We all tend to be good at altering our behaviour based on what we are being measured on.  This is good news, as it means that we can influence the behaviours within a business (and hence its performance), by implementing metrics.  However – there is a downside – once you have embarked on driving behaviour through metrics, measuring all of the right things becomes crucially important.  If you don’t measure everything you need to, don’t be surprised if the metrics look good, and the bottom line doesn’t.

The aim for any business should be to make and deliver good quality product to customers when they want it, at the right cost.  To continue doing it, it’s important to have a motivated, engaged workforce.  And of course, no one wants people to be hurt in the process.
QCDSE defines the 5 objectives of your metrics, and helps to build a balanced set of Key Performance Indicators (KPIs) to measure and drive business performance.

Lauras International help implement the appropriate metrics – ensuring they are balanced to achieve maximum bottom line benefit, and are associated with a review process that generates action plans, and addresses shortcomings.  To maximize benefit, ensure the metrics, and the reasons for having the metrics, are cascaded throughout all management levels, and that targets and stretch targets are bought into, and mean something.

Quality

To delivery a quality product, one which meets the customer’s specification, in a cost effective way, quality should be built in throughout the design, production and distribution process. Parts Per Million (ppm), scrap and rework costs are well known quality measures.

How many ‘modifications’ are made throughout your process which go undetected, and hence unmeasured?  Is your product really produced Right First Time?  How consistent are your processes and where are you weaknesses?  To truly drive quality within your business, ensure you are using the right KPIs

Cost

Costs of manufacturers can be divided into three:  Direct Labour, Raw materials & Packaging, and Overheads.  Direct Labour is measured by Efficiency, Raw materials and Packing is measured by Yield, and Overheads are measured through Utilization and budgetary controls.

Above all, ensure that the metrics measure against true potential, and that you are not hiding opportunity from yourself.

The correct measure, and target levels do differ from sector to sector – be careful of blindly putting in a measure that works well in another sector into your own.  For instance, for capacity constrained lines with fixed crews, OEE is almost certainly the right metric for Efficiency.  If however, you are sales constrained, and have variable crewing requirements for different SKU’s, then Labour Efficiency will probably give you a better metric to control your direct labour costs.

Do you measure and quote On Time In Full delivery?  What about delivery to forecast?  Do you measure schedule adherence?  If you attain the schedule but achieve it in a different sequence are you credited with the result?  There are so many ways you can measure delivery so what should you be using?
The right answer depends on where you currently are in terms of delivery performance, and where you are trying to get to.  Make sure you choose the right metrics for your situation.

Safety

Lost Time and Reportable Accidents are easily measured but do these measures help prevent the accidents in the first place?  According to Heinrich’s Accident Triangle, for every major accident there are 29 minor incidents and a further 300 unsafe acts.Look for proactive metrics that encourage open-ness in reporting incidents, and measure the number of solutions and improvements made.

Engagement

Engagement is often measured using annual employee surveys.  On a daily basis a common metric is absence (2.5% is a good estimate of average true sickness over a high sample, based on observations in developing markets – therefore any absence over 2.5% could be inferred as being due to low levels of engagement).  Another often used metric is ideas per person per week. Have you got metrics in place that help to drive improvements in engagement?