Key Performance Indicators - KPI

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Training Pack
Key Performance Indicators - KPIs
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Aims Objectives

• Target Audience Site Management to Team Leaders
  
• Purpose of Module To ensure employees have the
  skills to quantify impact, and provide timely
  direction for an individuals contribution ( at
  all levels) towards achieving overall business
  goals
• Aims Objectives
• How to define measure our given business goals
• Why have KPIs
• How clarity of objectives improves motivation
  and delivers performance
• Standardised approaches to KPIs
• How to translate and cascade KPIs at all levels
• Explain links to Performance Management

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Key Performance Indicators

• Course Outline
• INTRODUCTION
• WHAT ARE KEY PERFORMANCE INDICATORS?
• CHARACTERSITICS OF A GOOD KPI
• EXAMPLES OF KPIS
• THE KPI CASCADE PROCESS
• HOW TO CREATE AND MANAGE KPIS
• SUMMARY

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4
Introductions

• Name
• Department
• Length of service
• Knowledge of
• Key Performance Indicators

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What are KPIs
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Key Performance Indicators
WHAT ARE KPIs FOR?

• TO COMMUNICATE STATUS - ACTUAL v TARGET
• PLANT LEVEL
• BUSINESS LEVEL
• WORK STATION LEVEL
• TO DRIVE IMPROVEMENT BY FACT NOT GUESSWORK
• TO HELP PRIORITISE IMPROVEMENT ACTIVITY
• A CONTINUAL HEALTH CHECK FOR THE BUSINESS
• TO CONNECT THE CUSTOMER TO THE PROCESS

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Key Performance Indicators
ESSENTIAL

• IMPORTANT TO THE VIEWER
• VITAL - AFFECTS THE BUSINESS
• CUSTOMER FOCUSED
• DRIVES IMPROVEMENT

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Key Performance Indicators
USEFUL

• CURRENT - UP TO DATE
• EASY TO UNDERSTAND
• IMPORTANT AND RELEVANT
• VIEWER CAN CONTRIBUTE
• HAS A STAKE
• CAN HAVE AN EFFECT (good and bad)

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Key Performance Indicators
IMMEDIATE

• URGENCY / OWNERSHIP
• RESPONSIBILITIES DEFINED
• DYNAMIC IMPROVEMENT PLAN
• AUDIT PROCESS - ACTUAL Vs PLAN
• CLEAR OBJECTIVES

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Key Performance Indicators
WHAT ARE KPIs NOT?

• GROUP OF METRICS
• NOT EVERYTHING WE MEASURE IS A KPI !
• STATISTICS
• THESE CAN HELP DEFINE KPIs
• WORK MEASUREMENT
• A TOOL FOR BLAME
• WALL PAPER

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Key Performance Indicators
CHARACTERISTICS OF GOOD KPI

• DYNAMIC
• WELL MANAGED - ROTATE VITAL FEW
• OWNED AND OPERATED BY LOCAL TEAM
• SIMPLE
• EASY TO UPDATE - MANUAL
• VISUAL
• LOCATED WHERE EASY TO SEE
• CHANGES JUMP OUT AT VIEWER
• ENGAGING
• RELEVANT - CREATES TALKING POINT
• STANDARD FORMAT
• EASY FOR OUTSIDER TO UNDERSTAND
• FEEDBACK RECORDED AND ACTED UPON

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Key Performance Indicators
Business KPIs

• Safety Performance
• Quality Performance
• Cost Performance
• Delivery Performance
• People Performance

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Examples
Actual Performance Plotted Against Target
Defects Per Assembly
Unambiguous Title
Visual Indicator of Performance Trend
600
500
400
300
200
Legend Easy To understand
100
Target Improvement
0
Jul
Jul
Jan
Mar
Nov
Sep
Nov
May
Sept
Machining
Sub Assy
Assembly
Test
2001 Target
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Examples
RAG Colour Coding

• RED
• Outside of target with no improvement
• or deteriorating trend.
• AMBER
• Inside of target but with deteriorating trend.
• Outside of target but with improving trend.
• GREEN
• Inside of target with improving or level trend.

