Fig. 1. Shown is a model for evaluating the benefits and costs for non-traditional investments.
Source : Jack J. Phillips and Patricia Pulliam Phillips; Show Me the Money: How to Determine ROI in People Projects and Programs; San Francisco, Berrett-Koehler Publishers, Inc., 2007.
truth is transformed into business strategy via Compatibility. Despite the fact that much has been written about this profoundly important profit- making concept, scrap’s true impact on profitability remains underappreci- ated, as does scrap elimination as an investment imperative. Moreover, the metrics used to quantify poor qual- ity are inadequate, as the sales value of defective castings is a far cry from scrap’s total cost, and even the broader cost of quality falls short of what is needed to spur new thinking and new investment. Further, serious quality trouble can only rarely be solved with new production machinery. Tese factors too have caused many to look
past scrap elimination when allocating investment dollars. Just so with lead times. Investing to
remove time from the system of pro- duction is also an investment impera- tive, one like scrap that has been obscured by our continued allegiance to an ROI-based and growth-oriented investment model. Like quality, time is a systemic-level concept, one that we understand too little, spend inadequate time thinking about and measuring, and fail to invest in sufficiently. Like scrap, removing time shrinks cost structures, increases capacity for free, enhances productivity and turbo- charges profitability. Uniquely, invest- ments that remove time also attract
Managing for maturity means finding better ways to think about and measure the costs associated with scrap and non-competitive
lead times, and it means exploring new ways to steer investment
dollars to improving performance in these critical areas.
36 | MODERN CASTING October 2014
new work and ward off low priced offshore competition by virtue of short lead times and speed to market. But don’t confuse time with molding speed; removing time from the overall system of production not only boosts competitiveness and customer satisfac- tion, it also removes real dollars from the cost of goods sold. Allowing unreal job costs to con us into investing in new equipment actually (more often than not) accomplishes the opposite. Scrap elimination and lead time
reduction are most effectively advanced by investing in human capital, and our management mindset and toolbox must adapt to this new investment priority. Doing so first requires that we stifle the reflexive reaction that such investments merely “bloat the payroll” or “increase fixed costs.” Next, we need to employ new methods for evaluating the ben- efits and costs of such investments, ones like the model shown in flowchart form in Fig. 1. Tis model originated in the 1970s and differs most from traditional ROI in its rigorous focus on measuring an investment’s actual, after-the-fact, costs and benefits. Instead of pretend- ing to justify an investment up front via biased predictions of growth and return, this newer approach allows the impact of non-traditional investments to be objectively and accurately “monetized” and their true profit impact quantified. Serious investments in HR are now
essential for metalcasters to thrive and for bottom lines to grow in the years ahead. Tey are required no mat-
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