24 The loss model a management development tool

In Chapter 1, we introduced the view that customer expectations should drive the company and therefore the company's operations' response (Figure 1.1). Then we introduced the management challenge presented by improved equipment effectiveness.

Here we look more closely at the TPM-derived loss model, an important management tool to deliver a Totally Productive Operation.

The example in Figure 2.4 raises some important issues concerning cost reduction and profitability:

• Producing 10 per cent more in the same time increases return on capital employed by 20 per cent.

• Producing the same in 10 per cent less time increases return on capital employed by 5 per cent (*reduced labour cost by 10 per cent).

• This highlights the importance of management focus on business development to create the environment for bottom-up continuous improvement.

Produce same 88%

0 0

Post a comment