Almost every production company has a continuous improvement process: an army of people is constantly working on improving operational KPI’s, like, for instance, Overall Equipment Efficiency (OEE). However, despite all the effort, results may be stagnating. Does this sound familiar? Then you most likely have the wrong focus in steering operations. In this article, our manufacturing expert Martin Dieker shares what indicators make the difference in steering your operations.
To illustrate this point, I’d like to start with a problem that will be familiar to some people, especially in the current ongoing Covid-19 crisis: too much body weight. Let’s say you have gained 10 kilograms in the last 12 months, currently weighing in at 90 kilograms (baseline value). You want to return to 80 kilograms (target value) within the next six months. To get from the baseline value to the target value, we have to define a tracking object and a metric to measure success. In this case, your tracking object is your body. The metric measuring success is body weight in kilograms.
Every morning you measure progress by weighing yourself. But your weight generally stays the same: one day, you lose a kilo, the next day, you gain it back. After a couple of weeks, you get frustrated because you don’t see any progress. It would be best if you change certain daily routines to achieve your target.
But what influences your body weight? The amount of food you eat and the energy you burn. Instead of focusing just on your weight, you start measuring your daily habits. How many steps did you take [#], and how many calories [kcal] did you eat?
The big difference between weight and steps or calories is that you directly impact the latter because the focus lies on activities instead of just on KPIs. To be successful in your weight loss, it is crucial to identify what actions are impacting the target value. In other words, what are the leading indicators impacting your lagging ones? Indicators that function as input parameters are leading indicators; indicators that represent the outcome are lagging indicators. This sounds obvious from a weight-loss perspective; however, if you transfer this concept into operations, it is a different ballgame. Because OEE is a lagging indicator that is influenced by leading indicators. Improving your OEE is not solely done by focusing on the KPI OEE itself but by optimizing those leading indicators driving OEE. There is minimal value just focusing on OEE. Mature companies focus on their leading indicators daily.
Let's look at some examples:
Focusing on leading indicators will impact the lagging ones! This is a paradigm shift. The leading indicators listed above represent concrete activities. Such activities are easy to track and create transparency from shop-floor to top-floor. For leadership, the transition from leading to lagging indicators requires an operational understanding of processes. However, you will gain a lot of credibility from the operational level because you have well-aligned targets. The crucial part is not for operators to change – but for leadership to change.
Are you already measuring leading indicators that impact your lagging ones? What concrete activities did you conduct today to improve OEE? Get in touch with Martin Dieker to talk about setting concrete, transparent targets that help improve your lagging indicators by sending him an email.