Nestl Continuous Excellence

Goal Alignment in Manufacturing

Appendix to Reference Guide v.2.0
Step 2 Performance Measures Guideline
August 2011

Agenda
Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learnings

MFG - Performance Measures

Objectives
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

MFG - Performance Measures

Workgroup exercise
Group into a circle of 5-7 people
Ground rules
Pass the balls between you
In the SAME order
As quickly as possible

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

MFG - Performance Measures

Agenda
Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learnings

MFG - Performance Measures

Lets practice 1st Run

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 $

Actions:
1.
2.

Develop a score card and action plan. Use the templates provided.
(First shift starts strictly in 5 minutes)
Run production and deliver the product

MFG - Performance Measures

Lets practice
Your Feedback Run 1
How did it go?
Something to change/improve for the next run

MFG - Performance Measures

Performance Measures is the second practice of

Goal Alignment
Operational
Operational
Master
Master Planning
Planning

Sustainable
solutions
eliminating root
causes
Problem
Problem
Solving
Solving

Business Priorities
Functional Objectives

Performance
Performance
Measures
Measures

Common ways of working

Cascade measures
and objectives to
all levels
Note: ** To be introduced in GA Phase
2 in Manufacturing
MFG - Performance Measures

Standard
Standard
Routines**
Routines**
Operation
Operation
Reviews
Reviews

Manage performance at all levels

Operational Master Plan is the input for

Performance Measures
OMP
OMP

Performance
Performance Measures
Measures

Factory

Alignment,
Relevance,
Ownership

Area /
Department

Shop floor /
Teams

Measures aligned to deliver competitive advantage and delight consumers

MFG - Performance Measures

1. Assess current performance

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

Results

Measures are prerequisites to improve

performance

3. Narrow the gap

How do we get there?
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
MFG - Performance Measures

10

Practices

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

Drives

them?

Drives
Drives

Behaviour
Behaviour

Measures
Measures
MFG - Performance Measures

11

Performance
Performance

Success
Success

Why do we need a balanced scorecard?

Is this a world class operation?

MFG - Performance Measures

12

In which factory do you want to work? Balanced

measures drive sustainable improvement

MFG - Performance Measures

13

Agenda
Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learnings

MFG - Performance Measures

14

Lets practice 2nd Run

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

MFG - Performance Measures

15

Proper Measures should follow 5 main principles

Properly cascaded
at all levels

Balance between
Results and Practices

Balanced Categories

Appropriate No. of
Measure at each level

Balance between
Leading and Lagging

MFG - Performance Measures

Relevant
Meaningful
Actionable

16

First principle:
Balance between Results and Practices
Results Measures
Results are an output and the final
outcome of a sequence of activities,
events or operations
The measurement is mainly quantitative

Workgroup Brainstorming:
List 10 key Results
List 10 key Practices

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

Results

Practice Measures

First Time Quality

LTIFR
% Performance
Material Variance

Temperature
Monitoring
BBS Feedback
Wearing Safety
Gloves
Cleaning of Sealing
Jaws

Practices
MFG - Performance Measures

17

Second principle:
Balance between Leading and Lagging
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
1.
2.
3.
4.
5.
1.
2.
3.
4.
5.

Line Performance
First Time Quality
Cost of Production
Absenteeism
LTIFR

Breakdown Analyzed
Temperature
Start Up Checklist
Recognition
BBS Coaching Feedback

Leading Measures

Measures can be leading for one level and lagging for another
MFG - Performance Measures

18

Balance of results/practices and leading/lagging

Measures change at different levels
Organisation Level
Results

Lagging

Factory

Area

Line / Team
Practices

MFG - Performance Measures

Leading

19

Third principle:
Balance between categories - QSCP

QUALITY
SERVICE
COST
PEOPLE
MFG - Performance Measures

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

QMS Checks, First Time Quality etc.)

Measures level of service provided and satisfaction of customers and

consumers needs (e.g. % Performance, Change Over Time, # of
Breakdowns, MSA)
Measures financial figures (e.g. Non Quality Cost, Material Variances,
Cost of Production etc.)

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

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

20

QSCP is recommended but factories can also use

PQCDSM in Phase 1
GA Phase 1

GA Phase 2

P
Q
C
D
S
M

QUALITY
SERVICE
COST
PEOPLE

MFG - Performance Measures

21

RODUCTIVITY
UALITY
OST
ELIVERY
HE
ORALE

Fourth principle:
Properly translated at all levels
Cascading Measures
guidelines
High Level Measures

transformed and translated

at each level should:
Be relevant, meaningful
and actionable
Guide desired
behavior

Factory

Area

Relevant data and

appropriate people
considered at each level

MFG - Performance Measures

Line/
Team

22

Relevant, Meaningful and Actionable

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

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

MFG - Performance Measures

23

Fifth principle:
Appropriate number of Measures at each level
Frequency
Hourly

Shiftly

Daily

Weekly

Monthly

Area
Factory Review Board
Subset of
measures to
track factory
objectives
(approx 12)

