key performance indicators - kpi’s training pack

Key Performance Indicators - KPI’s

Training Pack

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 KPI’s • How clarity of objectives improves motivation and delivers performance• Standardised approaches to KPI’s• How to translate and cascade KPI’s at all levels• Explain links to Performance Management

Aims & Objectives

Course Outline

•INTRODUCTION

•WHAT ARE KEY PERFORMANCE INDICATORS?

•CHARACTERSITICS OF A GOOD KPI

•EXAMPLES OF KPI’S

•THE KPI CASCADE PROCESS

•HOW TO CREATE AND MANAGE KPI’S

•SUMMARY

3

Key Performance Indicators

• Name

• Department

• Length of service

• Knowledge of

Key Performance Indicators

Introductions

Flip Chart

What are KPI’s

•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

WHAT ARE KPI’s FOR?

Key Performance Indicators

ESSENTIAL

• IMPORTANT TO THE VIEWER

• VITAL - AFFECTS THE BUSINESS

• CUSTOMER FOCUSED

• DRIVES IMPROVEMENT

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)

Key Performance Indicators

• URGENCY / OWNERSHIP

• RESPONSIBILITIES DEFINED

• DYNAMIC IMPROVEMENT PLAN

• AUDIT PROCESS - ACTUAL V’s PLAN

• CLEAR OBJECTIVES

IMMEDIATE

Key Performance Indicators

• GROUP OF METRICS• NOT EVERYTHING WE MEASURE IS A KPI !

• STATISTICS•THESE CAN HELP DEFINE KPI’s

• WORK MEASUREMENT

• A TOOL FOR BLAME

• WALL PAPER

WHAT ARE KPI’s NOT?

Key Performance Indicators

• 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

CHARACTERISTICS OF GOOD KPI

Key Performance Indicators

Business KPI’s

• Safety Performance

• Quality Performance

• Cost Performance

• Delivery Performance

• People Performance

Key Performance Indicators

Defects Per Assembly

0

100

200

300

400

500

600Ju

l

Sep

t

Nov Jan

Mar

May Ju

l

Sep

Nov

Machining Sub Assy Assembly

Test 2001 Target

Target Improvement

Actual PerformancePlotted Against Target

Legend EasyTo understand

Visual Indicatorof

Performance Trend

Examples

Unambiguous Title

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.

RAG Colour Coding

Examples

Scrap Cost 2004

0

2000

4000

6000

8000

10000

12000

14000

16000

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC

£

0

10

20

30

40

50

60

70

80

No

. O

f It

em

s

Scrap Cost Scrapped Items Budget

YTD Scrap Cost: £34.0k

Examples

Schedule

0%10%20%30%40%50%60%70%80%90%

100%

Stage 1 Stage 2 Stage 3

How are we doingagainst the plan?Are we on target?

Examples

External Supply Schedule Adherence

0%

20%

40%

60%

80%

100%

23 24 25 26 27 28 29 30 31 32 33

Supplier 1 Supplier 3 Supplier 5Supplier 2 Supplier 4

What are we aiming for?

Examples

WIP

0

1000

2000

3000

4000

5000

6000

7000

8000

9000

Nov 99 Jun 00 Sep 00 Oct 00 Nov 00 36951 37043

£ '0

00

0

0.5

1

1.5

2

2.5

3

3.5

Sto

ck T

urn

s

WIP Value Product A WIP Value Product BWIP Budget Stock Turns

Examples

130

125

120

115

110

105

100

95

90

85

80

75

70

65

60

55

50

45

40

35

30

25

20

15

10

5

DAY

DATE

SHIFT

Hrs Achieved / Hrs Planned x 100% TAKT ADHERENCE

Examples

Examples

&

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

Manhours (Shift B)

2, 000

2, 200

2, 400

2, 600

2, 800

3, 000

3, 200

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

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

Performance Management Cascade

&

Stg 01 Cost Per Set

40

45

50

55

60

65

70

75

80

85

90

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

P er iod

Direct Indirect NPO Disruption Budget Forecast

Stg 01 Hours per Set

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29

WeekAdded Value Out Of J ig T r aining

Disr uption - E xter nal Disr uption - Inter nal Budget

For ecast (Lean)

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

Stg 01 Build

40

60

80

100

120

140

160

180

YTD 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29

Week

(1. 2)

(1. 0)

(0. 8)

(0. 6)

(0. 4)

(0. 2)

