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KPI Overview

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					EICC Working Hours Taskforce
KPI Scorecard


May 2010
Overview

  •    Objectives
  •    Potential KPI Cause and Effect Diagram
  •    KPI Impact Interaction Matrix
  •    KPI Reporting Guidelines
  •    Examples of Recommended Methodologies*
  •    KPI Development Progress Scorecard
  •    Summary


  * The root causes included in this presentation and in the KPI guidelines are examples only and are not based on
  actual root cause analysis data or results. Each situation is unique and should be addressed accordingly with the
  Root Cause Analysis Tool provided as part of the Working Hours Task Force toolkit.




                                                                                                                      2
Objectives

  • Provide high-level understanding of the various Key
    Performance Indicators that may be of value when
    addressing possible root causes of excessive working
    hours.

  • Provide an understanding of the interactions between
    departments within an operation that may impact
    working hours performance.

  • Recommend review process for KPIs.



                                                           3
                      High-Value KPIs: Excessive Working Hours

                                                      Total cost trend
                                        Return
                                                      Satisfaction rating
Cause and Effect



                                               Overtime pay
                                 Impact        Training cost delta
                                               Productivity


                                     # of workers exceeding working hours limit
                        Reporting # of workers without 1 day/wk off in 7 days
                                     Attrition rate



                                  Orders outside of lead time
                   Root Cause     Material delivery / safety stock level
                                  Resource planning accuracy


                                                                                  4
                                            KPI Impact Interaction Tool
                                      Direct impact     Primary data collection                                                                                                    Leading/
  KPI                                                                                                                                     Additional areas/ Organization with
                Description             to working          and reporting                 Potential causes & influencing factors                                                    Lagging
number                                                                                                                                                 influence
                                      hours (yes/no)        responsibility                                                                                                         indicator

                   Return
                                                                                  See KPI numbers 2,3,4,8,12                           Executive pressure. P&L owners
  1      Total Cost Trend                  No             Cost Management                                                                                                          Lagging
                                                                                  See KPI numbers 8, 12                                HR Managers, Production Supervisors
  2      Worker Satisfaction rating        Yes                    HR                                                                                                               Lagging
                   Impact
                                                                                  See KPI numbers 6,7,12                               HR Managers, Production Supervisors,
  3      Overtime pay                      Yes               HR/Cost Mgr                                                                                                           Lagging
                                                                                                                                       finance dept.
                                                                                  See Kpi numbers 10, 11,12                            HR Managers, Production Supervisors,
  4      Training cost delta               Yes               HR/Cost Mgr                                                                                                           Leading
                                                                                                                                       finance dept.
  5      Productivity                      Yes           Production Planning      See KPI numbers 2, 8, 9, 10, 12, 13                  Workers, Production Supervisors             Lagging
                 Reporting
                                                                                  See KPI numbers 4,9,10,11,12,13                      HR Managers, Production Supervisors
         # of workers exceeding
  6                                        No          HR/Production scheduling                                                                                                    Lagging
         work hour limit
                                                                                  See KPI numbers 4,9,10,11,12,13                      HR Managers, Production Supervisors
         # of workers without 1
  7                                        No          HR/Production scheduling                                                                                                    Lagging
         rest dqay per week
                                                                                  See KPI numbers 2,3,4,6,7,13                         HR Managers, Production Supervisors
  8      Attrition rate                    Yes                    HR                                                                                                               Lagging
                Root Cause
         Orders outside of lead                                                   Communication & Contract negotiations                Supplier production planning
  9                                        Yes              Buyer planning                                                                                                         Leading
         time
                                                                               Sub-tier supplier contracts/orders outside of lead      Sub-tier suppliers
         Material delivery / safety                                            time. Quality problems. Communication, material
                                                          Supplier material
  10     stock level/inventory             Yes                                                                                                                                     Leading
                                                       management / Purchasing supply interruption, orders, too low material safety
         accuracy                                                              stock
                                                                                  Sales predictions underestimated or overly ambitious, Materials and production planning teams.
         Life Cycle Volume
  11                                       Yes                 Customer           Product Ramp profile. Incentives (sandbagging).       Marketing Consultants                      Leading
         accuracy

                                                                                  Cost pressures to be too lean. Not understanding the Material planning, risk management,
                                                                                  scope of work in detail. Incentives (sandbagging).   production planning, account managers
                                                                                  Force Majeure. Vertically focused organizations not
         Resource planning                                                        integrated with the rest of operations. Silos not
  12                                       Yes                 Supplier                                                                                                            Leading
         accuracy                                                                 collaborating/communicating with each other.
                                                                                  Corporate culture/policy


                                                                                  Average age of employees and relative availability of HR Managers, Production Supervisors, P&L
  13     Worker attitude                   Yes                    HR              work force. Type of work. Culture of enterprise.      Executives                                 Leading
                        KPI Reporting Guidelines