Factory

Complete set of
measures to
track factory
objectives
(approx. 25)

Area Review Board

Approx. 4-8
measures,
strongly linked
to the factory
objectives

Area

Heart Beat
Board

Line / Team

Real
Real time
time
measures
measures
showing
showing
health
health of
of the
the
process
process

Higher number
of measures
(approx. 12),

Line Review Board

Approx. (3-4)
simple
measures,
easy to
understand

Operations Review More Operational

Approx. 3-6
measures,
relevant to
represent
24h Measure
Operations Review More Strategic

Note: Approximate number of measures illustrated are used as a guide for the factories
MFG - Performance Measures

24

Quarterly/
Yearly
Operational
Master Plan
Milestone
Milestone &&
key
key activity
activity
review
review with
with
business
business

Fortune cookie Movie

Watch the movie and define what should be the
key Measures for this process
Try to fill the given template

Without
Without measures
measures you
you
can
can not
not become
become aa world
world
class
class operation
operation

Frequency
Hourly

Shiftly

Daily

Area

Factory
Area
Line/
Team

MFG - Performance Measures

25

Weekly

Monthly

Agenda
Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learnings

MFG - Performance Measures

26

Performance Measures development and

management process consists of 5 steps
1

2
Map measures of
OMP priorities
and Maintain
Items

Visualise the
measures from
Operational Master
Plan/ Maintain Items
Define if they are
quarterly/monthly/
weekly/ daily

Identify main
contiributors

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

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

5
Cascade and
visualise
measures

Cascade the defined

measures to next
level until you reach
the team level (1)
Visualise
communication by
applying the
Measures tree
Validate measures

Factory
Factory Management
Management
Middle
Management
Middle Management
Line/TeamShopfloor
Line/TeamShopfloor

WHO
WHO

(1)

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

MFG - Performance Measures

27

Implement
measures in
Operation
Reviews
Use of Visual
Management
principles
Utilise identified
measures in
Operation Review
Perform the
measures and target
review regularly

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

MFG - Performance Measures

28

Measures and targets should be cascaded and

validated throughout the organisation
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

MFG - Performance Measures

29

Measures and Targets should be reviewed

Key Priorities

Measures/Target revision
should be performed
when:
- High Level Measures (link
to Key Priorities and
Maintain Items) are
sustainably achieved
Measures/Targets have to
be revised by:
-Setting new targets (if can
be stretched) or
- Identifying new measures
by looking into the next
contributor (weekly)

Maintain item
Factory
Management

Area

Line/
Team

-Cascade to all levels

afterwards
MFG - Performance Measures

30

Maintain item

Targets reflect improvements planned in the OMP

MFG - Performance Measures

31

Measures Tree describes how measures

are connected with each other
Priority 1

Priority 2

Measure
1

Measure
2

Quarterly
Quarterly
Review
Review

Monthly
Monthly
Review
Review

Weekly
Weekly
Review
Review

Measure
1.1

Measure
1.1.1

Daily
Daily
Review
Review

Measure
1.1.2

Measure
1.1.2.1

Measure
2.1

Measure
1.2

Measure
2.1.1

Priority 3
Measure
3

Measure
2.2

Measure
2.1.2

Measure
2.1.2.1

Maintain Items

Measure
3.1

Measure
3.1.1

Measure
3.1.2.1

Measure
4.1

Measure
3.1.2

Measure
4.1.1

Measure
3.1.2.2

Even the simplest activity drives measures on a strategic level

MFG - Performance Measures

32

Measure
4

Measure
4.1.1.1

Illustrative example of Measures tree from

Switzerland, Nespresso Orbe
Monthly
Weekly
Daily

Cascaded measures
using data & Pareto

Shift

Cascaded measures
and translated

Cascaded measures to
different levels

Balanced categories

MFG - Performance Measures

33

Visual Management provide us with an overview

of the current results
Do we have a good or bad performance?
How are we performing in relation to our targets?
Can we easily identify the trend?
Goal Alignment Visual Management
Current Visual Management
KPI

JAN

FEB

MAR

APR

FTQ

90%

92%

98%

99%

MSA

95%

97%

98%

98%

LTIFR

0.21

0.54

0.02

Line
Performance

67%

75%

80%

82%

MFG - Performance Measures

34

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?

Colour Management:
Black - For writing
Green HIT Target
Red - MISSED Target
MFG - Performance Measures

Who is responsible to
update? (1 owner per chart)
35

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?

MFG - Performance Measures

36

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

MFG - Performance Measures

37

Agenda
Objectives
Introduction to Measures
Principles of Measures
Performance Measures Development and Management
Process
Key Learnings

MFG - Performance Measures

38

Measures should be defined based on 5 main

principles
Properly cascaded
at all levels

Balance between
Results and Practices

Balanced Categories

Appropriate No. of
Measure at each level

Balance between
Leading and Lagging

MFG - Performance Measures

Relevant
Meaningful
Actionable

39

Key Learnings

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.

MFG - Performance Measures

40

THANK YOU

MFG - Performance Measures

41