02 SD - Performance Measures MFG Guidelines

Nestlé Continuous Excellence

Goal Alignment in Manufacturing

Appendix to Reference Guide v.2.0Step 2 – Performance Measures Guideline

August 2011

MFG - Performance Measures 2

Objectives

Introduction to Measures

Principles of Measures

Performance Measures Development and Management

Process

Key Learning’s

Agenda


Understand needs and purposes of Measures

Learn principles and guidelines of Performance Measures

Introduce Cascading Measures Process

Understand how to manage Measures at all levels within

the Factory

Learn how to visualise Measures and Challenging targets

Objectives


Ground rules Pass the balls between you In the SAME order As quickly as possible

Group into a circle of 5-7 people

Exercise feedback

What did you do to achieve such good Measure?

What did I do?

Key Message

Improvement is difficult without Targets, Measures, Reviews and Actions and most importantly 100% Engagement

Workgroup exercise


Objectives




Process

Key Learning’s

Agenda


Sticklebrix game: The Scene

You work for the so called Sticklebrix company & your aim is to:

Give 100% quality & delivery performance to your

customer and maximised profit

Manufacture 3 different sticklebrixs with minimum scrap

1st Production run 1 Demand from client 30 finished products per day: 10 green, 10 red and 10 yellow. See product

specifications. 3 shifts / 6 days / week, 1 day = 5 minutes Cost of materials = 10 cents/ piece. Material not used at the end of the run are consider scrap. Labour cost = 1 $ per day per person Sales price of 1 finished product = 1 $

Let’s practice – 1st Run

Actions:1. Develop a score card and action plan. Use the templates provided.

(First shift starts strictly in 5 minutes)

2. Run production and deliver the product


Let’s practice

Your Feedback – Run 1

How did it go?

Something to change/improve for the next run


Performance Measures

Cascade measures and objectives to all levels

Operational Master Planning

Business PrioritiesFunctional Objectives

Problem Solving

Sustainable solutions eliminating root

causes

Standard Routines**

Common ways of working

Performance Measures is the second practice of Goal Alignment

Operation Reviews

Manage performance at all levels

Note: ** To be introduced in GA Phase 2 in Manufacturing


Operational Master Plan is the input for Performance Measures

Alignment, Relevance, Ownership

OMPOMP

Factory

Area / Department

Shop floor / Teams

Measures aligned to deliver competitive advantage and delight consumers

Performance MeasuresPerformance Measures


1. Assess current performance “Where are we?”

Practices

Res

ult

s

2. Define performance objectives “Where do we need to go?”

3. Narrow the gap “How do we get there?”

Measures are prerequisites to improve performance

Results are an output

Practices are what we do to get the results

5 Goal Alignment practices

Note: Standard Routines will be introduced in GA Phase 2


SuccessSuccessDrives

DrivesPerformancePerformance

DrivesBehaviourBehaviour

How well could you drive a car without a dashboard?

What Measures do you see on the dashboard?

Which of these Measures are short, medium and long term?

Which Measures can not be seen?

What Measures do you have in your process?

Why should you always measure your Measures?

How do you Measures them?

MeasuresMeasures


Why do we need a balanced scorecard? Is this a world class operation?


In which factory do you want to work? Balanced measures drive sustainable improvement


Objectives




Process

Key Learning’s

Agenda


2nd Production Run

Record measures and set SMART objectives that you feel are appropriate using the

provided Chart for Visual Measures

Your Feedback

How did it go versus the previous run?

Who knows how well you performed?

Your Factory Manager wants to share on the factory performances

Quality is poor

We are losing money

We need to do something, tell me what! You have got 10 min

Let’s practice – 2nd Run


Balance betweenResults and Practices

Balance betweenLeading and Lagging

Balanced Categories

• Relevant• Meaningful• Actionable

Properly cascadedat all levels

Appropriate No. of Measure at each level

Proper Measures should follow 5 main principles


First principle: Balance between Results and Practices

Workgroup Brainstorming:

List 10 key “Results”

List 10 key “Practices”

Results Measures Results are an output and the final

outcome of a sequence of activities, events or operations

The measurement is mainly quantitative

Practice Measures

Practices are what we do to get the results

Practice Measures are based on activities or events performed to drive qualitative outputs or positively influence on results

