Critical KPIs Manufacturers Are Missing

Beyond Compliance
Webinar & Podcast Series for Process Manufacturers
Critical KPIs Manufacturers
Might Still be Missing
Denis J. Devos, P.Eng.
Devos Associates, Inc.
Advisors to Industry

// About SafetyChain
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Plant Management Platform

Casual but Professional Format
✔ Ask questions! (Q&A at end)
✔ Only panelists are displayed
✔ Recording link will be shared
✔ Audio issues: use call-in number
Before We Get Started
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Helpful tips
Devos Associates, Inc. 2021 - All Rights Reserved

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Meet the Speaker - Denis Devos, P.Eng.
● Authority on Quality Management, Lean Methods, Audit, COQ
● Contributor to books on Auditing, The ASQ Certiﬁed Quality
Auditor Handbook and ASQ Certiﬁed Quality Manager Handbook
● Training and Advisory services for QA and Operations for
manufacturing sectors
Denis Devos, P.Eng.
Advisor – Devos Associates Inc.
Fellow of the American Society for Quality (ASQ)

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● Implementing/Improving ISO 9001 Quality Systems
● Implementing/Improving ISO 14001 Quality Systems
● Strategic Planning and Management Metrics
● Lean Methods - Facilitating Rapid Improvement Events
● Problem Solving - Root Cause Analysis & Corrective Action
● Internal Audit Services for ISO 9001 and ISO 14001
Consulting and Advisory Services
● New Product Introduction (NPI)
● Statistical Methods and SPC
● Failure Modes and Effects Analysis (FMEA) and HACCP
● Lean Methods - Introduction to Lean Manufacturing
● Problem Solving - Root Cause Analysis and Continuous Improvement
● Internal Auditor Training
Training Programs
Pharmaceutical,
Food and Beverage
Packaging
● Corrugated
● Containerboard
● Rigid Plastics, ﬁlms
● Corn Sweeteners
● Ethanol

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• Session Objectives
• The Basics of KPIs and process metrics
• Selection of KPIs aligned with business strategy
• Examples
• Tips for selecting the right metrics for your organization
Agenda

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“Key” Performance Indicators
● Quantifiable level of achieving a critical objective
ISO 22400
● “Key” suggests organization-level, aggregated metrics
“Local” Performance Indicators
● Process level, important to process owners and department
managers, not important to the C-Suite
Definitions: Key vs. Local Metrics

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Set of interacting activities (using resources) that use
inputs to deliver an output.
P
INPUTS OUTPUTS
What is a Process?

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“Local” Process Measures can be taken at the Input, In-Process, and Output
P
INPUTS OUTPUTS
Control
Point
Control
Point
Control
Point
Control points

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Set of interacting activities (using resources) that use inputs to deliver an output.
● What does your customer want?
● Design a process to deliver that product/service
● ‘Expected’ output is what the customer wants
● Do we always deliver what the customer wants?
● ‘Actual’ output may not be exactly right
● ‘Quality’ compares actual to expected output
Processes are Designed to Deliver Output

Which of these KPIs are you currently tracking in your Plant Operations?

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The degree to which your process delivers intended results (output)
Process Metrics
• Lower level processes must be managed in
order to meet higher level strategic objectives.
• E.g. Cost controls in hundreds of processes
roll up to a single profit metric at the
corporate level.

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Strategic Objectives
Operational Results
Individual Results
Process Results
Hoshin Planning

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Hoshin Kanri - Metrics Derived from Strategic Planning

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Sometimes we have to settle for inexact measures of
exactly the right things W. Edwards Deming

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Objectives
● What we want to accomplish, usually
including a performance level target
Metrics
● Data necessary to evaluate progress
toward the objective
Objectives vs Metrics

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Operational Metrics
• Sales, Profit, Cash Flow
• Market Share
• Customer Satisfaction
• Throughput
• Yield/Efficiency
• Sales per Labour Hour
• Cost of Poor Quality
Tactics/Initiatives
• Program Timing/ Budget
• Meeting Milestones
• Hiring required talent
• Team turnover
• Number of RCA or
improvement tasks done
• Reduction Cost of Poor Quality
Operational Metrics vs Tactics/Initiatives

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Purchasing Department is rewarded for keeping raw material
inventory values low, but Production is missing materials and
this leads to downtime and late customer deliveries
Call Center cycle time is low, less than one minute per call, but
customers are frustrated and customer satisfaction suffers
Engineering salary targets are met, but the number of new
products and time to market metrics suffer
Conflicting Metrics

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Lagging
•Measuring something that has happened in the past, such as
customer satisfaction, or lost time injuries
Leading
•Predictive, and measures an input variable that influences the
Lagging indicator. The level of training of front-line staff may
increase customer satisfaction. The number of people wearing
PPE will reduce the amount of injuries.
A metric is only a ‘Leading’ indicator if it is related to its ‘Lagging’ indicator
Lagging vs Leading Indicators

