Scorecards in Today’s Manufacturing Industry
Internal and supplier performance scorecards are mission-critical components of any continuous improvement strategy. Quality management systems that do not include flexible scorecard capabilities are generally insufficient to overcome the challenges facing today’s lean manufacturing industry. Manufacturers and suppliers alike utilize scorecards as a means to monitor key performance indicators (KPIs) versus target values. The question that manufacturing enterprises must answer is how to develop scorecards to yield maximum value-added data.
Building Internal and Supplier Performance Scorecards
The philosophy governing lean manufacturing principles seeks to eliminate waste in all forms, including inefficiencies in internal business processes. Actionable, value-added performance metrics are key to the entire process. Knowing which KPIs to include in scorecards could mean the difference between success and failure.
To mitigate the risk of deploying inadequate scorecards, companies should adopt a balanced scorecard approach, which focuses on financial data, customer data, internal business processes and resulting lessons learned. With respect to supplier scorecards specifically, companies must be able to identify KPIs that affect quality, product delivery, responsiveness and cost. Supplier scorecard features are arguably some of the most useful tools of integrated quality management systems.
Furthermore, companies must establish the scope of supplier evaluation data. Paper-driven quality management systems are likely inadequate for handling such a large, continuously expanding data set. Deploying agile quality management software can solve this problem, but buy-in from management personnel is equally as important as leveraging IT resources.
For scorecard strategies to work, management must buy into the concept and foster cross-functional decision-making. Each relevant department or employee must have a voice in developing scorecard metrics, or else companies risk creating scorecards that yield few value-added data. Shrewd companies can avoid such a pitfall by starting with a “short” scorecard to test the value-added potential of KPIs.
Maximizing Scorecard Effectiveness
If shrewdly developed and deployed, balanced scorecards can provide manufacturers with a wealth of rich quality management data. Leveraging these data into successful cost reduction initiatives requires that companies focus tightly on their quality. Without an integrated IT infrastructure that allows manufacturers to continuously monitor and improve quality metrics, scorecards will be difficult and therefore costly to optimize.
Ideally, all KPI metrics included in a scorecard must align with a manufacturer’s business goals. Business decision-makers need actionable information from quality management system scorecards to maximize their effectiveness. For instance, advanced quality planning metrics can help differentiate the reliability of one supplier from another. Since scorecards allow companies to view quality management from a broader perspective, cost is not the sole determining factor.
Implications for Today’s Evolving Manufacturing Industry
Integrated quality management systems afford manufacturers the luxury of increased internal and supplier visibility. The ability to develop and share quality-related metrics within large supplier networks serves as a boon in an uncertain global economy. Scorecarding and lean manufacturing principles go hand-in-hand, so as more companies adopt the lean mindset, scorecards will continue to evolve likewise.
One overlooked risk of scorecards is the issue of data overload. Scorecards can potentially become so large as to yield little value-added information. Rather than clarifying data, bloated scorecards can muddle any actionable information.
The benefits of developing scorecards far outweigh the risks, however. The key facet of scorecarding that companies must keep in mind is that KPI metrics should yield as many value-added data as possible.