Graph # 3 of 8 From Company Dashboard - Production Sales & Labor Costs

Never underestimate the power of a visual representation of your company's data. I have long been interested in how people learn. Coaching wrestling for over 15 years, allowed me to understand how different athletes learned. One key takeaway from a coaching class I attended was that about 65% of people learn visually, 30% auditorily and 5% learn by doing the particular task.

Taking time to show data in a graph and explain the data in words, you will reach most of the different learners in your organization. Also, by using a graph, data and trends are easier to see for nonfinancial leaders. Even CPA's and accountants will understand the data easier in a graph as compared to a spreadsheet. I will admit some financial people would rather have an Excel spreadsheet than a graph.

The purpose of this graph is to understand production labor costs and how much value those labor costs are producing. This graph works nicely for a manufacturing company, but could also be modified to a metric that is meaningful to your company. I love this graph for a manufacturing company that might not be able to show their production output based on sales or inventory. Sales and inventory is out of their control. The production values in sales dollars is not completely out of their control. One aspect that is out of their control would be the value of the products they produce - e.g. high sales price products vs low sales price.

This metric is not easily generated in most ERP systems. Or at the very least will likely require a custom report built in your system. I used Excel to generate this data. Once the process was set up, the second time it will not take as long to produce this graph. One caution on overtime tracking. Make sure that is not a key metric your plant manager is judged. Many a plant manager will focus on how low overtime is, but if they are sacrificing production of a high ticket item than it's not in the company's best interest to have no overtime. I have seen when overtime was not initially approved but after a closer look it was approved. At this manufacturer, every $1 of overtime generated $25 of gross margin to the company. At that return on investment, it's a no brainer to authorize some additional overtime.