When it comes to the things that cost you money, no matter what business you’re in, people are going to be your most expensive line item. Payroll has its own spot on the balance sheet for a reason; you need to show a return on that cost.

At CIMx, we track the LER of our people – Labor Efficiency Ratio. We have our friend Greg Crabtree to thank for that. We’ve used his philosophy for years. The LER simply tells you the output you’re getting from your staff for the money you invest. Yes, it is more complex than that and it takes a while to understand what your individual LER is.

What I really love about it is the way it tells us the health of our business. Our particular business. We have a few benchmarks for what a typical software company should produce, but in general, we are comparing ourselves to ourselves. Year over year, as we measure our income and our LER, we can see where there’s a sweet spot for each team we have. There is a performance metric that they can reach and hold where we are performing at our peak.

How do you measure IT?

I’m guessing that you have a measure you use as well.   Often, in manufacturing, it’s going to reflect the units produced and quality issues. That latter one, we often see as days since a quality incident. Many manufacturers have a hard time counting quality issues and maintaining a log without a manufacturing software tool. (Keeps us busy, mind you.)

I’m suggesting that you look a little deeper. Is there a way that you could calculate and track your LER? What if you could look at the performance of individual parts or products you make across an historical timeline to see how efficient you are actually being? Would that help you to know where you should make changes or tweaks in your process(es) to drive more productivity?

Manage and Leverage Production Data with Quantum  LEARN HOW HERE



In our business, the LER tells us whether or not we are underutilizing our staff. We know the number that we need to hit to be ultimately productive and something lesser than that gets our attention. Going back to the philosophy that your people are your most expensive asset, you know that utilizing them is going to be important to getting that return.

For me, underutilizing talent is most often seen in the supervisory area, especially in quality or defects. When we enter a conversation with a manufacturer, these higher-paid positions are the ones we naturally focus on. They are a tell-tale sign for how the business is performing. In a smooth operation, the supervisors are helping to solve problems periodically and have access to the resources that they need when they need them.

Note here that we are trying to get manufacturers to the point where they can use their supervisors as coaches, eliminating the fire-fighting mode we often see when we first arrive. Let me give you an example. In one company we worked with, the quality engineer was a specialist because of the product they made. When quality issues arose, the team needed the engineer to troubleshoot and create a path forward. There was no easy way for them to move without him.

He was also the highest-paid member of the shop floor team. His expertise was unmatched and he was paid well for it. One of the challenges they had was freeing him to do the work he was supposed to do – what he was trained and hired to do. His expertise was in creating new engineering paths for their products. Building a better mouse trap as it were.

He had no time for the mousetrap. His LER, we would say, took a sinker.

What Can you do?

Naturally, we are partial to a software solution. A good, solid software tool is able to build a neural network (digital) for your shop floor that can respond as things happen in real-time. We do realize, however, that not all of you are ready for that step. So what can you do to move forward in the meantime?

It’s going to be a lot of tracking and data collection, which without software will be manual. But it’s the only way to see the patterns that you’re looking for. Start with tracking non-conformances (quality issues). Create a small list of the most common ones you see and don’t forget to make a list of holds while you’re at it.

A non-conformance is going to be when something goes wrong in production. Something you want to note in the production record for audit purposes or for trend analysis. It’s something that may even have to report to your customers if you’re in certain industries. Here’s what happened while I was making the product that I sent you and here’s what I did to fix any issues.

A hold, on the other hand (and these are equally as important to us), is something that stopped the process mid-step. Perhaps a machine went down (we’ll say it again, we don’t wish that on anyone). Or you didn’t have the materials to do the job. (See our segment on inventory if that is the case.) These are issue that won’t make it to the production record, but should be noted for you because each one of these is driving down your LER.


Increase Quality and Reduce Scrap with Quantum  CLICK HERE


What’s next?

We’ll talk next week about some questions you can ask of vendors to ensure that the product (if you want to buy a tool to solve your issue) that they’re selling you can handle the job you have. In the meantime, if you have any questions or need us, give us a shout at info@cimx.com to engage with us, ask questions or get a Process Gap Analysis of your shop.



Contact CIMx Software to see how a Manufacturing Execution System can improve production control for you.

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