5 Metrics that Drive Continuous Improvement
Kevin Wiltshire, A Senior Consultant of Renault-Nissan Consulting, outlines 5 key metrics for you to follow
Any corporate initiative that takes up time, money or any other resources should be monitored to ensure it is effective and creates a return for your business.
The various metrics used will often depend on the type of project and the objectives or ideal outcome, so it’s wise to tailor how you measure the effects of any work carried out to your own individual organisation.
The following five metrics can be used as a guide to ensure a Continuous Improvement project is worthwhile and contributes to the overall success of the company.
Metric 1: ROI
A financial return on investment is one of the most popular and accurate ways to determine the success of any project. A successful continuous improvement initiative will display results on your balance sheet over time, which will give you an indication of its contribution to the success of your business.
Increased cash flow is just one of the financial metrics that indicate Continuous Improvement is working. You may also like to analyse sale of goods and services or a percentage increase in profit.
To look more closely at ROI created by a continuous improvement project, you can review the cost of goods sold, which gives you an idea of the waste being eradicated. Alternatively, a cost per unit will also help you assess the results achieved.
If your focus is on Lean, you may find that lead time from order to delivery is the most effective method of reviewing ROI. Bear in mind however, that you should measure the area of your business you are trying to improve. If that’s cost of units, your metric should be costs. If it’s more important for you to increase profit as a result of improving efficiency or speed, these are the areas you should review.
Metric 2: Product Quality
Many product-based businesses will run a Lean or continuous improvement project in order to raise the standards of manufacturing, increase speed and improve product quality. So it makes sense for this to be one of the metrics used to monitor the effectiveness of any Continuous Improvement project. Has there been an increase in production? Are there fewer defects reported? And is delivery demand being met or exceeded?
There are also other less immediate ways to monitor product quality. For example, an increase in quality may lead to improved customer satisfaction and a rise in repeat orders. Over time, the effectiveness of your product development processes will be visible on the company balance sheet as sales and, in theory, profits move in an upward trajectory.
Metric 3: Saving Time
Reducing the amount of time spent on manufacturing goods or supplying services is one of the common reasons for a Continuous Improvement drive. Therefore, assessing any change in time spent producing products or services is an effective way of measuring its success.
Although this efficiency can be difficult to measure accurately because it doesn’t necessarily show up in the Profit and Loss report, there are still ways to identify if the project is worthwhile. ‘Time to market’, order and delivery timescales and units produced, will all give you a suitable measurement.
Metric 4: Customer experience
There are a number of ways to determine customer satisfaction when it comes to your goods or services. Repeat purchases, surveys or the volume of returns or complaints will all give you an indication of how happy your customers are with the finished product. You can also use feedback from sales teams to gauge the reactions of consumers following any major product developments. Creating an excellent customer experience should be a goal for any company, and process improvement can help you reach it. Another way to measure customer experience is through the Net Promoter Score (NPS), we, at RNC score around 70.
Metric 5: Safety
For organisations manufacturing goods or providing services directly to consumers, safety is fundamental to their reputation and success. Car manufacturers, for example, rely on safety to maintain trust among buyers and sell their products. Any serious lapse in quality control or a lack of adherence to standards and compliance requirements could have major consequences. Safety is also integral to the manufacturing process itself.
It’s not always easy to directly measure safety when it comes to Continuous Improvement in manufacturing, but it is an effective way to assess the success of your efforts. Collecting and reviewing data on product faults or customer complaints over time and comparing it to past information will give you an accurate indication of whether quality is improving or deteriorating.