0. 0

0. 2

0. 4

0. 6

0. 8

1. 0

Week Var iance to 32.1 Week Var iance to 32.1 Ref r esh

Cumulative Actual Cumulative Budget 32.1

For ecast 32.1 Ref r esh

Production Volume

0

50

100

150

200

250

300

350

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

-2

-1. 5

-1

-0. 5

0

0. 5

1

1. 5

2

Period Variance (32.1) Period Variance ForecastCumulative Actual Cumulative Forecast

Hours per Set

2,000

2,500

3,000

3,500

4,000

4,500

5,000

5,500

6,000

6,500

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov Dec

Stage 1 Stage 2Stage 3 FALDisruption OBPForecast

Cost Per Set

0

50

100

150

200

250

J an Feb Mar Apr May J un J ul Aug Sep Oct Nov DecActual Disruption

Budget (32.1) Forecast

Step 5 – Senior Management Team reviews Monthly performance

• Senior level escalation plans.

Performance Management Cascade

&

Summary - All Categories

0

20,000,000

40,000,000

60,000,000

80,000,000

100,000,000

120,000,000

140,000,000

160,000,000

180,000,000

200,000,000

-1,500,000

-1,000,000

-500,000

0

500,000

1,000,000

1,500,000

Monthly +/1 Forecast +/- to budget Cumulative actualCumulative budget Cumulative forecast

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.

Performance Management Cascade

Flip Chart

What KPI’s do you think would be applicable to your area

IdentifyCustomers

and Suppliers

FormImprovement

Teams

CreateImprovement

Plan

Train Users

Monitor ProgressTo Plan And TakeCorrective Action

Form Team

Determine Performance

Drivers1

Identify ownersand users

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Develop FormatAnd Review

Process

Collect Data

PLAN

Continuous

Improvement Cycle

DOCHECK

ACT

How to Create and Manage KPI’s

Score & PrioritiseKEY

PerformanceIndicators

IdentifyCustomers

and Suppliers

Determine Performance

Drivers

Form Team

Define LocalPerformance

Indicators

How to Create and Manage KPI’s

&

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Ease of recording dataImpact on businessFrequency of occurrence

How to Create and Manage KPI’s

IdentifyCustomers

and Suppliers

Form Team

Determine Performance

Drivers

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Develop FormatAnd Review

Process

Identify Ownersand Users

How to Create and Manage KPI’s

&

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1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7 1 2 3 4 5 6 7

A GB HC ID JE KF L

M

Blue Shift = TWOwner: Red Shift = DJ

Location: X:\Broughton\A340-600\Lean Manufacturing\Stage 00\Std Documents\Lost Hours KPI

LOST HOURS (UNPLANNED WORK) PRE & POSTKPI : Key Performance Indicator

Unplanned Absence

28 29 30 31

Tooling

Internal

Days

LeanHandling

OSS

Week

SupplierLogistics

Engineering

MCC

Shop Support

MaintenanceTrefnTAC

QualityMSE

1

2

3

4

5

Example

IdentifyCustomers

and Suppliers

Form Team

Determine Performance

Drivers

Identify Ownersand Users

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Develop FormatAnd Review

Process

Train Users

How to Create and Manage KPI’s

IdentifyCustomers

and Suppliers

CreateImprovement

Plan

Train Users

Form Team

Determine Performance

Drivers

Identify Ownersand Users

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Develop FormatAnd Review

Process

Collect Data

How to Create and Manage KPI’s

CreateImprovement

Plan

Train Users

Form Team

Determine Performance

Drivers

Identify Ownersand users

Score & PrioritiseKEY

PerformanceIndicators

Define LocalPerformance

Indicators

Develop FormatAnd Review

Process

Collect Data

FormImprovement

Teams

IdentifyCustomers

and Suppliers

Monitor ProgressTo Plan And TakeCorrective Action

How to Create and Manage KPI’s

KPI - examples TargetQuality

Defects(Defects per unit)Errors(errors per unit)

DeliverySchedule adherence(Hours delta to plan)Cycle Time(Hours per Unit)

Cost Manning(man hours per set)(Cost per unit)

PeopleSkill LevelTraining Hours

0 delta (nil Hours behind or ahead of plan)

To be agreed

1 Defects per unit

2 errors per unit

270 hours per unit

£5,000 per unit

Key performance indicators need to be simple and focused

75% people trained to Practitioner Level40 hrs per man per year

Typical KPI’s

•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

SUMMARY

KPI’s