Practice measures address desired ways of working

The measurement is usually qualitative

Practices

Res

ult

s

• First Time Quality• LTIFR• % Performance• Material Variance

• Temperature Monitoring

• BBS Feedback

• Wearing Safety Gloves

• Cleaning of Sealing Jaws


Second principle: Balance between Leading and Lagging

Measures can be leading for one level and lagging for another

Lagging Measures offer little room to impact processes that might result in poor performance

Leading Measures drive performance by detecting issues before they occur/impact Measures significantly

Lagging Measures

Leading Measures

1. Line Performance2. First Time Quality3. Cost of Production4. Absenteeism5. LTIFR

1. Breakdown Analyzed2. Temperature3. Start Up Checklist4. Recognition5. BBS Coaching Feedback


Balance of results/practices and leading/lagging Measures change at different levels

Organisation Level

Results

Practices

Line / Team

Area

Factory

Lagging

Leading


Third principle: Balance between categories - QSCP

Measures how well we do, what we do (e.g. Consumer Complaints,

QMS Checks, First Time Quality etc.)QUALITY

Measures level of service provided and satisfaction of customers and

consumers needs (e.g. % Performance, Change Over Time, # of

Breakdowns, MSA)SERVICE

Measures financial figures (e.g. Non Quality Cost, Material Variances,

Cost of Production etc.)COST

Measure engagement and skills/capability development (e.g.

LTIFR, Coaching Visits, BBS Feedbacks, Recognition, Overtime, etc.)PEOPLE


QSCP is recommended but factories can also use PQCDSM in Phase 1

QUALITY

SERVICE

COST

PEOPLE

GA Phase 1 GA Phase 2

P

Q

C

D

SM

RODUCTIVITY

UALITY

OST

ELIVERY

HE

ORALE


Fourth principle: Properly translated at all levels

Area

Line/Team

Factory

Cascading Measures guidelines

High Level Measures transformed and translated at each level should: Be relevant, meaningful

and actionable Guide desired

behavior

Relevant data and appropriate people considered at each level


Relevant Must be aligned with Key Priorities, to have an impact on the performance and processes

Meaningful Should ensure clear understanding at each level to monitor and improve performance

ActionableOwner should be able to influence the Measures on a short, medium and long term horizon

Relevant, Meaningful and Actionable


Line / Team

MonthlyQuarterly/

Yearly

Area

Weekly

Factory

Frequency

AreaHourly Shiftly Daily

Real time measures showing

“health” of the process

Real time measures showing

“health” of the process

Heart BeatBoard

Approx. (3-4) simple

measures, easy to

understand

Approx. 3-6 measures, relevant to represent

24h Measure

Line Review Board

Subset of measures to track factory objectives

(approx 12)

Complete set of measures to track factory objectives

(approx. 25)

Factory Review Board

Milestone & key activity review with business

Milestone & key activity review with business

OperationalMaster Plan

Approx. 4-8 measures,

strongly linked to the factory

objectives

Higher number of measures (approx. 12),

Area Review Board

Operations Review – More StrategicOperations Review – More Operational

Fifth principle: Appropriate number of Measures at each level

Note: Approximate number of measures illustrated are used as a guide for the factories


Fortune cookie Movie

Watch the movie and define what should be the

key Measures for this process

Try to fill the given template Without measures you can not become a world class operation

Without measures you can not become a world class operation

Hourly

Line/

Team

WeeklyDailyShiftlyFrequency

Area

Area

Factory

MonthlyWeekly


Objectives




Process

Key Learning’s

Agenda


Performance Measures development and management process consists of 5 steps

WH

O

• Factory Management• Middle Management• Line/TeamShopfloor

Map measures of OMP priorities and Maintain Items

1

• Visualise the measures from Operational Master Plan/ Maintain Items

• Define if they are quarterly/monthly/ weekly/ daily

Identify maincontiributors

2

• Understand and identify main contributors related to OMP/ Maintain Items measures by using analysis tools

• Associate main contributors to the right frequency and different organizational levels

Implement measures in Operation Reviews

5

• Use of Visual Management principles

• Utilise identified measures in Operation Review

• Perform the measures and target review regularly

Cascade and visualise measures

4

• Cascade the defined measures to next level until you reach the team level (1)

• Visualise communication by applying the Measures tree

• Validate measures

Translate and transform contributors into measures

3

• Translate and transform contributors into measures applying the 5 principles at the same level

(1) Manufacturing, cascading will happen in step 3 were you only have the whole factory to cascade


Some Measures might need to be monitored as a Maintain Item

Maintain Items are measures that are not

considered in the OMP but important for the

Business and therefore need to be

reviewed on a regular basis

Example of Maintain Items

Overfill is not the main problem and has a good performance, however it is

important to monitor to control


Both Measures and targets are to be cascaded

from OMP and Maintain Items

Targets should be......

