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Introduction Competitive businesses must strive for continuous improvement in a highly competitive global market. Methods to infuse quality practices for the application of operations management principles form the basis for collecting and analyzing the data essential for strategic business decisions. One challenge for companies today is the wealth of information and computers to process it. There are numerous software applications to assist in forecasting, capacity planning, production scheduling, enterprise resource monitoring and other decision areas. Businesses must determine the proper application to work with their company model and carefully monitor implementation of a system that will have a broad impact on how…show more content…
The tier one metrics serve as the foundation to efficiency. Each metric can either directly impact efficiency or feeds up to tier two metrics. Reducing scrap will reduce unit cost and overall cost of production. The raw material, work in progress and finished goods all come together to determine total inventory. Batch size of production is another metric that can impact total inventory. Total inventory is an important metric to monitor and optimize to keep inventory cost down while meeting customer demand. Tier two metrics are driven by tier one. In addition to total inventory, demand forecast, cycle time and units sold are important measures to monitor. The demand forecast helps predict the appropriate production level. The cycle time illustrates how long it takes to produce and sell the end product. Monitoring the cycle time helps determine the proper inventory required and proper production levels. The total number of units sold is a final metric in tier two that is key to help determine the expected revenue. The final tier in this example is the tier three metrics. These include overall cost and revenue. Cost and revenue are the final metrics to determine the return on investment. Each of the first two tiers impact these final metrics. Monitoring the return on investment is the ultimate measure to make sure the business is meeting the strategic objectives of operations. This is a very simple model to illustrate how metrics
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