KPIs from a Lean perspective: Achieve goals, reduce waste

Sir Francis Bacon, the 16th century English philosopher, wrote: “Knowledge is power.” He was right of course – but with an important caveat. Knowledge becomes truly powerful when it leads to change. Knowledge gained from real-time plant floor Key Performance Indicators can unleash powerful forces of change that result in significant improvements within your manufacturing opera...

07/15/2007


Sir Francis Bacon, the 16th century English philosopher, wrote: “Knowledge is power.” He was right of course %%MDASSML%% but with an important caveat. Knowledge becomes truly powerful when it leads to change. Knowledge gained from real-time plant floor Key Performance Indicators can unleash powerful forces of change that result in significant improvements within your manufacturing operation.

A KPI is a measurement that strongly supports and facilitates achieving a critical goal of the organization. KPIs can be viewed from two perspectives: the Lean manufacturing perspective of eliminating waste, and the corporate perspective of achieving strategic goals. These two perspectives are closely related.

Why measure?

KPIs are important for the plant floor because they are highly effective for exposing, quantifying and visualizing muda (the Lean term for waste); and they are also highly effective motivators. The essence of Lean manufacturing and the central theme of the Toyota Production System are to eliminate waste %%MDASSML%% to relentlessly eliminate all activities that do not add value for your customer. Effective KPIs quantify waste; provide an early warning system for processes operating outside the norm; and offer important hints to where improvement efforts should be focused.

KPIs also function as very effective motivators. Motivation theory is a complex field with many diverse opinions. However, there is wide agreement that a central key to effective motivation is setting challenging but attainable goals (e.g. SMART goals, which are Specific, Measurable, Achievable, Realistic and Time-specific). SMART goals are ideal candidates for plant floor KPIs.

For example, a manufacturing plant with semi-automated processes introduced real-time visual KPIs as a means of motivating their operators. One of their engineers mistakenly set the expected run rate for a cell at 180 pieces per minute instead of the normal 140 pieces per minute. Hours later the engineer returned and was astonished to find the cell averaging 178 pieces per minute. Visual KPIs had motivated the operators to greatly exceed what the process engineers had thought was possible.

Yesterday’s news

It is very important for plant floor KPIs to be real-time. “The closer you get to the process, the faster you need information,” said Guillermo Locht, master black belt and Lean leader for GE Consumer & Industrial.

“Getting information to the plant floor in real-time drives productivity,” agreed Laird Brownlie, plant manager at Smurfit-MBI.

In most manufacturing plants, information flow is far from real-time. Production reports are frequently compiled long after a shift or job has ended. Simply put %%MDASSML%% they are yesterday’s news. “If our operators can see how they are performing minute-by-minute, they can react to changes in the process,” Brownlie continued. “If you have to wait eight hours, you have lost the opportunity to address the underlying issues.”

It is a fundamental principle of all KPIs to be current or forward-looking metrics. For current metrics to be effective, they must be updated frequently. If a production line goes down, the reaction and response must be immediate. For KPIs to be actionable on the plant-floor, it is essential that they be real-time %%MDASSML%% not yesterday’s news.

Information democracy

Effective plant floor KPIs should energize the plant floor %%MDASSML%% they should unleash competitive spirit and promote kaizen (the Lean term for continuous improvement). This is achieved by providing both a 'will’ (a strong desire for improvement) and a 'way’ (effective tools).

The 'will’ flows from a culture of trust. The goal isn’t simply to improve a number; it is to truly improve performance. Achieving this requires genuine buy-in from the plant floor. “Numbers are great, but it is the soft side that really gets things done,” said Tom Fink, staff engineer for Honda. “People are competitive; they want to know where they are in relation to their goals.”

The 'way’ flows from KPIs that can be influenced and controlled by plant personnel. After all, if operators can’t influence the KPI, what value does it provide? Locht advocates a scoreboard approach %%MDASSML%% giving operators an opportunity to win on a daily basis.

Collectively, this 'will’ and 'way’ approach is information democracy: empowering plant floor personnel with actionable information and a meaningful level of control over the process. It’s an integral part of creating effective plant floor KPIs.

Waste times two

There is a connection between the two real-time KPI perspectives: the Lean manufacturing perspective of eliminating waste and the corporate perspective of achieving strategic goals. They are connected through waste.

From a broad Lean perspective, the seven major forms of waste in the manufacturing process include:

  • Overproduction

  • Waiting/idle time

  • Unnecessary transport

  • Over-processing

  • Inventory

  • Unnecessary motion

  • Defects

    • Eliminating these wastes requires modifying and improving processes using techniques such as kaizen events and Value Stream Mapping.

      From the narrower perspective of existing processes, the Six Big Losses identify and categorize the most common sources of waste in discrete manufacturing operations:

      • Breakdowns

      • Changeovers

      • Slow cycles

      • Small stops

      • Startup rejects

      • Production rejects.