Using KPIs during a Lean Transformation

Metrics are used in all industries. They can be used to measure the overall success of an organization or manage daily functions. Metrics help determine if operations are efficient or if changes need to be made to avoid future inefficiencies and problems. Known as Key Performance Indicators (KPIs) these metrics are an essential tool for manufacturing management.

Examples of KPIs in Manufacturing

Every aspect of the manufacturing process can be measured, but it is important to measure indicators that help the organization meet its goals. Here are some examples of the most common KPIs used in manufacturing as organizations strive to become more Lean:

  1. Count-the amount of product produced
  2. Reject ratio-the ratio of unacceptable units resulting in scrap
  3. Rate-how fast or slow machines produce goods
  4. Target-goals for rate and quality
  5. Takt time-the length of time to complete a task (derived from the German word Taktzeit, translated best as meter, is the average time between the start of production of one unit and the start of production of the next unit,
  6. Overall Equipment Efficiency-measures resource utilization
  7. Downtime-any time the machines are not running

KPIs measure efficiency, effectiveness and capability. All of these measures are quantifiable and meaningful. Ideally, they should help to drive the decision-making process leading to continuous process improvement. KPIs provide critical feedback that in turn helps management to create or revise current corporate strategy to achieve organizational goals. Becoming a Lean business could be one of those goals.

KPI and the Lean Transformation

Organizations often embark on a “Lean transformation” to eliminate waste and bring value to the customer. Becoming “Lean” is not just about learning to use new tools or applying new concepts, it is about changing organizational mindset. It is changing the culture, thoughts and behaviors of the workforce in order to change the way things are done.

How should KPIs be used during a Lean Transformation? KPIs provide the new goals or standards for measuring the lean transformation. A big difference exists between business-as-usual and navigating a major organizational change when it comes to KPIs. Measures that are important under normal circumstances may not be valuable during a period of flux.

In order to successfully use KPIs during a lean transformation all metrics must be shared with employees. After all, the metrics are how operations are being measured. Each employee must know how he or she will be measured. Management needs to know how each area is performing but change only occurs if the metrics are shared at the front line. Otherwise, management has an impressive array of numbers and a great deal of knowledge without any real change. Measuring for the sake of measuring IS waste if it does not provide value. Do not get carried-away by the numbers.

KPIs are a great guide when attempting to transform a business. They provide the baseline for any subsequent improvement and measure the impact of any business process improvement. Finally, the KPIs can be used to monitor operations after the Business Process Improvement making sure the new process is performing as planned.

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