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Examples
Scrap Cost 2004
16000
80
YTD Scrap Cost 34.0k
14000
70
12000
60
10000
50
No. Of Items

8000
40
6000
30
4000
20
2000
10
0
0
JAN
FEB
MAR
APR
MAY
JUN
JUL
AUG
SEP
OCT
NOV
DEC
Scrap Cost
Scrapped Items
Budget
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Examples
How are we doing against the plan? Are we on
target?
Schedule
100
90
80
70
60
50
40
30
20
10
0
Stage 1
Stage 2
Stage 3
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Examples
What are we aiming for?
External Supply Schedule Adherence
100
80
60
40
20
0
23
24
25
26
27
28
29
30
31
32
33
Supplier 1
Supplier 3
Supplier 5
Supplier 2
Supplier 4

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Examples
WIP
9000
3.5
8000
3
7000
2.5
6000
2
5000
'000
Stock Turns
4000
1.5
3000
1
2000
0.5
1000
0
0
Nov 99
Jun 00
Sep 00
Oct 00
Nov 00
36951
37043
WIP Value Product A
WIP Value Product B
WIP Budget
Stock Turns
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Examples
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Examples
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Performance Management Cascade

• Step 1 - Team Leaders manage the Key Drivers of
  performance
• Are we fully manned to complete the
  workpackages?
• Is overtime under control?
• Are we hitting targets (Minutes to complete
  Operations)?
• Step 2 - Manager holds daily
• Team Leader review by
• work package
• Actions timely and focused
• Support given when needed

Stage 1 Jig Board
Minutes to complete Op 1
Minutes to complete Op 2

• Step 3 - Assembly Managers review Weekly
  Performance withManagers.
• Cost accountability introduced. Focus on shift
  by shift performance.

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Performance Management Cascade

• Step 4 - Head of Business reviews Weekly
  Performance
• Good informed
• debate
• resulting from
• upward cascade
• of Team Leaders
• performance
• Countermeasure plans if targets not being
  met

• Step 5 Senior Management Team reviews Monthly
  performance
• Senior level escalation plans.

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Performance Management Cascade

• Step 6 - Site Cost Performance consolidated.
  Manufacturing Director reviews Factory Manager
  Performance.
• Forecasts of cost performance compiled to ensure
  corrective actions taken to achieve Budget.
• Risks Opportunities monitoring and control.

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What KPIs do you think would be applicable to
your area
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How to Create and Manage KPIs
Identify Customers and Suppliers
Monitor Progress To Plan And Take Corrective
Action
Determine Performance Drivers1
Form Improvement Teams
Form Team
Create Improvement Plan
Define Local Performance Indicators
Score Prioritise KEY Performance Indicators
Collect Data
Train Users
Identify owners and users
Develop Format And Review Process
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How to Create and Manage KPIs
Identify Customers and Suppliers
Score Prioritise KEY Performance Indicators
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How to Create and Manage KPIs
Ease of recording data Impact on
business Frequency of occurrence

Score Prioritise KEY Performance Indicators
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How to Create and Manage KPIs
Identify Customers and Suppliers
Determine Performance Drivers
Form Team
Define Local Performance Indicators
Score Prioritise KEY Performance Indicators
Develop Format And Review Process
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Example

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How to Create and Manage KPIs
Identify Customers and Suppliers
Determine Performance Drivers
Form Team
Define Local Performance Indicators
Score Prioritise KEY Performance Indicators
Identify Owners and Users
Develop Format And Review Process
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How to Create and Manage KPIs
Identify Customers and Suppliers
Determine Performance Drivers
Form Team
Create Improvement Plan
Define Local Performance Indicators
Score Prioritise KEY Performance Indicators
Train Users
Identify Owners and Users
Develop Format And Review Process
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How to Create and Manage KPIs
Identify Customers and Suppliers
Determine Performance Drivers
Form Team
Create Improvement Plan
Define Local Performance Indicators
Score Prioritise KEY Performance Indicators
Collect Data
Train Users
Identify Owners and users
Develop Format And Review Process
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Typical KPIs
KPI - examples
Target
Quality Defects (Defects per unit) Errors (err
ors per unit) Delivery Schedule
adherence (Hours delta to plan) Cycle
Time (Hours per Unit) Cost Manning (man
hours per set) (Cost per unit) People Skill
Level Training Hours
1 Defects per unit 2 errors per unit
0 delta (nil Hours behind or ahead of plan) To
be agreed
270 hours per unit 5,000 per unit
75 people trained to Practitioner Level 40 hrs
per man per year
Key performance indicators need to be simple and
focused
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KPIs
SUMMARY

• Direct relationship to business plan
• Communicates progress against plan
• Drives continuous improvement
• Visual - provokes a response
• Effective - simple and easy to understand
• Ownership - relates to everyone
• Up to date - dynamic management