KPIs (Key Performance Indicators) is a topic we deal with extensively here at CMC. We have already discussed some of the best practices for choosing the most effective KPIs for your factory in China.
This is a good place to start when designing KPIs for your company.
The next step is to build dashboards that allow everyone from the senior leadership team to the operators to see and track the KPIs throughout the organization. Without a KPI Dashboard, it is difficult for employees, from senior management to operators, to work together towards a common goal and keep track of moving the company forward. When creating your KPI Dashboard, follow the guidelines below to ensure that it is made effectively and practically.
Picking the Right KPIs When Manufacturing in China
Characteristics of Good Manufacturing KPIs
To start your KPI Dashboard, you must first pick a suitable KPI to track. Good KPIs provide:
- Objective evidence of progress towards achieving the desired result;
- Quantifiable measures used to help track the factory’s objectives to aid in better decision making;
- A comparison that gauges the degree of performance change over time.
If a KPI does not meet all of those requirements, it is not worth including.
Create KPIs that Focus on Manufacturing Goals and Objectives
Focus on your company’s goals and objectives when designing KPIs. If the company goal is high quality and first-time yield, then a generic “high quality” stated goal is ineffective. An excellent way to know if your KPI is not valuable to your actual operation is if it was written to please ISO 9001 auditors and not for your day-to-day activities.
Keeping Your Top-Level KPIs Simple
Management should keep top-level KPIs as minimal and straightforward as possible. An excellent general rule is not to have more than 9 KPIs and ensure that not every KPI is financial. “Days without an accident” is a suitable example of a non-financial KPI. “Daily production” and “on-time delivery” are excellent KPIs at the time level. If production is erratic or deliveries are late, then there is something wrong with your production.
These are metrics that can be easily shown and understood through the whole organization even when they cascade to middle management and the factory line.
Everyone should be able to see and quickly read the current situation in any location and throughout the organization.
Be Specific with Your KPIs
Role Specific KPIs
The KPIs should apply to everyone and be connected to their specific job. The purchasing manager’s KPIs may be the quality of the incoming raw material and its timely delivery, not the quality of the final product.
Even non-production jobs should be included. For example, a KPI defined in your internal sales SLA could be something like “sales reps must respond to all requests within 24 hours” (this is one of our KPIs). Or your call center reps must respond within three rings. Make sure the KPI is able to define performance for that role.
Contextually Specific KPIs
When setting KPIs, do not confuse simple for functional. As we pointed out before in our previous blog about KPIs, specific and informative is best. “Scrap cost in dollars” may be specific, but it is not informative.
It needs to be more causally related to the production process. Is “$100,000 in scrap” alarming? Is “$50,000 in scrap” reasonable? Without context, it can be difficult to tell. “Scrap value as a % of total costs” is simple but gives a much better idea of the variation in scrap and how much it costs the operation.
Top Considerations for Building Your Manufacturing KPI Dashboard
When building your KPI Dashboard from scratch, keep the presentation simple and do not bog it down in unnecessary detail. Major programs can have visual boards that look like this:
This example is too complex for a factory to start with. The visual board below is an excellent place to start.
Keep in mind that KPIs are supposed to give people the information they need to improve and help to motivate the team. They are not about finding blame for failures but should be used to understand the problems and find solutions. Transparency is vital to using KPIs to drive process improvement.
So, what is the logical approach to set up these KPIs using lean visual management boards?
- Step 1 is to clarify the company’s goals & objectives.
- Step 2 is to cascade those goals & objectives down to each department, workshop, and team.
- Step 3 is to train the local leaders to “keep score”, if possible, on a visual board.
- Step 4 is for managers to use a mix of persuading and enforcing to get everybody to fill out their boards.
- Step 5 is to keep that new system alive. Switch to better KPIs when you find them. Set targets, adjust them to be realistic and motivating. Continuously show interest from top management.
Keep it Consistent
Putting up a visual board to track KPIs is not effective if it is not consistent or accurate. Information should be noted at the same time every time. If management cannot create a culture that rewards employees for tracking and using KPIs to make improvements, then it is a wasted opportunity and extra work for management.
Do you use KPI Dashboards in your manufacturing operations? We’d love to hear your insights or challenges in the comments below!