02 sd - performance measures mfg guidelines
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Nestlé Continuous Excellence
Goal Alignment in Manufacturing
Appendix to Reference Guide v.2.0Step 2 – Performance Measures Guideline
August 2011
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Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learning’s
Agenda
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Understand needs and purposes of Measures
Learn principles and guidelines of Performance Measures
Introduce Cascading Measures Process
Understand how to manage Measures at all levels within
the Factory
Learn how to visualise Measures and Challenging targets
Objectives
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Ground rules Pass the balls between you In the SAME order As quickly as possible
Group into a circle of 5-7 people
Exercise feedback
What did you do to achieve such good Measure?
What did I do?
Key Message
Improvement is difficult without Targets, Measures, Reviews and Actions and most importantly 100% Engagement
Workgroup exercise
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Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learning’s
Agenda
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Sticklebrix game: The Scene
You work for the so called Sticklebrix company & your aim is to:
Give 100% quality & delivery performance to your
customer and maximised profit
Manufacture 3 different sticklebrixs with minimum scrap
1st Production run 1 Demand from client 30 finished products per day: 10 green, 10 red and 10 yellow. See product
specifications. 3 shifts / 6 days / week, 1 day = 5 minutes Cost of materials = 10 cents/ piece. Material not used at the end of the run are consider scrap. Labour cost = 1 $ per day per person Sales price of 1 finished product = 1 $
Let’s practice – 1st Run
Actions:1. Develop a score card and action plan. Use the templates provided.
(First shift starts strictly in 5 minutes)
2. Run production and deliver the product
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Let’s practice
Your Feedback – Run 1
How did it go?
Something to change/improve for the next run
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Performance Measures
Cascade measures and objectives to all levels
Operational Master Planning
Business PrioritiesFunctional Objectives
Problem Solving
Sustainable solutions eliminating root
causes
Standard Routines**
Common ways of working
Performance Measures is the second practice of Goal Alignment
Operation Reviews
Manage performance at all levels
Note: ** To be introduced in GA Phase 2 in Manufacturing
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Operational Master Plan is the input for Performance Measures
Alignment, Relevance, Ownership
OMPOMP
Factory
Area / Department
Shop floor / Teams
Measures aligned to deliver competitive advantage and delight consumers
Performance MeasuresPerformance Measures
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1. Assess current performance “Where are we?”
Practices
Res
ult
s
2. Define performance objectives “Where do we need to go?”
3. Narrow the gap “How do we get there?”
Measures are prerequisites to improve performance
Results are an output
Practices are what we do to get the results
5 Goal Alignment practices
Note: Standard Routines will be introduced in GA Phase 2
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SuccessSuccessDrives
DrivesPerformancePerformance
DrivesBehaviourBehaviour
How well could you drive a car without a dashboard?
What Measures do you see on the dashboard?
Which of these Measures are short, medium and long term?
Which Measures can not be seen?
What Measures do you have in your process?
Why should you always measure your Measures?
How do you Measures them?
MeasuresMeasures
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Why do we need a balanced scorecard? Is this a world class operation?
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In which factory do you want to work? Balanced measures drive sustainable improvement
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Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learning’s
Agenda
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2nd Production Run
Record measures and set SMART objectives that you feel are appropriate using the
provided Chart for Visual Measures
Your Feedback
How did it go versus the previous run?
Who knows how well you performed?