                                                               Table of Contents
1      Purpose.............................................................................................................................................. 3
2      Scope ................................................................................................................................................. 3
3      Responsibilities................................................................................................................................. 3
4      Terms, Definitions & Acronyms ....................................................................................................... 3
5      General............................................................................................................................................... 3
5.1       Format ............................................................................................................................................ 3
5.2       Reporting Timeline ........................................................................................................................ 3
5.3       Historical Tracking Log................................................................................................................. 3
5.4       List of KPIs..................................................................................................................................... 3
5.5       Out of Goal..................................................................................................................................... 4
6      Reporting Procedure......................................................................................................................... 4
6.6       KPI #1 - Number of Workers Over Max Working Hours Limit..................................................... 5
6.7       KPI #2 - Number of Workers without 1 Day per Week Off........................................................... 5
6.10      KPI #3 - Material Delivery / Safety Stock Level / Inventory Accuracy ........................................ 5
6.11      KPI #4 - Life Cycle Volume Accuracy........................................................................................... 5
7      References......................................................................................................................................... 6




                                                                                                                                                                   6
Three Examples of KPI Development Tool in Use

The following examples are intended to illustrate use of a KPI
Scorecard to track specific indicators of, or contributing factors
influencing excessive working hours.

 1. Identification of working hour overages or lack of rest days
    (includes both EICC and China OT legal requirements)
 2. Potential excessive working hours created by material
    shortage
 3. Potential excessive working hours created by life cycle
    volume inaccuracy




                                                                     7
                                       KPI Development Methodology – Example
                                                   Working Hours
Elements of KPI                                                                  Steps to take
• Primary owner (for reporting metric) HR, Finance                               • Establish methodology to extract time & attendance
• Method – Trend Analysis                                                           data
• Management Influence – Sales, planning/forecasting,                            • Collect and report out working hour and rest day data
   HR/workforce planning, operations, materials                                     on weekly basis
• Type of Indicator – Lagging                                                    • Analyze working hour (and rest day) data to determine
• Potential Causes – Orders exceeding capacity,                                     whether it meets EICC and local legal requirements
   unexpected demand, lack of required workforce                                 • Identify potential trends and root causes of work hour
   resources, material availability                                                 overages; implement plans to address root causes
• Comments – Requires accurate weekly/monthly data                               • Continue to track performance against EICC/local legal
   reporting from time and attendance system                                        requirements and address overages
                 Metrics/Indicators                Jan    Feb    March   April   May    June   July   Aug    Sept   Oct    Nov    Dec
 Number of employees that exceeded 36 hours OT
                                                    0      75     44       8      16     29     72    117    120     0      0      0
 for the month (China requ)
 Percentage of employees that exceeded 36 hours
                                                   0.00% 5.39%   3.16%   0.57% 1.16% 2.09%     5.24% 8.54% 8.80% 0.00% 0.00% 0.00%
 OT for the month (China requ)
                                                                                                                                          Work hours
 Number of employees that exceeded 60 hours/
                                                    0      0       0       0      0      0      0      0      0      0      0      0
                                                                                                                                         and rest days
 work week for the week or month (EICC requ)                                                                                               meet EICC
                                                                                                                                         requirement,
 Percentage of employees that exceeded 60 hours/
                                                 0.00% 0.00%     0.00%   0.00% 0.00% 0.00%     0.00% 0.00% 0.00% 0.00% 0.00% 0.00%          but fail to
 work week for the week or month (EICC requ)
                                                                                                                                          meet China
 Number of employees not meeting the one day off                                                                                            OT legal
 rest per week requirement for the week or month    0      0       0       0      0      0      0      0      0      0      0      0      requirement
 (EICC requ)                                                                                                                                for Feb –
 Percentage of employees not meeting the one day                                                                                              Sept.
 off rest per week requirement for the week or   0.00% 0.00%     0.00%   0.00% 0.00% 0.00%     0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
 month (EICC requ)

 Total Operator Headcount                          1416   1391   1394    1396    1382   1386   1375   1370   1363   1362   1365   1370




