This is the fourth of a five-part series on How To Measure Success.
Constantly remember your goal. Even redefine it if necessary. If we do not know our destination, then all measurements that are supposed to get us there will be useless.
A business analyst definitely should be familiar with the domain of the business they work at in order to choose success measures that are consistent with the goal and vision of that business. For instance, in the manufacturing industry, the goal is to manufacture what the market is buying. The more of those products getting out of factory’s gate, the more successful that factory is. Also, a successful factory is always after efficiency. So, a typical plant manager may introduce several KPIs (key performance indicators) for the workshops and assembly line in his factory to acquire and maintain desirable efficiency levels. But, he should be aware that all those workshops are part of a bigger body, which is the factory, a body that has inflow of raw material and outflow of its product. So, at the end of the day, the efficient factory is what he should be looking for, not efficient individual workshops. Basically, in terms of mathematics, if you go for efficiency at the workshop level, then you are finding local optimums. But, if you seek efficiency at the factory level, you are finding the global optimum. What should be important for the plant manager are the macro picture and the global optimum. At the global optimum level, the factory is supposed to have the fastest flow from input point to the output point, and to keep the inventory levels as low as possible.
For instance, workshop A is set for producing parts for product Alpha. But, today’s market demand is product Beta. And there might not be an order for Alpha within a month. Although setting up workshop A for producing Beta will cost time and money, that is more efficient than making Alpha units for possible sale one month in the future. Finishing some more Alpha units instead of immediately changing to Beta set up has more efficiency at the workshop level, but at the same time causes more Beta work in process inventory sitting before workshop A and adds incremental inventory costs. Besides, it will add opportunity cost by not selling Beta units in the market in time. In order to achieve such efficiency, fluctuations in each part of production should be measured to assess the global fluctuation at the plant. Moreover, the bottlenecks should be identified, as those are the points in the manufacturing process that have the largest effect on the process flow. Those measures will help management assign confident inventory levels before each workshop in order to maintain the desired global flow in the factory.
NEXT WEEK: CUSTOMIZED REPORTS BY AUDIENCE