Your Factory Manager wants to share on the factory performances
Quality is poor
We are losing money
We need to do something, tell me what! You have got 10 min
Let’s practice – 2nd Run
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Balance betweenResults and Practices
Balance betweenLeading and Lagging
Balanced Categories
• Relevant• Meaningful• Actionable
Properly cascadedat all levels
Appropriate No. of Measure at each level
Proper Measures should follow 5 main principles
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First principle: Balance between Results and Practices
Workgroup Brainstorming:
List 10 key “Results”
List 10 key “Practices”
Results Measures Results are an output and the final
outcome of a sequence of activities, events or operations
The measurement is mainly quantitative
Practice Measures
Practices are what we do to get the results
Practice Measures are based on activities or events performed to drive qualitative outputs or positively influence on results
Practice measures address desired ways of working
The measurement is usually qualitative
Practices
Res
ult
s
• First Time Quality• LTIFR• % Performance• Material Variance
• Temperature Monitoring
• BBS Feedback
• Wearing Safety Gloves
• Cleaning of Sealing Jaws
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Second principle: Balance between Leading and Lagging
Measures can be leading for one level and lagging for another
Lagging Measures offer little room to impact processes that might result in poor performance
Leading Measures drive performance by detecting issues before they occur/impact Measures significantly
Lagging Measures
Leading Measures
1. Line Performance2. First Time Quality3. Cost of Production4. Absenteeism5. LTIFR
1. Breakdown Analyzed2. Temperature3. Start Up Checklist4. Recognition5. BBS Coaching Feedback
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Balance of results/practices and leading/lagging Measures change at different levels
Organisation Level
Results
Practices
Line / Team
Area
Factory
Lagging
Leading
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Third principle: Balance between categories - QSCP
Measures how well we do, what we do (e.g. Consumer Complaints,
QMS Checks, First Time Quality etc.)QUALITY
Measures level of service provided and satisfaction of customers and
consumers needs (e.g. % Performance, Change Over Time, # of
Breakdowns, MSA)SERVICE
Measures financial figures (e.g. Non Quality Cost, Material Variances,
Cost of Production etc.)COST
Measure engagement and skills/capability development (e.g.
LTIFR, Coaching Visits, BBS Feedbacks, Recognition, Overtime, etc.)PEOPLE
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QSCP is recommended but factories can also use PQCDSM in Phase 1
QUALITY
SERVICE
COST
PEOPLE
GA Phase 1 GA Phase 2
P
Q
C
D
SM
RODUCTIVITY
UALITY
OST
ELIVERY
HE
ORALE
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Fourth principle: Properly translated at all levels
Area
Line/Team
Factory
Cascading Measures guidelines
High Level Measures transformed and translated at each level should: Be relevant, meaningful
and actionable Guide desired
behavior
Relevant data and appropriate people considered at each level
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Relevant Must be aligned with Key Priorities, to have an impact on the performance and processes
Meaningful Should ensure clear understanding at each level to monitor and improve performance
ActionableOwner should be able to influence the Measures on a short, medium and long term horizon
Relevant, Meaningful and Actionable
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Line / Team
MonthlyQuarterly/
Yearly
Area
Weekly
Factory
Frequency
AreaHourly Shiftly Daily
Real time measures showing
“health” of the process
Real time measures showing
“health” of the process
Heart BeatBoard
Approx. (3-4) simple
measures, easy to
understand
Approx. 3-6 measures, relevant to represent
24h Measure
Line Review Board
Subset of measures to track factory objectives
(approx 12)
Complete set of measures to track factory objectives
(approx. 25)
Factory Review Board
Milestone & key activity review with business
Milestone & key activity review with business
OperationalMaster Plan
Approx. 4-8 measures,
strongly linked to the factory
objectives
Higher number of measures (approx. 12),
Area Review Board
Operations Review – More StrategicOperations Review – More Operational
Fifth principle: Appropriate number of Measures at each level
Note: Approximate number of measures illustrated are used as a guide for the factories
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Fortune cookie Movie
Watch the movie and define what should be the
key Measures for this process
Try to fill the given template Without measures you can not become a world class operation
Without measures you can not become a world class operation
Hourly
Line/
Team
WeeklyDailyShiftlyFrequency
Area
Area
Factory
MonthlyWeekly
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Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learning’s
Agenda
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Performance Measures development and management process consists of 5 steps
WH
O
• Factory Management• Middle Management• Line/TeamShopfloor
Map measures of OMP priorities and Maintain Items
1
• Visualise the measures from Operational Master Plan/ Maintain Items
• Define if they are quarterly/monthly/ weekly/ daily
Identify maincontiributors
2
• Understand and identify main contributors related to OMP/ Maintain Items measures by using analysis tools
• Associate main contributors to the right frequency and different organizational levels
Implement measures in Operation Reviews
5
• Use of Visual Management principles
• Utilise identified measures in Operation Review
• Perform the measures and target review regularly
Cascade and visualise measures
4
• Cascade the defined measures to next level until you reach the team level (1)
• Visualise communication by applying the Measures tree
• Validate measures
Translate and transform contributors into measures
3
• Translate and transform contributors into measures applying the 5 principles at the same level
(1) Manufacturing, cascading will happen in step 3 were you only have the whole factory to cascade
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Some Measures might need to be monitored as a Maintain Item
Maintain Items are measures that are not
considered in the OMP but important for the
Business and therefore need to be
reviewed on a regular basis
Example of Maintain Items
Overfill is not the main problem and has a good performance, however it is
important to monitor to control
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Both Measures and targets are to be cascaded
from OMP and Maintain Items
Targets should be......
