One of the most poweful operational metrics I know of is Rolled Throughput Yield (RTY). It’s used to assess the “true” yield of a given process. This includes what we often call the “hidden factory” that plagues so many organizations… sucking profit right off their financial statements!
Let’s use an example to demonstrate how some, let’s call them, traditional manufacturing folks attempt to measure things.
Say there is a manufacturing process with 3 steps – Processes 1, 2, and 3 (original, eh?). Let’s also say that on a particular day they note the following performance:
- Process 1: 100 parts passed through this process and 84 “good” parts left this process (scrapped 16).
- Process 2: With some WIP laying around 110 parts passed through this process with 82 “good” parts passing (28 scrapped)
- Process 3: With even more WIP laying around this process they managed to produce 138 parts with 126 parts passing (12 scrapped).
Since the manufacturing manager only cares about “what goes out the door” the process they are most concerned with is the last one – process 3. And since they had a great day (only scrapped 12 parts) they report a “yield” of 91% (126/138). The manager even calls his buddy Sal, the sales manager, to brag about all the product they shipped!
Not So Fast Buddy
There are some fundamental flaws with this technique. The most severe issue is the fact they are ignoring all the scrapped parts process 1 and 2 created. This “hidden factory” is not known by Sal or really anyone else short of the folks on the line.
Here is how the manufacturing manager should be measuring the performance of their line.
Process 1 had a daily yield of 84% (84/100) while process 2 had a daily yield of 75% (82/110) and finally process 3 had a daily yield of 91% (126/138).
So, to calculate RTY we simply multiply these yields together giving us a composite yield for the day. Doing this gives us:
- 84% x 75% x 91% = 57%
This value of 57% is a more accurate representative of how this production line is performing. And more importantly this 57% is our opportunity as lean and six sigma practitioners!
Sure, the manager will probably not call old Sal telling him the latest RTY. And that’s fine. But we must not kid ourselves into believing we are performing better than we are. By focusing on RTY we can be sure we stay focused on the true pulse of the organization.
Note: All the WIP I mentioned in the example is another problem! But we will save that for another day.
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