Iris Guide 1 - Kpis

IRIS International Railway Industry Standard

GUIDELINE 1 : 2011 KPIs

English

We would like to thank the following people for the excellent cooperation and contribution, without which this Guideline would not have been possible:

Technical Forum for Improvement representatives Marcus Schmid (Leader) VOITH TURBO Cristina Bianchi RINA Corine Branchet Bureau Veritas Jean-Christophe Coulaud Alstom Transport Angela de Heymer Bombardier Transportation Bernd Diekmann Siemens Mobility Denis Garrigues RATP Giuseppe Greco UNIFE Hans Jahn DQS Kay Jürgensen TÜV NORD Bernard Kaufmann UNIFE David Martinez de Miguel AENOR





IRIS Management Centre Robert Milner LRQA Mikael Nilsson Faiveley Elio Poletti IMQ Anne Pouyanné AFNOR Susanne Schaub SBB/CFF/FFS Oliver Stein Knorr-Bremse Ursula Tacke GHH-Valdunes Luca Tuci AnsaldoBreda Dominique Sauvion SNCF Hans Van Mulekom NEDTRAIN Klaus Wagner TÜV SÜD







Bernard Kaufmann IRIS General Manager Giuseppe Greco IRIS Senior Manager Nevena Petrova IRIS Manager

Guideline 1 : 2011 KPIs

The aim of this guideline is to provide guidance to all organizations during the implementation and maintenance of an IRIS Certified Business Management System (BMS) concerning the identification of the Key Performance Indicators (KPIs) required to comply with the IRIS requirements. 1 WHY KPIs? Key Performance Indicators (KPIs) help an organization to define and to measure progress toward organizational goals. Once an organization has analyzed its mission, identified all its stakeholders, and defined its goals, it needs a way to measure progress toward those goals. Key Performance Indicators are those measurements. In process oriented organizations, the goals are reached through the implementation of effective and efficient processes, therefore it is vital to make a regular performance appraisal for the processes and for all the aspects that can affect the efficiency of the business. The KPI, when properly developed, provide all staff with clear goals and objectives, coupled with an understanding of how they relate to the overall success of the organization. Published internally and continually referred to, they will also strengthen shared values and create common goals.

2 DEFINITION KEY: Only Key when it is of fundamental importance in gaining competitive advantage and is a make or break element in the success or failure of the organization. PERFORMANCE: Only relating to Performance when it can be clearly measured, quantified and influenced by the organization. INDICATOR: Only an Indicator if it provides leading information on future performance. Effectiveness and efficiency are also key parameters to be considered to identify the right KPIs: Effectiveness: The degree to which objectives are achieved and the extent to which targeted problems are solved. Efficiency: The comparison of what is actually produced or performed with what can be achieved with the same consumption of resources (money, time, labor, etc.). It is an important factor in determination of productivity. In contrast to efficiency, effectiveness is determined without reference to costs and, whereas effectiveness means „doing the right thing“, efficiency means „doing the thing right“. © 2011 UNIFE. All rights reserved.

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GUIDELINE 1 : 2011 - KPIs -

For a KPI of “Increase Sales“, there’s the need to consider whether to measure by units sold or by value of sales. Will returns be deducted from sales in the month of the sale or the month of the return? Will sales be recorded for the KPI at list price or at the actual sales price?

In the IRIS scheme, KPIs are meant to measure the performance of the Processes. The KPIs usually are long-term considerations and may differ depending on the type of organization.

Setting targets for each KPI is of fundamental importance. If one of the organization goals is “to be the employer of choice”, the associated KPI might measure the “employee fluctuation rate“. Once the KPI has been defined as “the number of voluntary resignations and terminations for performance, divided by the total number of employees at the beginning of the period“ and a way to measure it has been set up (by collecting the information in a human resource information system), the target has to be established.

The selected KPIs will need to:

“Reduce employee fluctuation by five percent per year“ is a clear target that everyone will understand and be able to take specific action to accomplish.

