Aligning corporate strategy with LSS
The flow from high-level strategy to individual projects requires an understanding of where and how value creation.
Some definitions:
Economic Profit% = % change in Return on Invested Capital – weighted % cost of Capital
Economic Profit = Owners Earning / Invested capital = (Profit after tax) – (3 year average CAPEX)
+ (D&A) – (Increase in working capital)
Process Cycle Efficiency = Value added time / Total lead time
Lead Time = Amount of WIP / Average completion rate
Waste Driver = (Total Demand) x (Set up Time) x (No. of different offerings) / [1 – (Defect Rate) – (total demand) x (Processing time)]
Capacity constraints limits output whereas a time trap causes the longest delays in the stream