...set in a way that if achieved they will

positively impact high level objectives

...simple, measurable, actionable, stretched

but attainable

...reviewed when consistently achieved

Measures can be changed to focus on other

areas once improvements in current

targets/behaviours have been delivered

Measures and targets should be cascaded and validated throughout the organisation


Measures and Targets should be reviewed

Measures/Targets have to be revised by:

- Identifying new measures by looking into the next contributor (weekly)

Factory Management

Maintain item Maintain item

Key Priorities

Area

Line/Team

-Setting new targets (if can be stretched) or

-Cascade to all levels afterwards

Measures/Target revision should be performed when:- High Level Measures (link to Key Priorities and Maintain Items) are sustainably achieved


Targets reflect improvements planned in the OMP


Measures Tree describes how measures are connected with each other

Measure 1

Measure 1.1

Measure 1.2

Measure 1.1.1

Measure 1.1.2

Measure 1.1.2.1

Measure 2

Measure 2.1.1

Measure 2.1.2

Measure 2.1.2.1

Measure 3

Measure 3.1.1

Measure 3.1.2

Measure 3.1.2.1

Measure 3.1.2.2

Measure 4

Measure 4.1

Measure 4.1.1

Measure 4.1.1.1

Quarterly Review

Quarterly Review

Monthly Review

Monthly Review

Weekly ReviewWeekly Review

Daily ReviewDaily

Review

Measure 2.1

Measure 2.2

Measure 3.1

Priority 1 Priority 2 Priority 3 Maintain Items

Even the simplest activity drives measures on a strategic level


Illustrative example of Measures tree from Switzerland, Nespresso Orbe

Monthly

Weekly

Daily

ShiftCas

cad

ed m

easu

res

to

diff

eren

t le

vels

Cas

cad

ed m

easu

res

and

tra

nsla

ted

Balanced categories

Cascad

ed mea

sures

using data & P

areto


Visual Management provide us with an overview of the current results

KPI JAN FEB MAR APR

FTQ 90% 92% 98% 99%

MSA 95% 97% 98% 98%

LTIFR 0.21 0.54 0.02 0

Line Performance 67% 75% 80% 82%

Do we have a good or bad performance?

How are we performing in relation to our targets?

Can we easily identify the trend?

Current Visual Management

Goal Alignment Visual Management


Colour Management:

Black - For writingGreen – HIT TargetRed - MISSED Target

Visual Management of Measures should consist of the following

What is our Measure? How do we measure it?

What is our measuring scale?

Can we easily see the trends?

What is our Target?

Who is responsible to update? (1 owner per chart)


Key questions to ask during Measures or Target review

Did we achieve the objective for the quarter? Are there positive trends? Are the positive trend sustainable? Did we have Red Bars for the quarter? How many? Do we need to stretch the target? Do we need to replace the Measure? Do we need to update the Measures tree?


The Coaching Tool is used to evaluate and coach for continuous improvement

The Coaching Tool evaluates quality of Measures in 3 areas:

• General

• Visual Communication

• KPI Tracking

The Coaching Tool can be applied by the internal team or an independent person from another area / function


Objectives




Process

Key Learning’s

Agenda


Balance betweenResults and Practices

Balance betweenLeading and Lagging

Balanced Categories

• Relevant• Meaningful• Actionable

Properly cascadedat all levels

Appropriate No. of Measure at each level

Measures should be defined based on 5 main principles


Measures are the first step for improvement

Use measures to evaluate performance based on facts and figure

Measures should be defined based on 5 key principles

Translated and cascaded measures should ensure alignment with

Key Priorities

Targets have to be properly set and reviewed on a quarterly basis

Display measures tree to show alignments and help

understanding how each individual impacts the high level KPIs.

Key Learnings


THANK YOU

Documents

02 SD - Performance Measures MFG Guidelines