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Balanced Scorecard for Chinese Factories

October 28, 2014

 by David Collins III

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How can a manufacturer keep track of its performance along the dimensions that really matter? The best manufacturers tend to focus on Safety, Quality, Delivery, Cost, and Morale, and together the metrics behind these dimensions of performance form a "balanced scorecard". This is very applicable to Chinese factories.

TRANSCRIPT

So how do you get the measurables you need out of your system? How do you know if you’re doing well? You, as the general manager, how do you know every day that the factory is running? Well, maybe you’re out on a sales call or you’re working with some government official or you’re out doing something else that you have to do because you’re managing the entire business.

Well, one of the best ways to do that is what we called a balance scorecard. A balance scorecard measures the most important things that you have to do and we like to use something called SQDCM. The S can be for safety – the safety of your workforce is doing well. Are they coming to work? Are they healthy? What’s happening with your workforce?

The next one is quality (Q). Quality is always key. What’s your measurable for quality? What’s coming off the end of the line? How many reworks do you have? How much is first time quality? You should be looking at first time quality to the 95 to 97 percent range. Probably right now you’re getting less than 20%.

Cost (C). The overall cost of your product is totally important, so that you can measure that on a daily basis.

Delivery (D). Are you delivering to your market on time? [At] many factories that we work with, the factory isn’t delivering on time at all. In fact the factory is getting the delivery late to the customer all the time.

And the last one, one that most people don’t measure but I think is extremely important, is the morale of the people (M). How do you measure morale? You can measure morale simply through knowing if they turn over – how many people are leaving you in a year. In China I see 35, 40 percent turnover rates of people leaving. That should be able to get down to the 6 to 10 percent range pretty easily by engaging the workforce better. Otherwise absenteeism.

Also, are the people giving information to you? Are they giving you ideas? Are they trying to help you with the work? It’s another good measurement of morale. Or are they always complaining? Bad morale. And bad morale frequently is bad work.

When you measure these five things you can quite simply know what’s going on in your factory at a glance. Now, every single one of these little pieces has many variables to it. For example let’s just go on to the cost. That’s the cost of your materials, the cost of your inventory, the cost of your electricity. All the cost that you have, including the cost of your labor, the cost of real work, the things that you can control.

Quality is obvious. What’s the quality system going on is that you do have good quality throughout your process or is it just end of line quality – what’s happening there?

So, these five things are measurable, simply put into a scorecard, simple for you to view on a daily basis, and then simple for you to drill down into the details if you need to, if you’re finding something is wrong.

So if all of these are in the green, so to speak, [regarding] the processes that you want, you don’t worry about it. If they start to get yellow that means some things are starting to fade and get bad on you. They’re fading away. If they’re red you’re in trouble and you have to help and get into the work and find out what’s really going on.

A real simple way to manage what you’re doing and a real simple way to know what’s happening in your factory at any given minute.

And then everybody is working together for the same goals. Those goals are the SQDCM that you’re looking at. And when you have everybody in the factory marching to the same goals that you want them to work as the factory manager, then at that point in time you have a team working together for the good of the company and the good of the factory.


 

22 Signs Of Good Factory Management in China eBook

David Collins III

David Collins III

David was a Senior Strategy Consultant for Deloitte, served in Iraq as a Special Operations Civil Affairs soldier, and as a Governance Advisor to the Afghan Government with the Department of State. At CMC, David advises clients on strategy and investments.

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