Demonstrate how KPI's relate to the overall project
To define Key Performance Indicators (KPI’s)
Provide some examples of KPI's
Show how to measure against the selected KPI's
The objectives of this session are:
First some definitions
A measurable variable that is related to a series of process
steps against which performance can be managed to
deliver against a particular corporate objective.
One, or a series, of process steps that are critical to the
achievement of a particular corporate objective.
The following is a generic “road map” to help you
think through the establishment of KPI's
KPI - Key Performance Indicator
CSF - Critical Success Factor
KPI's and Processes
But KPI's need to relate back to objectivesBut KPI's need to relate back to objectives
Defining KPI's by Process
KPI's and Projects
Why are KPI's important as part of a project ?
To establish the base line
We need a base line for selected KPI's. To assess current
performance so we can quantify the opportunity for improvement
and correlate to the base case
To have selected KPI's for today that will be monitored for the future
to demonstrate success
Utilize results of Benchmarking
How do our KPI's compare to the outside world so we can scope
our objectives for improvement
KPI's & Projects
–The CSF to achieve the Process objectives
–The CSF to achieve the overall target
KPI's can be driven out of either
Both will give similar “answers” but....
We need to ensure that
– We have addressed all areas
– They are linked to CBA
– Meet the management teams/steering committees
Establishing KPI's - The KPI process
Develop Action Plan
What needs to improve?
Establish improvement target
Create a plan on how we are
going to measure
Monitor the KPI
Evaluate & feedback results to
To achieve the CSF of - reducing time to market
Develop action plan
Manufacturing lead-time reduction for new product
Reduce Manpack development to 2 days
How do we capture current lead-time for Manpack
development? Who should do it? How often is it
Measuring current lead-times
Who to feedback to? How is it fed back? Do you want
action taken if it is not achieving target?
What factors contributes to delivery of the critical success
What do we need to measure?
What are the expectations for performance?
Get the objectives agreed
Once the objectives are defined we can agree the targets...
Once the objectives are set we need to develop the action plan to collect
information and monitor performance...
What specific performance targets should we aim to achieve?
What is the time frame for achievement?
What action occurs when measures go outside control limits
for the target?
Should there be unique goals for
– product groups?
– other significant input variables
Develop Data Action Plan
How something is measured is very important especially during a major change
project and if individuals are regarded based on existing KPI's
This is the plan for how we will collect the information to monitor our
Where will the data come from?
– is it consistent?
– is it valid/accurate?
– is it trusted?
– how will it be collected?
Who is the “policeman”?
How often will data be collected?
Who reports it?
What format is it collected in?
Who “owns” the measurement?
An example of how calculations can be misleading
1. Delivery Reliability from Production (production orders)
No. of PO correct (time and quantity)
Total no. of PO
x100 = 3/10 = 30%
2. Delivery Reliability from Production (quantity)
Total actual production
Total planned production
x100 = = 104%
3. Delivery Reliability (financial)
Total produced actual £
Total planned £
x100 = = 110%
Which is correct?
There is always more than one way to calculate a KPI
Summary - The steps to establish KPI's as a management tool
Develop action plan
The KPI process - Key Things to Remember...
Keep the total number of KPI's to 8-10 (key indicators)
Sub measures may be required to build the total picture
Take into account how easy it is to measure the KPI now and in
Will the KPI effect behavior?
How will we ensure consistency of data and how KPI's are
calculated throughout the project?
Who owns the KPI?
How will the KPI work with other aspects of the project (e.g.. CBA,
You are a consumer in a specific supermarket
Use the process just described to develop appropriate KPI’s.
What KPI's would you use to measure the store service?
What should the target be?
How should they conduct the measurement?
Who should they feed it back to?
What KPI's should we use in a project?
What are the factors
that influence these
Break down to select
the primary impact
There are a large number of KPI's which could be
selected for a project
KPI breakdown - What are the components of cost?
Decomposition is a major tool...
% New Products <
% Updates < 30
Idea Generation Prototype
% sales from
KPI - Level of stock
Working stock Safety stock
No. of stepsQueue timeBatch size
time Which area should we measure?
If the level of stock is a major component of cost - What are the major impact areas?
Raw material price
Purchasing dept.. expenses
Interest on raw material held
Raw material inspectors
KPI - What are the components of cost?
What should be measured?
Cost to supply
manufacture Cost to serve
All costs associated
with the purchase and
holding of raw
All costs incurred
materials to finished
All costs incurred due
to holding inventory
of finished goods
Production dept.. expenses
Utilities and expenses
product quality testing
Process control systems
Warehouse material handling
Rework and waste
Holding costs of WIP
Interest on WIP
Logistics dept.. costs
Interest on F.Goods stock
Material handling costs
Another way to break down
a major cost area into its
KPI - What are the components of service?
What should we measure to truly reflect customer service?
Customer Service =
Number of Back
KPI's - Specific types of measures in each area
There can be KPI's which are
Absolute numbers - today the value
is X tomorrow we want the value to
Ratio’s - today the ratio between A
& B is X% tomorrow we want Y%.
Process - today the process
requires resources and has X
number of steps, in the future it will
have less steps and use fewer
Time Money Volume
All of these can be
KPI's - An example of ratios as KPI's
Credit Notes/Total invoices
Some KPI's can be shown as ratios
= Accuracy of customer ordering
Number of Rework Orders/Total Production Orders
= Quality of Right First Time
Number of Product Change Requests/Total Number of
= Accuracy of Design to Production Conversion
These are only some examples of where ratios can be used
Main Activities Innocence Awareness Understanding Competence Excellence
no contract basis
• No coherent
demand for price
• Larde number of
• Adversarial but
• Strategy based on
price, quality &
• Large supplier
base with long
but does not
involve feedback to
• All suppliers
• Relationships established
with strategic suppliers
• Strategy recogniwes long
term relationships with
• Focus on reduced
number of suppliers by
• Formal supplier
• Relationships based
• Strategy drives
• Some integration of
suppliers into the
internal supply chain
• Some involvement of
suppliers in the
• Formal supplier
data every 6 months
• Qll suppliers assured
based on supply
• Shared goals and
whole supply chain
• Early and key
suppliers in the
• Formal suppliers
• Suppliers manage
supply to defined
• EDI used for call
Skills • Buying/negotiating • Professional purchasing
• Paper based • Stand alone functional
• Integrated system
along internal supply
• Integrated system
KPI's - An example of a process related KPI
Select the key measures based on the project objectives &
Develop a plan to collect the measures
Work with other groups to action the plan
Monitor, control & communicate results
Within a project we need to
Key Performance Indicators
Measure what is important
KPI's are needed before, during and after a project
– Keep it simple
– Define objectives
– Set targets
– Develop plan (who, when, what)