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Metrics and KPI Boards (Part I)

Updated: Jul 1, 2022

Three key concepts in manufacturing that often get misconstrued or even used synonymously are productivity, effectiveness, and efficiency, but they refer to different things.

Productivity is solely about output versus time. What is the quantity of the production rate? A manufacturing line produces 500 units in one week. If the output increases to 700 units in the following week, the productivity has increased by the amount of goods or 200 units at the same time. This is an increase to the productivity levels.

Efficiency refers to “the ability to do something or produce something without wasting materials, time or energy.” This means that efficiency is often expressed by a percentage, with 100% being the ideal target with maximum efficiency so goods are produced at the lowest average total cost, with all else being constant. Then, efficiency is linked to Performance: how work is done and how well are the available resources used.

Effectiveness is related with the Critical Quality Attributes of the product: those features and characteristics that a customer expects and is willing to pay for. A process is effective only if it provides what the customer wants (internal and/or external customer). Effectiveness then looks at the output side of the process and is about the implementation of the objectives – doing what you said you would do.

How to find the Balance

Finding a steady balance between productivity, effectiveness and efficiency is crucial to making a manufacturing operation function at its best.

So, how do we merge the three? A common practice is to increase output while investing in employees simultaneously. Whenever changes are made, it is natural for employees to be uneasy. Effective training and understanding of the entire production line, right down to how important they are in making the product or delivering the service, will help. It is just as important for employees to know how the product is going to be used so they can contribute to improving the product or service firsthand. Employee empowerment is key.

Meanwhile, efficiency deals with doing the correct things the right way, minimizing mistakes and losses while maximizing the use of valuable resources. When these two concepts come together harmoniously, the company will see an increase in both quantity and quality. Though different, productivity and efficiency rely on one another greatly.

All combinations of effective/ineffective – efficient/inefficient are possible. Some think that effective is a prerequisite for efficient, this means that a process not doing the right things – therefore, ineffective – cannot be considered efficient.

Let us see an example. Imagine we want a portion of pizza for dinner. Four things can happen:

  1. The taste and temperature of the pizza is perfect (effective) and I get it very quick (efficient)

  2. The taste and temperature of the pizza is perfect (effective) but I have to wait too long (inefficient)

  3. I get a cup of coffee instead of pizza (ineffective) but very quick (efficient)

  4. I get cold pizza (ineffective) and I have to wait too long (inefficient)

To be continued...

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