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Lagging Indicators
• Profit
• Time to Market
• Warrantee
• On Time Delivery
• Member Retention
Leading Indicators
• Cost Reduction Targets
• Number of Engineering Changes
• Number of QC Rejections
• Machinery Down Time
• Internal Schedule Attainment
• Engagement Measured as
“Touchpoints” to New Members
Lagging vs Leading Indicators

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• As strategic planning, operations and
process measurement matures, an
organization should adopt more leading
indicators than lagging indicators.
• Manage the Leading Indicators, and
Lagging Indicators take care of
themselves
(But first, establish cause and effect)
Move from Lagging to Leading

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• Popularized by Kaplan and Norton, HBR
• Balancing stakeholder needs beyond just profit motive
• Financial (Sales, Income, RONA etc)
• Customer (Brand Loyalty, warrantee, quality, delivery)
• Operational (cycle time, yield, Lean initiatives)
• Learning and Growth (new products, employee dev’t)
There is great benefit to creating a Balanced
Scorecard rather than just adopting one
Balanced Scorecard

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• Manufacture low-cost coffee cups
• Manufacture high-end computer chips
• Uber, AirBNB, virtual services with no assets
• Wal-Mart, Amazon
• Law or Accounting Firms
Strategic Objectives Drive Metrics

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• Site metrics must roll up to Corporate Metrics
• Recognize that corporate may want information
of a certain type or in a certain format that isn’t
useful to the Site
• Never let Corporate metrics stand in the way of
metrics you need to drive the Site’s business
• Site KPIs can be different than Corporate KPIs, as
long as they align and roll up
• Ensure that common metrics across all sites are
being measured the same way (e.g. CoQ)
Comment on Corporate Metrics

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• Don’t overdo it. KPIs must be ‘Key’
• Recognize the difference between the ‘local’ metrics
that must be managed in each department and the
‘key’ metrics that drive the business
• Be careful of important vs. nice-to-have
• Critical factors that drive & measure success
• Difficulty gaining access to data (data has a cost)
• Reliability of data, (don’t be afraid of inexact
measures)
Selecting the Right Metrics

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• Focus on Strategic Objectives - Alignment
• Metrics must accurately measure results
• Deploy metrics throughout the organization
• Use Leading Indicators to predict Lagging results
Selecting the Right Metrics

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Graphical Representation – Don’t Overdo It

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• Availablity - % of scheduled time equipment is available - (Uptime)
• Quality - % of good units produced - (First Pass Yield)
• Performance - Speed as % of designed speed (Machine Efficiency)
100% OEE would be only good parts produced at maximum speed,
without interruption
Overlooked KPI - OEE

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Overlooked KPI - Cost of Quality (COQ)
Non-Conformance Costs
● External Failure – warranty, sorting etc.
● Internal Failure – scrap, rework etc.
Conformance Costs
● Routine Inspection and Testing, Auditing
● Prevention Costs – HACCP/PFMEA, worker training,
automation

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• Used correctly, metrics help us learn about processes
• Metrics may cause people to ignore other important factors, and
metrics may be manipulated to further personal goals
• Are metrics reinforcing right behaviours or driving bad ones?
• Are there too many metrics, causing overload?
• Do people know how to respond to metrics and react appropriately?
Psychology of Metrics

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Gaming the Metrics
• Setting easy targets
• “Play to the Test”
• Accelerating or delaying activities
• Misleading graphs (exaggerated scales etc)
• Aggregates vs. segmentation (customer
satisfaction etc)
• Presentations emphasize good news,
ignore bad news
Psychology of Metrics

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Lagging Indicators
• On-Time Delivery
• Weight Gain
• Quality Defects
• Product Dissatisfaction
• New Product Revenue
• Machinery Downtime
• Volunteer Retention
Leading Indicators
• Internal Schedule Attainment
• Calories per Day
• Hours of training per employee
• Number of hours spent with new
users per installation
• Product Introduction cycle time
• On-time Preventive Mtce, MTTR
• Touchpoints with new members
Frequently Overlooked KPIs

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• Start with Strategy, deploy tactics and metrics down - Alignment
• Ensure metrics are based on sound data, measure the right things
• Avoid conflicting metrics
• Recognize the psychology of performance measurement
• Don’t let metrics drive wrong behaviours
• Continue to ask “are we measuring the right things?”
• Find Leading Indicators for each Lagging Indicator
Conclusion

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Contact the Speaker
Denis J. Devos P.Eng
www.DevosAssociates.com
(519) 476-8951
DenisDevos@sympatico.ca
Denis@DevosAssociates.com

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