If you have spent time as a manager in manufacturing, then you know that there is no shortage of data. In fact, there are usually numerous ways for that data to be analyzed and calculated into metrics. But how do we know which metrics are the right ones to focus on? Which metrics will really be impactful to driving the bottom line of the factory? More importantly how do we measure our individual contributions or that of the teams we lead and routinely communicate these results to illustrate our factory’s success? The answers to these questions can be achieved with a process called “cascading KPI’s” or “CK” for short. In the following sections, I’ll explain a four step approach that you can begin to use today.
Cascading KPI Step 1
Step 1 of the CK process happens after the factory leadership has gained alignment on the strategic goals of the plant with regards to its role in the supply chain. Questions like “ Should OEE, Efficiency, Productivity, Performance, etc. vs Cost or Output Reliability vs Total Plant Waste.” should be sorted out. These decisions should be used as a compass as the leadership team creates the factory’s operational master plan. The output of this step is to have a clear answer stating which of the PDQCDSM KPI metrics the leadership team will focus on to drive a step change of improvement via the plant’s Continuous Improvement function. These metrics will be known as your Key KPI’s and will also be your most lagging indicators (meaning that they will not be actionable at a tactical level). Note: Step change improvement means that you have to meet the stretch goal, like your job depends on it……because it probably does or at least your bonus anyway ☺.
Cascading KPI Step 2
In Step 2, the task is to identify the primary factors or sub metrics that are having the most negative impact on the Key KPI’s. Performing a loss analysis using a minimum of 6 months of historical data for each KPI will identify which sub metrics need to be improved and which process or equipment are associated with these losses. The illustration below shows an example of a typical machine loss analysis linking minor stops (a primary sub metric of the Performance KPI) to the indexer equipment on line 7.
After the loss analysis, the sub-measures that have been identified are linked to the KPI flowing from lagging to leading. Lagging means that the metric isn’t directly actionable, happens over time, or is a composite result. Leading means the metric is directly actionable and has an immediate change based on individual actions. This is what is referred to as cascading the KPI’s. It is also best to note at which level in the factory the metrics will be evaluated (Plant, Department, Line, or equipment). The metrics should flow and demonstrate an f(x) relationship in which it is clear that improved metrics for individual actions on the equipment drive improved metrics for the line, for the department, and ultimately for the plant.
The picture below illustrates the cascading of the Performance and Quality KPI’s. Continuous Improvement methodology dictates how work is done by the individual. Therefore, continuous improvement metrics are linked to KPI’s at the tactical level. In the example below it shows how the metrics for CIL completion and defect tagging are linked to driving plant OEE.
Cascading KPI’s Step 3
Step 3 targets, triggers and glide paths are set for each of the metrics. The targets define what the goal is for success. This is typically denoted on the metric’s graph by a black line and it resembles a level indicator. The trigger defines the point to which the level of loss, as measured by the metric, gives cause for a root cause analysis to be performed. The glide path shows the expected level of increase performance that is expected over time in order to reach the metric’s goal for the year. Glide paths are typically utilized on strategic metrics in which the goal is achieved over a significant time span such as KPI’s or some PPI’s.
Cascading KPI Step 4
In Step 4, boards are used to visually display all of the graphs for each of the metrics so that they can be easily reviewed by the plant employees and used as visual aids during operational review meetings. By this method, every employee can be aware of the plants performance based on its key KPI’s.
The Cascading KPI’s process combines the use to strategic alignment, loss analysis, and visual controls to determine and identify the metrics that are most critical in driving a step change level of performance in the factory. Because of the lagging to leading, strategic to tactical, f(x) relationship of the metrics, clarity is given to link how measured actions at the team level impact the plant’s KPI’s. It is recommended that the metrics be reviewed quarterly as the plant gradually reaches its KPI targets. If a goal is achieved ahead of the glide path and sustainable, performing another loss analysis will reveal the next area to focus on continuous improvement efforts.
About the Author
Patrick T Anderson is a leader and practitioner of Continuous Improvement in manufacturing with over 18 years of extensive experience. During this time, he has trained, coached, and audited hundreds of people on Lean Methodology and led teams to deliver millions in hard savings to the companies he has served. Patrick is the founder of OpExApps, INC. in which he has taken his passion for programming technology to develop systems to make the application of continuous improvement simpler and more efficient. Patrick is an alumnus of Florida A&M University and Xavier University, from which he obtained his B.S. Chemical Engineering and MBA degrees respectively.
*Note: Do you want the ability to close out 100% of your defect tags 100% of the time with less stress and more efficiency? If so, sign up to be a Beta Tester for OpExApps, Inc. at www.opexapps.com today.