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Effectiveness doesn't measure overpolishing (work that is being done too well, compared to what we or the customers need) but WIP: work in progress. Work that has been completed; is ready to be delivered to the customer, but it hasn't been delivered yet. | Effectiveness doesn't measure overpolishing (work that is being done too well, compared to what we or the customers need) but WIP: work in progress. Work that has been completed; is ready to be delivered to the customer, but it hasn't been delivered yet. | ||
'''Inventory- | '''Inventory-Euro-Days (IED)''' | ||
Effectiveness is calculated in Inventory Dollar-Days. | Effectiveness is calculated in Inventory Dollar-Days. | ||
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Reliability measures commitments fulfilled to the external world, particularly focusing on timely delivery. | Reliability measures commitments fulfilled to the external world, particularly focusing on timely delivery. | ||
'''Throughput- | '''Throughput-Euro-Days (TED)''' | ||
* Calculated as: Value of late orders × Number of days late | * Calculated as: Value of late orders × Number of days late | ||
* Example: A $50,000 order delivered 5 days late results in 250,000 throughput-dollar-days | * Example: A $50,000 order delivered 5 days late results in 250,000 throughput-dollar-days | ||
* Lower TDD indicates higher reliability | * Lower TDD indicates higher reliability. The ultimate goal here too, is 0. | ||
Throughput-Dollar-Days are very similar to Inventory-Dollar-Days, with the key difference being the 'clock' on IED starts running from the moment you work on the project. TED starts from the expected delivery date or deadline of the project. | |||
===Key Characteristics=== | ===Key Characteristics=== | ||
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==Throughput== | ==Throughput== | ||
Throughput represents the rate at which the system generates goal units (typically money) through sales. | Throughput represents the rate at which the system generates goal units (typically money) through sales. We count all money arriving in the bank (cash flow model) paid by our clients. We don't consider invoices sent out as throughput because we, as a team, are also responsible for ensuring that the invoices get paid. Our work doesn't stop when the invoice has been sent. | ||
===Measurement=== | |||
Revenue is measured in euros. We track three key values in the Metrics sheet: | |||
* Revenue per day. | |||
* Revenue | * Revenue per quarter | ||
* | * Average revenue, trailing four quarters. | ||
* | |||
These all measure the same, but we don't get invoices paid daily. Effectiveness and Reliability go up and down each day in semi-predictable amounts because they mostly directly result from the work you're doing and not doing as a team. Revenue requires work by third parties (customers and banks) and is much more lump-sum. We track revenue per quarter and average trailing four quarters as those graphs smooth the numbers to such an extent that visual analysis is much easier. | |||
=Relationship Between Metrics= | =Relationship Between Metrics= | ||