The assumption that improving manufacturing operations and efficiency is a source of competitive advantage continues to be questioned. Manufacturing has progressively lost its role as value creator. This paper introduces a new key performance indicator for the CEO that is referred to as the ‘Manufacturing Value Added Coefficient’ (MVAC™), which can be used to assess apparent performance measurement gaps associated with the value added of manufacturing. MVAC™ is a tool to quantify how much value manufacturing assets contribute to the bottom line. An MVAC™ calculation can serve as a supplementary perspective on product margin analysis. Managers can improve company performance when they do not perceive manufacturing as a cost generator but instead integrate the cost of operational improvement into the broader enterprise value added framework. Two business case studies were selected in order to demonstrate the analytical power of the proposed method.
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