High Output Management

by Andrew S. Grove

now turned things into a continuous operation at the expense of flexibility,

How do you minimize the risk of a breakdown of this sort? Performing a functional test is one way.

A second way involves in-process inspection,

The point is that whenever possible, you should choose in-process tests over those that destroy product.

The eggs going into it could be cracked or rotten, or they could be over- or undersized, which would affect how fast they cook. To avoid such problems, you will want to look at the eggs at the time of receipt,

incoming or receiving i...

If the eggs are unacceptable in some way, you are going to have to send them back, leaving you with no...

you need a raw material ...

you should have enough to cover your consumption rate for the length of time it takes to ...

inventory costs money, so you have to weigh the advantage of carrying a day’s supply against the cost of carrying it.

you should also try to gauge the opportunity at risk:

what would it cost if you had to shut your egg machin...

All production flows have a basic characteristic: the material becomes more valuable as it moves through the process.

A common rule we should always try to heed is to detect and fix any problem in a production process at the lowest-value stage possible.

to run your operation well, you will need a set of good indicators, or measurements.

focus each indicator on a specific operational goal.

which five pieces of information would you want to look at each day, immediately upon arriving at your office?

sales forecast

How many breakfasts should you plan to deliver?

To assess how much confidence you should place in your forecast, you would want to know how many you delivered yesterday compared t...

the variance between your plan and the a...

raw material inventory.

Do you have enough eggs, bread, and coffee on hand to keep your factory running today?

condition of your equipment.

manpower.

If two waiters are out sick,

Should you call in temporary help? Should you take someone off the toaster lin...

quality ind...

Because your business depends on people wanting what you sell, you must be concerned with the public’s opinion of your service.

Perhaps you should set up a “customer complaint log”

If you look at them early every day, you will often be able to do something to correct a potential problem before it becomes a real one during the course of the day.

because indicators direct one’s activities, you should guard against overreacting.

This you can do by pairing indicators,

together both effect and counter-effect...

in the inventory example, you need to monitor both inventory levels and the incidence of shortages.

Example of leading and lagging indicator. Leading inventory check predicts meeting tbr needs today. Lagging outages require action to prevent losses tomorrrow.

joint monitoring is likely to keep things in the optimum middle ground.

a genuinely effective indicator will cover the output of the work unit and not simply the activity involved.

what you measure should be a physical, countable thing.

Because those listed here are all quantity or output indicators,

their paired counterparts should stress the q...

indicators have many uses.

they spell out very clearly what the objectives of an individual or group are.

provide a degree of objectivity when measuring an admini...

give us a measure by which various administrative groups performing the same function in different organizations ...

Leading indicators

showing you in advance what the future might look like.

they give you time to take corrective action, they make it possible for ...

for leading indicators to do you any good, you must believe...

the indicators you choose should be credible, so that you will, in fact, act whenever they flash warning signals.

linearity indicator.