examples of Dashboards:
Qualities of a good dashboard:
For more information on Dashboards visit our recommended reading: The Balanced Scorecard: Translating Strategy into Action, by Robert S. Kaplan and David P. Norton.
Secondary Metrics are the additional metrics are the additional measurements established to help interpret the results of the primary metrics. Secondary metrics are often described as circumstantial evidence, despite this common reference, secondary metrics ensure that problems do not just change forms or move from one place to another.
If you were attempting to reduce a cycle time on a service orientated project your cycle time reduction would be the primary metric. But the secondary metric may be customer service or employee satisfaction.
Actual measurements are the measurements as they exist in fact. They are real measurements that are accompanied by objective evidence.
Samantha went to the store to buy Michelle her favorite popsicles while she was sick. Michelle asked Samantha how much money she would need. Samantha answered "about $5.00." After Samantha went to the store, Michelle asked for the change and the receipt. The receipt showed the popsicles were $3.50 and the change was $1.50.
What two amounts are considered "actual" amounts? **Place answers in comments below**
An estimate is defined as an approximate judgement, calculation or opinion regarding time, size, weight, worth etc. A good source to read about project estimating is the book titled project estimating and cost management.
A project budget is a comprehensive assessment or estimate of all costs related to a project. The project budget is more detailed than a high-level budget that may have been developed in the initial stages of project development.
What is included in a project budget?
1. Labor or manpower costs.
2. Material costs.
3. Direct costs such as training
4. Equipment costs including ongoing equipment fees.
5. Overhang and consulting fees
6. Project reserves or contingency planning
7. Subcontracting costs or vendor fees.
There may be other costs unique to your project. Keep in mind the project budget is your best estimate of how much the project will cost and ultimately determine the initial cost to benefit analysis for sponsorships decision.
Strategic planning is the process of developing a strategic plan. The strategic planning process is used to prioritize, focus, strengthen and ensure everyone is aligned towards a common goal. The disciplined activity of strategic planning produces actions and decisions that help form, shape and guide how the organization is defined, who it serves and what the organization's purpose is.
General Steps of Strategic Planning
1. Analyze and or assessment of where the organization currently stands.
2. High level forming and framework
Hoshin Kanri is one type of strategic planning.
The control phase is the final stage of the DMAIC methodology. It ensures that the improvements made continue to work and meet the requirements of the customer. The control phase all documents are finalized and monitoring plans are put into place along with response plans in order to ensure that everyone knows what to do if a process falls out of control.
Cost of Poor Quality
The cost of poor quality are the costs associated with providing poor quality products or services either internally or externally. There are four categories that costs can be placed in: Internal Failure costs, External Failure Costs, Appraisal Costs and Prevention Costs. Read more in our recent post on The Cost of Poor Quality.
Understanding the cost of poor quality:
The iceberg is a great representation to use when understanding the cost of poor quality. The visible portion of the iceberg is often depicted as the visible costs associated with poor quality, such as:
Discussion Opportunities (Comment Below Please)
Business Metrics are a system for collecting, measuring and benchmarking a measure to an established standard or a specific objective for a department, operation, product, service, business, organization etc. A good performance metric will establish criteria, a standard or desired level of performance and a measurement. One of the greatest books on Metrics is; Metrics, how to improve key business results.
Line Haul Costs
Line haul costs are the basic costs of carrier operation. This includes driver's wages, wear and tear or usage depreciation of the vehicle and any costs associated moving containers or materials. The costs often vary or change based on mileage, distance shipped and the amount of weight that is carried. Click on the link below to download a free line haul cost template for your organization.
A product family are products which pass through similar processing steps and share common equipment prior to leaving your company (shipping to customer). In general product families share about 80% or more processing steps or equipment. The significance of the "product family" as it relates to lean or six sigma is that the value streams of our organizations are in some way related to a product/service, when we group them into product/service families we are then able to see which product/services share the same processes and which value stream will be the greatest improvement opportunity for the organization.
The "hidden factory" is the set of activities in a process or value stream that result in the reduction of quality or velocity of a business process. The reference to hidden insinuates that the process is not known to individuals who might be seeking to improve the process.
Examples of the Hidden Factory Concept
Rolled Throughput Yield
A rolled throughput yield is a percent that measures the probability that a unit can "roll through" a process without defects. The rolled throughput is calculated by determining the throughput yield (first pass yield, first time yield) of each process step and then multiplying those throughput yields (first pass yield, first time yield) by each other in order to obtain the cumulative or "rolling" throughput yield. This measure takes into account rework and scrap providing an organization with a more accurate assessment of internal waste and or hidden costs.
The average or ratio of the number of defects per unit observed during an average production or service run divided by the total number of opportunities to make a defect on a product or service normalized to the number 1,000,000.
-To Calculate DPMO from DPO simply multiply DPO by 1,000,000.
- To Calculate DPMO from DPU - DPU/(opportunities/unit) x 1,000,000.
The Seven Basic Quality Tools
The seven basic quality tools are a set of tools that are used to help organizations understand and improve their business processes.
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