...set in a way that if achieved they will
positively impact high level objectives
...simple, measurable, actionable, stretched
but attainable
...reviewed when consistently achieved
Measures can be changed to focus on other
areas once improvements in current
targets/behaviours have been delivered
Measures and targets should be cascaded and validated throughout the organisation
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Measures and Targets should be reviewed
Measures/Targets have to be revised by:
- Identifying new measures by looking into the next contributor (weekly)
Factory Management
Maintain item Maintain item
Key Priorities
Area
Line/Team
-Setting new targets (if can be stretched) or
-Cascade to all levels afterwards
Measures/Target revision should be performed when:- High Level Measures (link to Key Priorities and Maintain Items) are sustainably achieved
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Targets reflect improvements planned in the OMP
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Measures Tree describes how measures are connected with each other
Measure 1
Measure 1.1
Measure 1.2
Measure 1.1.1
Measure 1.1.2
Measure 1.1.2.1
Measure 2
Measure 2.1.1
Measure 2.1.2
Measure 2.1.2.1
Measure 3
Measure 3.1.1
Measure 3.1.2
Measure 3.1.2.1
Measure 3.1.2.2
Measure 4
Measure 4.1
Measure 4.1.1
Measure 4.1.1.1
Quarterly Review
Quarterly Review
Monthly Review
Monthly Review
Weekly ReviewWeekly Review
Daily ReviewDaily
Review
Measure 2.1
Measure 2.2
Measure 3.1
Priority 1 Priority 2 Priority 3 Maintain Items
Even the simplest activity drives measures on a strategic level
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Illustrative example of Measures tree from Switzerland, Nespresso Orbe
Monthly
Weekly
Daily
ShiftCas
cad
ed m
easu
res
to
diff
eren
t le
vels
Cas
cad
ed m
easu
res
and
tra
nsla
ted
Balanced categories
Cascad
ed mea
sures
using data & P
areto
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Visual Management provide us with an overview of the current results
KPI JAN FEB MAR APR
FTQ 90% 92% 98% 99%
MSA 95% 97% 98% 98%
LTIFR 0.21 0.54 0.02 0
Line Performance 67% 75% 80% 82%
Do we have a good or bad performance?
How are we performing in relation to our targets?
Can we easily identify the trend?
Current Visual Management
Goal Alignment Visual Management
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Colour Management:
Black - For writingGreen – HIT TargetRed - MISSED Target
Visual Management of Measures should consist of the following
What is our Measure? How do we measure it?
What is our measuring scale?
Can we easily see the trends?
What is our Target?
Who is responsible to update? (1 owner per chart)
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Key questions to ask during Measures or Target review
Did we achieve the objective for the quarter? Are there positive trends? Are the positive trend sustainable? Did we have Red Bars for the quarter? How many? Do we need to stretch the target? Do we need to replace the Measure? Do we need to update the Measures tree?
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The Coaching Tool is used to evaluate and coach for continuous improvement
The Coaching Tool evaluates quality of Measures in 3 areas:
• General
• Visual Communication
• KPI Tracking
The Coaching Tool can be applied by the internal team or an independent person from another area / function
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Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learning’s
Agenda
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Balance betweenResults and Practices
Balance betweenLeading and Lagging
Balanced Categories
• Relevant• Meaningful• Actionable
Properly cascadedat all levels
Appropriate No. of Measure at each level
Measures should be defined based on 5 main principles
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Measures are the first step for improvement
Use measures to evaluate performance based on facts and figure
Measures should be defined based on 5 key principles
Translated and cascaded measures should ensure alignment with
Key Priorities
Targets have to be properly set and reviewed on a quarterly basis
Display measures tree to show alignments and help
understanding how each individual impacts the high level KPIs.
Key Learnings
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THANK YOU