1. Reflect the organizational goals, 2. Be quantifiable (measurable), 3. Be key to the organization‘s success.

Be key to the organization‘s success

Reflect The Organizational Goals An organization that has as one of its goals “to be the most profitable organization in the Rail Industry“ will have Key Performance Indicators that measure profit. On the other hand, a manufacturer of Bearings, having one of its goals “to provide better customer service” will set the related KPI to measure the responsiveness performance of its Customer Service department.

In selecting KPIs, it’s critical to limit them to those factors that are essential to the organization reaching its goals. It is also important to keep the number of Key Performance Indicators small just to keep everyone‘s attention focused on achieving the same KPIs. That is not to say, for instance, that a organization will have only three or four KPIs in total. Rather there will be three or four Key Performance Indicators for the organization and all the units within it will have three, four, or five KPIs that support the overall organization goals and can be “rolled up“ into them.

Be quantifiable (measurable) For a KPI to be of any value, there must be a way to accurately define and measure it. “Be The Most Popular Organization“ won‘t work as a KPI because there is no way to measure the organization‘s popularity or compare it to others.

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If an organization‘s Key Performance Indicator is “Increased Customer Satisfaction“, that KPI will be focused differently in different departments: the manufacturing department may have a KPI of “Number of Units Rejected by Quality Inspection“, while the sales department has a KPI of “Minutes A Customer Is On Hold Before A Sales Representative Answers“. Success by the

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sales and manufacturing departments in meeting their respective departmental Key Performance Indicators will help the organization to meet its overall KPIs.

office‘s volume numbers are counted in one region, i.e. that none are skipped or double counted? How much, by percentage or value or units, do we want to increase sales volumes each month?

Example of a well defined KPI: • Title of KPI: Employee Turnover • Defined: The total of the number of employees who resign for whatever reason, plus the number of employees terminated for performance reasons, and that total divided by the number of employees at the beginning of the year. Employees lost due to Reductions in Force (RIF) will not be included in this calculation. • Measured: The human resource information system contains records of each employee. The separation section lists reason and date of separation for each employee. Monthly, the human resource department will query the database and provide department heads with Employee Turnover reports. The human resource department will post graphs of each report on the intranet. • Target: Reduce Employee Turnover by 5% per year. Example of a badly defined KPI: • Title of KPI: Increase Sales • Defined: Change in sales volume from month to month • Measured: Total of sales by region for all regions • Target: Increase each month What‘s missing? Does this measure increases in sales volume by value or units? If by value, does it measure list price or sales price? Are returns considered and if so do they appear as an adjustment to the KPI for the month of the sale or are they counted in the month the return happens? How do we make sure each sales

3 SMART KPIs A KPI can follow the SMART criteria. Specific: It has to be clear what the KPI exactly measures. There has to be one universally-accepted definition of the KPI to make sure the different users interpret it the same way and, as a result, come to the same and right conclusions which they can act on. Measurable: The KPI has to be measurable to define a standard, budget or norm, to make it possible to measure the actual value and to make the actual value comparable to the targeted value. Achievable: For every KPI a target value has to be defined. It is important for the acceptance of KPIs and Performance Management in general within the organization that this value is achievable. Nothing is more discouraging than striving for a goal that you will never reach. Relevant: The KPI provides more insight in the performance of the organization or processes in being consistent with its policy and business plan. A KPI is only relevant if the organization‘s processes can influence it. Time phased: It is important to express the targeted value of the KPI in time. Every KPI only has a meaning if one knows the time dimension in which it is realized. The realization and standardization of the KPI therefore has to be time phased. 4 IMPLEMENTING KPIs When an organization wants to define KPIs it has to assure that the indicators are unmistakably defined, objectives are in place and that the calculation can be

