Training Pack

Key Performance Indicators - KPIs

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

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
3

Introductions

Name Department Length of service Knowledge of Key Performance Indicators

What are KPIs

Flip Chart

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

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

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

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

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

Key Performance Indicators

Business KPIs
Safety Performance Quality Performance Cost Performance Delivery Performance People Performance

Examples
Actual Performance Plotted Against Target

Defects Per Assembly

Unambiguous Title

600 500 400 300 200

Legend Easy To understand

Visual Indicator of Performance Trend

Jul

Mar

Sept

May

Nov

Jan

Jul

Sep

Target Improvement

Machining Test

Sub Assy 2001 Target

Assembly

Nov

100 0

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.

Examples
Scrap Cost 2004
16000
YTD Scrap Cost: 34.0k

80 70 60 50 40 30 20 10 0 JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC Scrap Cost Scrapped Items Budget

14000 12000 10000

8000 6000 4000 2000 0

No. Of Items

Examples
How are we doing Schedule against the plan? Are we on target?

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

Stage 1

Stage 2

Stage 3

Examples
External Supply Schedule Adherence
What are we aiming for?
100%

80%

60%

40%

20%

0% 23 24 25 26 27 28 29 30 31 32 33

Supplier 1 Supplier 2

Supplier 3
Supplier 4

Supplier 5

Examples
WIP
9000 8000 7000 2.5 '000 5000 4000 3000 1 2000 1000 0 Nov 99 Jun 00 Sep 00 Oct 00 Nov 00 36951 37043 0.5 0 2 1.5 Stock Turns 6000 3.5 3

WIP Value Product A WIP Budget

WIP Value Product B Stock Turns

Examples
% TAKT ADHERENCE
130

Hrs Achieved / Hrs Planned x 100

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

Examples

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.
Manhours (Shift B)
3,200 3,000 2,800

2,600

2,400

2,200

2,000

Jan

Feb

M ar

A pr

M ay

Jun

&

Jul

A ug

Sep

Oc t

Nov

Dec

Performance Management Cascade

Step 4 - Head of Business reviews Weekly Performance Good informed Stg 01 Cost Per Set debate Stg 01 Hours per Set 4,500 resulting from Stg 01 Build 4,000 upward cascade 3,500 of Team Leaders 3,000 2,500 performance
90 85 80 75 70 65 60 55 50 45
18 0 1. 0 0.8 0.6 0.4 0.2 0.0 (0.2) (0.4) 16 0 14 0 12 0

2,000
10 0

1,500 1,000 500 0

YTD 9 10 11

Countermeasure plans if targets not being met

40 Jan Feb M ar Apr M ay Jun Jul

80

(0.6) Aug (0.8) ( 1. 0 )

Sep

Oct

Nov

Dec

60

P e r i od

40

Week V ar iA dded o 32. 1 anc e t V al ue W eek Di s r ual Cumul at i v e A c tupt i on - E x t er nal For ecas t 32. 1ec asrt es h For Ref (Lean)

12

13

14

15

16

Direct
17 18

19

11

20

21

13

Out OfWeek V ar i ance t o 32. 1 Ref r esh ai ni ng Ji g Tr Week Di sr upt i on - at i v e nal B udget Cumul I nt er B udget 32. 1

22

23

15

Indirect
24

( 1. 2 )

17

25

26

19

27

21
28

29

23

NPO
25

27

29

Disruptio

Step 5 Senior Management Team reviews Monthly performance Production Volume Senior level escalation plans. Hours per Set
350 300 250 200
6, 500 6, 000
250

2 1. 5 1 0. 5 0

Cost Per Set

150

5, 500 5, 000 4, 500

200

-0 . 5

150

4, 000 3, 500

100 50 0

-1 - 1. 5 -2

100

3, 000 2, 500 2, 000

&

50

J an
J an Feb M ar A pr

Feb

M ar

A pr

M ay

Jun

Jul

A ug

Sep
Dec

Oc t

Nov

Dec

0 Jan

Feb

Period Variance (32.1) J un J ul A Cumulative ug Sep Oc t Nov Actual Nov Dec Stage 1 Stage 2 Stage 3 FAL Budget (32.1) Forecast Di ti OBP
M ay
M ar ActualA pr M ay J un J ul A ug Sep Oc t Disruption

Period Var Cumulative

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.

Summ ary - All Categories

200, 000,000 180, 000,000 160, 000,000 140, 000,000 500, 000 120, 000,000 100, 000,000 80, 000,000 -500,000 60, 000,000 40, 000,000 20, 000,000 0 -1,500, 000 -1,000, 000 0 1, 000,000 1, 500,000

M onthly +/1 Cumulative budget

&

Forecast +/- to budget Cumulative forecast

Cumulative actual

What KPIs do you think would be applicable to your area

Flip Chart

How to Create and Manage KPIs

Identify Customers and Suppliers

Monitor Progress To Plan And Take Corrective Action Form Improvement Teams
ACT

Determine Performance Drivers1

Form Team
PLAN

Create Improvement Plan

CHECK

Continuous Improvement Cycle

Define Local Performance Indicators

DO

Collect Data

Score & Prioritise KEY Performance Indicators Identify owners and users

Train Users

Develop Format And Review Process

How to Create and Manage KPIs

Identify Customers and Suppliers Determine Performance Drivers

Form Team

Define Local Performance Indicators Score & Prioritise KEY Performance Indicators

How to Create and Manage KPIs

Ease of recording data Impact on business Frequency of occurrence

Define Local Performance Indicators

&

Score & Prioritise KEY Performance Indicators

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

Example
KPI : Key Performance Indicator

LOST HOURS (UNPLANNED WORK) PRE & POST

30 29 28 27 26 25 24 23 22 21 20 19 18 17 16 15 14 13 12 11 10 9 8 7 6 5 4 3 2 1 Days L

4 5

28

29

30

31

Week
OSS Internal MSE Shop Support A B C D E F MCC Trefn TAC G H I J K L M

Logistics Maintenance Engineering

Supplier Quality Tooling Lean Unplanned Absence

&

Handling

2
Owner:

Blue Shift = TW Red Shift = DJ

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

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

Train Users

Develop Format And Review Process

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 Identify Owners and Users

Collect Data

Train Users

Develop Format And Review Process

How to Create and Manage KPIs

Identify Customers and Suppliers

Monitor Progress To Plan And Take Corrective Action Form Improvement Teams

Determine Performance Drivers

Form Team

Create Improvement Plan

Define Local Performance Indicators Score & Prioritise KEY Performance Indicators Identify Owners and users

Collect Data

Train Users

Develop Format And Review Process

Typical KPIs
KPI - examples
Quality Defects
(Defects per unit)

Target 1 Defects per unit 2 errors per unit

Errors
(errors per unit)

Delivery Schedule adherence

(Hours delta to plan)

0 delta (nil Hours behind or ahead of plan) To be agreed

Cycle Time
(Hours per Unit)

Cost Manning (man hours per set) (Cost per unit) People Skill Level Training Hours

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

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