Patty arrived at work an hour early to prepare for her meeting with ACME CEO Mike Madigan. Nineteen days ago he had asked her to develop an electronics assembly metric that would correlate with profitability. This metric would, in turn, be able to help pinpoint opportunities for improvement. He gave her 3 weeks, so she was two days early. Mike was in town to meet with Sam Watkins, the local plant manager, so he ordered that they meet.
Patty had quickly identified non-material assembly cost per I/O (NMAC/I/O) as a good metric candidate. She went to five of ACME’s plants and, after a day or two at each one, she collected all the data she needed to prove her point. Rob helped by writing an Excel macro that would calculate NMAC/I/O and plot it versus profitability. The correlation coefficient was an outstanding 0.983.
While visiting the five factories, she tried to learn why those that had a poor NMAC/I/O were performing poorly. After a little checking, she and Pete discovered that the poor performing sites typically had lines that were not time balanced, had slow component placement machines, and occasionally had very slow printers or solder paste with poor response to pause. There was even one plant that was using a full wave solder process, when only eight solder preforms would have done the job in the reflow process. None of these “problems” would show up if you were only tracking line uptime. In light of this situation, she also developed a plan to use NMAC/I/O to identify and implement opportunities for improvement.
As Patty headed toward Sam’s office, Sam’s administrative assistant invited Patty into the conference room to allow Patty to get her laptop set up. Just as she finished setting up and her Powerpoint presentation was on the screen, Sam and Mike walked in.
“Coleman, we’re counting on you to take us to the next level,” Mike said a little gruffly, “so let’s get this show going.”
Patty looked at Sam and could tell that Sam was uncomfortable with his boss’s abrupt demeanor.
“I performed quite a bit of research and concluded that non-material assembly cost per I/O is the best metric,” Patty started.
“That’s great Coleman, but what the hell is non-material whatever you said,” Madigan interrupted.
Patty’s cellphone vibrated, but she ignored it.
“Non-material assembly cost per I/O is the total cost of running a factory less the components, hardware, and PWBs used. Some people call this the conversion cost,” Patty answered.
“If you think about it, it is almost obvious that this is the best metric,” Patty went on, “as it measures all the non-material cost divided by how much we produce.”
“I get it,” said Sam. “We are producing I/Os or solder joints, we measure the total cost to make solder joints and divide by the number of solder joints. It’s that simple.”
“Precisely,” Patty responded.
“I understand now why uptime alone wasn’t a complete metric. You can be up and running, but be doing it inefficiently,” Mike said with a rare smile on his face.
Patty’s cellphone vibrated again.
“Exactly,” Patty commented.
“OK, so we are going to measure NMAC/I/O,” Mike commanded, “How does it correlate to profit?”
“It is nearly perfect,” Patty said.
They continued their discussions and reviewed Patty’s plan to improve productivity at the sites with a high NMAC/I/O. Patty would take the lead on this effort.
As Patty got up to leave, Mike commanded, “Oh, and Coleman, find out why so few people use NMAC/I/O.”
Patty thought this was something to discuss with the Professor.
As Patty walked out of Sam’s office, Clare Perkins, Sam’s Admin stopped her.
“Ms. Coleman, your mother-in-law called, Rob has been taken to the hospital,” Clare said.