What are KPIs (Key Performance Indicators)?

Quick Definition

Key Performance Indicators are measurable, definable metrics typically used to signify company goals. KPIs are considered to be primary metrics. Key Performance Indicators, when exposed and properly analyzed can be used to understand and improve manufacturing performance.

Expanded Definition

Every company measures themselves to some degree. Often measurement and analysis occur based on historical information. Although there is value in historical analysis, KPIs are biased toward real time data and are used to support decisions that enhance manufacturing performance. KPIs are tied to company goals and require careful design and implementation in order to support positive change. As with many organizational issues, acceptance of Key Performance Indicators and how they will be used to improve performance in critical.

In order to successfully leverage performance improvements based on KPIs there are three main precursors.

• Measurability
• Team acceptance
• Conformance to organizational goals

Measurability

The KPI must be measurable. The methodology of the measurement must be documented and accepted before the process begins. Understanding exactly what is to be measured will help determine how it will be measured. The effects of changes can be tracked through careful analysis of the benchmark KPI data. Goals and desires are often vague - key performance indicators are always very specific.

Team acceptance

Team buy in is often the difference between success and failure of many manufacturing projects. In regards to KPI it is critical. KPIs are typically the primary source of information regarding the performance of a process that is being monitored. In order to successfully use the data everyone needs to understand why the indicator was chosen and how it represents the underlying condition. Additionally, since the data will be used as an indicator of process performance, it is necessary that the entire team use it in the same way.

Conformance

General company goals and initiatives are at the heart of KPI. By determining a way to measure the success of a project companies are able to monitor change. When action is required, KPIs will provide advance warning. Successful KPI implementation means limiting exposed performance data to only key indicators. Often there may be a desire to measure the entire process. While this is understandable, the difference between KPI and other metrics must be understood and enforced.

KPI provides a mechanism for companies to identify areas for improvement, create the metrics that will be used to analyze the process and the tools to support change to the future state. Lean manufacturing is a process. Companies that use KPIs in this context use them to improve every day.

How Can KPIs (Key Performance Indicators) Help My Organization?

Once you've defined the KPIs that reflect your company's goals and have a consistent way to measure them, use them to enhance performance by charting the progress toward the target KPI. Only then will people be informed and motivated to:

• Support company initiatives
• Manage growth
• Manage change

KPIs provide the tools to measure manufacturing performance enhancements.

KPIs (Key Performance Indicators)

A manufacturing truth – “you cannot change that which you do not measure”. Visual displays provide real-time information to enhance manufacturing performance by delivering real-time display of KPIs.