Yield Management
| Published date | 01 July 1985 |
| Date | 01 July 1985 |
| Pages | 23-25 |
| DOI | https://doi.org/10.1108/eb057410 |
| Author | William J. Wood |
| Subject Matter | Economics,Information & knowledge management,Management science & operations |
Yield
Management
by William J. Wood
Kingston Regional Management Centre
Introduction
The productivity of an industrial/commercial unit can be im-
proved by achieving a greater output of products and ser-
vices for the same or a correspondingly smaller input of
resources. The need to manage material resources more
effectively is being recognised by an increasing number of
businesses. However, although this particular area of
modern-day management is now receiving much greater
attention than was previously the case, there are still very
few companies that are aware that Yield Management is
a very important part of the total "materials management
cake".
In fact, even in those companies that do realise the
importance of this vital ingredient, the approach to yield
management tends to be unco-ordinated and fragmented.
Yield tends to be managed by accident rather than by
design.
So what is yield management and why is it important? First,
let us define exactly what we mean when we refer to
yield.
There are several definitions that have been applied:
— "It's how many I get out the other end."
— The volume of good product resulting from a
process.
— The quantity of items produced from a manufactur-
ing operation.
However, the definition suggested as being more appropriate
is as follows: yield is the quantity of good pieces resulting
from a process expressed in proportion to the quantity of
good pieces entering that process.
The effective management of yield is essential to each and
every business. Yield information will be used directly and,
in some instances, indirectly by the vast majority of func-
tional areas within a company. For example:
● Marketing — will use yield information when referr-
ing to product lead times and prices — for allowance
will have had to have been made for the effect of yield
on product availability and cost.
● Customer liaison — will use yield information when
they commit the company to meet customer delivery
schedules.
● Production planning — will need to make allowances
for anticipated yield losses and will build these into
manufacturing schedules.
● Purchasing — must make adequate allowance for
yield losses when considering purchase quantity,
price and lead times.
● Stores — inventory levels will reflect fluctuations in
yield achievement performance.
● Quality assurance — will be influenced in the selec-
tion of appropriate monitors by the target yield that
can be expected from an operation or process.
● Production engineering — will have to consider yield
when considering alternative methods of manu-
facture.
● Personnel — will make use of yield information when
determining the skills and training needs required to
perform any particular task.
● Finance — will use yield information to produce more
accurate product costs, and hence yield information
will provide a sounder basis for pricing each item.
It will also be possible to compare budgeted scrap
costs with actual costs for individual items and to
produce summary information by product type and
product group.
● Manufacturing — will be concerned with the target
yield they expect to achieve and the yield they ac-
tually receive from each process.
So,
given the widespread use and therefore the need for
accurate yield information in an organisation, why is the
management of yield not receiving the focus of attention
that it deserves? A recent survey, carried out to determine
the extent to which the need for effective yield management
is recognised within UK manufacturing companies, provides
us with several indicators as to why yield is not currently
being effectively managed.
The general conclusions drawn from this survey are as
follows:
— That in the majority of companies levels of yield from
production processes are seemingly erratic and are
not precisely known or monitored. Allowances for an-
ticipated losses contained in production schedules
are therefore currently a matter of guesswork — ac-
curate yield data not being readily available;
— In those few instances where yield information was
available the reporting format was found to be un-
wieldy to use and therefore the information that was
available tended to be ignored;
IMDS • JULY/AUGUST • 1985 23
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