We all know there are many books, articles and viewpoints on how to measure how effective your operations are, no matter what industry you are in. Some will focus on overall equipment efficiency (OEE) or Total Effective Equipment Performance (TEEP) under the Total Quality Management (TPM) paradigm. It will include a mix of metrics and KPIs.
One thing to remember: A KPI (Key Performance Indicator) is a metric, but a metric is not always a KPI. The definition of a KPI is a metric that helps you understand how you are doing against your objectives or goal. A metric is just a number, such as number of data errors or a ratio for example.
It is important to have various levels of KPIs, ”business or operating,” but it is important to not have too many clouding the story on overall performance. You can focus too much on cost per piece and lose site if you are making money. If you have more than 25 KPIs to manage your business, you are going to be missing the point. Some will say measure to the point value is realized. If a piece of equipment at the end of the value chain is down, even though the rest of the equipment is working, value is not realized, as the client is impacted.
Once you have the correct data identified to support your course of action, such as bottlenecks, do you have the buy in to do something about it? In operations, you have three main buckets: operating expense, throughput and inventory. When you are looking at ways to increase topics like throughput, are you presenting KPIs that show the impact to revenue or just one part of the system or both?
Are you looking in the rearview mirror or out the windshield when you use your metrics? Have you established your baseline so you can look at progress?
Metrics and KPIs are used to tell a story good or bad and usually are dependent on each other to support the story. Now that you have the story, is the data accurate? THAT takes an interest in data quality.
- Define KPIs that connect to the company's overarching goal. Department KPIs should all connect back to the goal.
- Limit the number of KPIs and having a team buy-in these are important. Do not be afraid to improve or change them over time.
- Ensure the KPIs have accurate data to support prevent driving down the wrong road.
You are on your way to measure your progress and determine directional where you need to dig further on those bottlenecks.