KPI Analysis and Evaluation Techniques

Most Key Performance Indicators (KPI’s) in manufacturing aren’t wrong. They’re just misunderstood, misused, or misaligned. Here’s how to fix that 👇 1)OEE (Overall Equipment Effectiveness) – Misused as a benchmark instead of a diagnostic tool → Use it to find bottlenecks, not to chase 100% 2)First Pass Yield – Misinterpreted as a pure quality metric → Always pair it with rework data for full context 3)Downtime – Often tracked, rarely categorized → Split into planned vs unplanned & then go deeper (reason codes) 4)Scrap Rate – Used in isolation → Relate it to production volume and trends over time 5)Cycle Time – Teams chase faster cycles → Instead, focus on consistency and takt time alignment 6)Lead Time – Understood only as delivery time → Include every touchpoint, from raw material to finished product 7)Throughput – Taken as an output metric → It’s also a signal for process flow health 8) Changeover Time – Seen as “something to reduce” → Use SMED(Single minute exchange of die) principles to reduce waste, not cut corners 9) Capacity Utilization – More ≠ better → Balance with actual demand and takt time 10) Inventory Turnover – Misjudged without a benchmark → Find the right rate for your product mix — not just “higher” 11) MTBF (Mean Time Between Failures) – Tracked without root causes → Always contextualize with operator, part, and process data 12)Overall Labor Effectiveness (OLE) – Sounds complex, becomes ignored → Break into Availability, Performance, Quality, simplify and share 📌 Remember: KPIs are tools, not goals. Use them to make better decisions, not just prettier reports.

Key Takeaways: 1) Distinguish KPIs from Metrics: KPIs is a metric- but not all metrics are KPIs. A KPI is a strategic metric that: - Directly supports your organization’s top-level goals - Has clear executive buy-in and ownership - Cascades effectively to operational and individual levels ➤ Focus on the cross-functional KPIs that are applicable at all levels and aligned with the strategic goals 2) Adopt a Tiered KPI Framework: Use a 3-tier system to connect strategic priorities to day-to-day actions: - Tier 1: Strategic KPIs aligned with corporate objectives - Tier 2: Diagnostic metrics for root cause analysis - Tier 3: Operational metrics for team and individual accountability ➤ This hierarchy enables faster insight, alignment, and corrective action. 3) Move from Reporting to Action: Dashboards and scorecards aren’t just tools — they are part of your governance engine. - Use them to monitor, analyze, and respond, not just to report - Make data transparency and regular performance reviews a habit, not a chore 4) Accelerate with GenAI & ML: Next-gen technologies can supercharge KPI governance by: - Detecting anomalies and trends earlier - Automating analysis and forecasting - Providing actionable insights before issues escalate ➤ These tools enable proactive performance management, not just reactive correction. 📚 Reference: To dive deeper into Effective KPI Governance and Performance Measurement see: “Realizing Value from Digital/Gen AI/ML-Driven Supply Chain Planning Transformations” https://lnkd.in/g6JbA6Mf

I wish I had learned this framework earlier in my career, when I was a Staff Accountant. At the time, I was booking journal entries and putting reconciliation schedules together from one month-end to the next. I remember finding things I thought management should be worried about but nobody seemed to listen when I would bring them up. Well now, I know that if I was applying this buy-in framework, things would have been much different. So if you want to be the go-to person for strategic recommendations in your organization and help others do the same, do these 4 things consistenly. 𝟏 - 𝐆𝐞𝐭 𝐃𝐚𝐭𝐚 𝐟𝐨𝐫 𝐁𝐞𝐧𝐜𝐡𝐦𝐚𝐫𝐤𝐢𝐧𝐠 Get in the habit of reading other companies’ financial statements and audit reports, especially if they are within your industry. [ Hint: Public companies and large not-for-profits usually have their financial statements available online. ] Start by downloading these documents and diving into the details. Comparing different companies’ financials will give you a broader industry perspective. 𝟐 - 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐞 𝐊𝐞𝐲 𝐑𝐚𝐭𝐢𝐨𝐬 Use the financial data to calculate essential ratios like current ratio, debt-to-equity ratio, and return on equity. These metrics are critical for benchmarking against industry standards and understanding where your company stands relative to others. How do you know that your current profit margin makes sense if you don't know the bigger picture? 𝟑 - 𝐀𝐧𝐚𝐥𝐲𝐳𝐞 𝐊𝐏𝐈𝐬 Identify and track key performance indicators (KPIs) such as revenue growth and operating cash flow. Compare these metrics with those of other companies in the industry to gain insights and identify best practices. 𝟒 - 𝐂𝐨𝐧𝐯𝐞𝐫𝐭 𝐃𝐚𝐭𝐚 𝐭𝐨 𝐈𝐧𝐬𝐢𝐠𝐡𝐭𝐬 Use the following framework to turn your analysis into actionable insights and get buy-in on your recommendations: > Observation: What does the data show? (i.e., "Revenue growth has slowed over the last two quarters.") > Analysis: Why is this happening? (i.e., "This could be due to increased competition and higher production costs.") > Implication: What does this mean for the business? (i.e., "If the trend continues, it could impact our profitability and market share.") > Recommendation: What should be done next? (i.e., "We should explore cost-cutting measures and evaluate new market opportunities to boost revenue.") By following this framework, you not only leverage your company’s data but also incorporate industry benchmarks to provide context. This helps stakeholders understand the broader landscape, see the implications clearly, and align with your recommendations, especially if you use an easy-to-understand format. What do you think?