                                                                                                                                                          8
                               KPI Development Methodology – Example
                                         Material Availability
Elements of KPI
                                                              Process     WK 1     WK 2      WK 3      WK 4      WK 5      WK 6      WK 7     WK 8
• Primary owner- Suppliers’ Material Management          Sch. Del       100,000
   and Brands’ Purchasing                                Act Del        100,000
                                                         Usage           95,000
• Method – Waterfall Chart, Trend Analysis               Delta            5000
• Mgmt Influence – Sub-tier suppliers, Planning          Sch. Del                 100,000
                                                         Act Del                  96,000
• Type of Indicator – Leading                            Usage                    98,000
                                                         Delta                     -2000
• Potential Causes – Force Majeure, Cost                 Sch. Del                           100,000
   Pressures, Incorrect or poor data inference.          Act Del                             85,000
                                                         Usage                              100,000
• Comments – Impact to working hours occurs              Delta                              -15000
   when material is not available and then a catch up    Sch. Del                                     100,000
                                                         Act Del                                       85,000
   schedule is introduced to match revised               Usage                                         95,000
   availability.                                         Delta                                        -10000
                                                         Sch. Del                                               100,000
                                                         Act Del                                                85,000
Steps to take                                            Usage                                                  90,000
                                                         Delta                                                   -5000
• Establish % flexibility of production in contract      Sch. Del                                                         100,000
                                                         Act Del                                                          85,000
• Establish material lead times                          Usage                                                            103,000
• Establish % material to be held in buffer/safety       Delta                                                            -18000
                                                         Sch. Del                                                                   100,000
   stock                                                 Act Del                                                                       0
• Establish material delivery plan                       Usage                                                                      100,000
                                                         Delta                                                                      -100000
• Track performance to plan                              Sch. Del                                                                             100,000
                                                         Act Del                                                                                 0
• Measure results using number of units short of plan    Usage                                                                                100,000
   and time to recovery with and without over time       Delta                                                                                -100000

• Determine course of action keeping in mind             Cum Delta       5,000     3000     -12000    -22000    -27000    -45000 -145000 -145000
   elimination of excessive working hours


           Material shortage begins to drive need for additional work hours
                                                                                                                                                        9
                              KPI Development Methodology – Example
                              Life Cycle Volume Accuracy
Elements of KPI                                             Steps to take
•   Primary owner- Brands’ Sales and Marketing &            •    Establish a trusting business relationship with clear
    Communications Teams, Retailers, End Customer,               and transparent communication between all parties
    Supplier’s Production and Shipping Teams                •    Plan to EICC working hours requirement
•   Method – Market Research, Trend Analysis (historic,     •    With the Code in mind, define terms & conditions for
    present and future), Communication of Demand                 the Retail/Brand relationship and the Brand/Supplier
    (Brand) Production & Shipping (Supplier)                     relationship (upside flexibility, lead times, committed
•   Management Influence – Brand’s Planning Teams,               capacity etc)
    Retail Forecasting Teams, Supplier’s Production, HR     •    Establish agreed upon reporting metrics
    and Purchasing Teams                                         (forecasting signals, production planning methods,
•   Type of Indicator – Leading                                  shipment plans)
•   Potential Causes – Fluctuating Retail Demand (Retail    •    Ensure adequate resources are in place to meet
    / End Customer), Overly Aggressive Forecasting               demand (Supplier)
    (Brand), Inadequate Resource Planning (Supplier),       •    In an *Unusual or Emergency Situation, Supplier
    *Unusual or Emergency Situations                             tracks any excessive working hours as a result (per
•   Comments – Requires monthly reporting of clearly             worker, per week)
    defined and agreed upon metrics                         •    Set up formal review of excessive working hours
                                                                 KPI data (Brand and Supplier)
                                                            •    Supplier develops a recovery plan to meet EICC
                                                                 requirement for excessive working hours


*Definition of Unusual or Emergency Situation - Per EICC Working hours Guidelines:
• Unpredictable events that require overtime in excess of legal or EICC limits. Such events cannot be planned for or
   foreseen.
• Equipment breakdown, power failure or other emergency resulting in prolonged shutdown of a production line.
• Unforeseen raw material or component shortages or quality issues that shut down production. Excessive overtime is then
   needed in both situations to recoup lost production time and meet customer commitments.


                                                                                                                           10
                             Sample Scorecard for Implementation of KPIs


                                                            Working Hours
                                                                   KPIs


                Over WH Limit          One Rest Day          LCV Accuracy              Material                TBD
 Indicators:
                                                                                      Availability      (Based on root cause
                                                                                                              analysis)


                Evaluation Process    Evaluation Process     Evaluation Process    Evaluation Process   Evaluation Process
                   Established           Established            Established           Established          Established

                  Data Collected        Data Collected         Data Collected        Data Collected       Data Collected
Implement-
ation Steps

                 Results Analyzed      Results Analyzed       Results Analyzed     Results Analyzed     Results Analyzed


                  Improvements          Improvements           Improvements         Improvements          Improvements
                    Identified            Identified             Identified           Identified            Identified



Responsible     Supplier Production   Supplier Production     Customer Demand      Procurement, Sub-           TBD
for reporting      Management            Management           Planning, Supplier      tier Supplier
                                                             Production Planning      Performance




                                                                                                                           11
How Do I Start?

  • Be proactive!
  • Engage senior management
  • Identify the root causes of excessive working hours
  • Select KPIs and gather data
  • Establish a regular, formal KPI review process to create
    accountability across the organization, monitor progress and take
    corrective action
  • Ensure that all departments and organizations which contribute to
    the conditions for excessive overtime take ownership for reducing
    working hours
  • Share your challenges and progress with your customers
  • Collaborate with customers to address brand-related factors

      The most important thing is to get started! Establish your
      baseline, and track your progress.


                                                                        12

				
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