After the age of the craftsmen, when the Industrial Revolution began to pump out products in mass, time became a critical issue with regards to production in manufacturing. No longer could products be made according to an arbitrary or infinite timeframe for production. With the introduction of mass manufacturing, production mandates and quotas were increasingly created according to the notion of how much time it should take to make x number of items. The idea gave rise to business efficiency theories and models such as Frederick Taylor’s time-motion studies in the early 1900’s, and Frank Gilbreth’s one best way production mode of scientific management in the 1950’s.
The notion of standards- or estimate-based labor performance measurements has continued through the years in one form or fashion, and continues today in our new Twenty First Century industrial revolution. In short, performance measurement is a way to manage and benchmark performance in order to identify areas for continuous lean improvements. However, what has changed over time has been the means by which labor performance data has been gathered, interpreted, and reported. Rather than just simply counting parts produced by any single worker in relation to the time they used to produce the lot, employee direct labor performance measurements are packaged with a variety of criteria including performance data such as competency scores, trending, goal progress, and several other factors to assess the actual labor utilized in production as a direct cost factored into pricing.
It is here, in assessing the direct cost of labor, where key performance indicators will drive the periodic employee and work center evaluations. Indeed, the quantification of the standards/estimates for any production process or technique means that evidence of productivity can be gathered on many levels and over time. To do this requires a detailed analysis of production processes to understand with greater accuracy where exactly the inefficiencies lie and where the benefits in adjustments will be achieved. ERP software systems are powerful tools for both establishing and revising performance measures, as well as monitoring how well adjustments in standards/estimates are meeting production efficiency goals. For example, ERP performance analyses may indicate certain products are being underpriced relative to their direct cost, or that machines or employees are being nonproductive in terms of time versus output.
In essence, ERP software systems work on an averaging that tells the tale of what production should be and what it actually is in practice. When labor and machine performance (as divided by individual employees, departments, and the whole plant) meets expected standards, manufacturing runs at rates that meet or exceed capacity. So, successful direct labor performance occurs when balance is achieved between predetermined standards/estimates, and the ability of resources (human and/or machine) to meet those goals. The bottom-line result: Cascading and effective ERP benefits through optimizing of all resources, and a productive ROI.
Dusty Alexander is the President of Global Shop Solutions. Global Shop Solutions is the largest privately held ERP software company in the United States.
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