Throughput #20
The manufacturing KPI mistake that’s slowing down your plant
In our last two newsletters, we’ve followed the transformation of a manufacturer that completely changed the way they managed operations.
First, they implemented Demand-Driven Replenishment to ensure the right materials were available at the right time.
Then they implemented Drum-Buffer-Rope (DBR), limiting the release of work into production based on the capacity of the constraint.
The results were dramatic.
Typical lead times dropped from three months to about three weeks.
Today, they’re shipping almost 20% more than they were a year ago, and revenue has increased by 20%.
But there was one final change that made those improvements sustainable.
Essential Shift #3: Stop Measuring Local Efficiency
Most manufacturers measure success at every work center.
Common local performance measures include:
- Labour or machine efficiency
- Output per person or per shift
- Overall Equipment Effectiveness (OEE)
- Labour absorption
- Cost per unit
These measures seem logical.
The assumption is simple:
If every department becomes more efficient, the entire plant becomes more productive.
Unfortunately, that’s rarely what happens.
The Hidden Efficiency Problem
When managers are rewarded for local efficiency, they naturally encourage behaviours that keep people and machines busy.
That often leads to:
- Releasing production orders too early
- Running larger batch sizes
- Building to forecast instead of customer demand
- Purchasing more raw materials than necessary to reduce unit costs
Every one of these decisions may improve a local KPI.
Together, they increase WIP, extend lead times, create scheduling chaos, and reduce overall throughput.
The plant looks efficient on paper while becoming less productive in reality.
Replace Local Efficiency with Schedule Adherence
Removing local efficiency measures isn’t enough.
You need to replace them with a measure that supports flow.
That’s why we at Montera focus on Schedule Adherence.
Schedule Adherence simply measures what the constraint (or “drum”) was scheduled to produce during a shift versus what it actually produced.
That’s where throughput is created.
When the drum achieves its schedule, the rest of the plant succeeds by supporting it — not by maximizing its own local efficiency.
Instead of asking, “How busy is each work centre?”
The better question becomes:
“Did we enable the constraint to achieve today’s schedule?”
That single shift changes behaviour across the entire operation.
Continuous Improvement Where It Matters
Schedule Adherence also provides a powerful foundation for continuous improvement.
When the drum misses its schedule, manufacturers can identify exactly what disrupted flow, build a Pareto chart of the most common causes, and focus improvement efforts where they’ll have the greatest impact on throughput.
Rather than launching dozens of improvement projects across the plant, teams concentrate on solving the few issues that actually limit performance.
It’s a far more effective way to improve productivity.
The Three Essential Shifts
Over the past three newsletters, we’ve explored the three essential shifts that form the foundation of Montera’s Flow Management System:
Shift #1: Ensure the right materials are available at the right time using Demand-Driven Replenishment.
Shift #2: Control production flow by limiting work release using Drum-Buffer-Rope.
Shift #3: Replace local efficiency measures with Schedule Adherence to reinforce flow instead of local optimization.
Together, these three shifts create a more stable, responsive manufacturing operation — one with less inventory, shorter lead times, higher throughput, and greater profitability.
If your plant is still measuring local efficiency while struggling with long lead times and constant firefighting, it may not be an operations problem.
It may be a measurement problem.
If you’d like to explore what these three shifts could look like in your operation, I’d be happy to start the conversation.
Thanks for reading!
— Jack Warchalowski, Montera CEO
[email protected]
Connect with me on LinkedIn
P.S. Get our free inventory imbalance report — the first step to greater efficiency, higher margins and long-term profitability.
Subscribe to Throughput, Montera’s manufacturing performance newsletter.