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GUIDELINE 1 : 2011 - KPIs -

done easily, preferably automatically. Additionally it is necessary that the organization identifies itself with the KPIs and is aware how to influence them. Not the quantity of KPIs but the quality decides (“twenty is plenty”). 5 MEASURING KPIs For measuring KPIs several prerequisites must be fulfilled: • Definition of calculation of KPI (e.g. (value X/value Y)*100; (actual value)- (planned value)); • Unit of measurement must be defined (e.g. percentage, Euro, quantities); • Adequate reporting interval must be fixed (e.g. monthly, quarterly); • Presentation form must be chosen (e.g. pie diagram, bar chart, spider diagram); • Target for the reporting period must be displayed (e.g. delivery performance to the customer 95%); • Data source must be chosen (e.g. table XYZ from the ERP-system); • Accuracy of the KPI data must be known; • Data collector must be nominated (e.g. Mr. X from the sales department, Ms. Y from procurement); • KPI owner must be named; • Trends of the KPI must be interpretable (e.g. sales increases due to a new sales representative or due to a sales campaign); • Guidance for taking actions must be in place (e.g. sales decrease is analyzed by meeting with sales representative) • All prerequisites must be documented in an agreed format (e.g. in a KPI profile) 6 HOW TO DEAL WITH IRIS KPIs 6.1 Mandatory IRIS KPIs • Customer on time delivery performance (IRIS clause

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5.6.2) • Non conformities raised by the customer throughout the entire Project Life Cycle (IRIS clause 5.6.2) • Tender management (IRIS clause 7.2.4) • Design and development (IRIS clause 7.3) • Purchasing Process (IRIS clause 7.4.1) • Project Management or new Product development (IRIS clause 7.7) • Project Management – Cost management (IRIS clause 7.7.4) 6.2 Recommended IRIS KPIs • Internal and supplier non conformities throughout the entire Project Life Cycle (IRIS clause 5.6.2) • Supplier on time delivery performance (IRIS clause 5.6.2) • Response time on non conformities raised by the customer (IRIS clause 5.6.2) • Quality Deficiency Costs (IRIS clause 5.6.2) • Review of requirements related to the Product (IRIS clause 7.2.2) • First Article Inspection (FAI) (IRIS clause 7.9) • Customer satisfaction (IRIS clause 8.2.1) • Analysis of data (IRIS clause 8.4) TABLE 1: KPI definition table KPI Description:

...

Process:

...

Objective of the process:

...

Process owner

...

Prediction of the KPI:

...

Unit of measure:

...

Target and reporting period:

...

Calculation of the KPI:

...

Accuracy of the KPI:

...

Data source:

...

Reporting interval:

...

Framework condition:

...

Influence on KPI:

...

Data collected by:

...

KPI reported to:

...

Actions:

...

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ANNEX 1: IRIS KPIs KPI or Process name

IRIS clause

Status

Definition examples

Target value

Process target

Reporting interval

Customer on time delivery performance

5.6.2

Mandatory

(sum deliveries on time) / (sum deliveries) x 100

X%

To be compliant with confirmed delivery dates

Monthly

Non conformities raised by the customer throughout the entire Project Life Cycle

5.6.2

Tender management

7.2.4

Design and development

7.3

Purchasing Process

7.4.1

Mandatory

X

Customer non conformity cost per month or Warranty cost by project or (Claimed parts) / (delivered parts) x 100 Mandatory Cost deviation to estimated budget, without customer caused change requests

X / Month or Z / project or Y%

To reduce variation and waste in supply chain

Monthly

X%

To meet customer requirements

Monthly or Project milestone

Mandatory

Number of design changes, without external caused changes or (sum of design changes after design freeze) / (sum of design drawing) x 100

Number of changes or X%

To be on time by keeping costs and quality criteria

Monthly or Quarterly

(Non conform purchased product deliveries) / (sum of received purchased product deliveries) x 100 or (Non conform purchased products) / (received purchased products) x 100 or Cost deviation to estimated purchase budget

X%

Mandatory

Reference to Annex

X To improve the supplier delivery quality

Monthly

X

or to improve the budget control

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KPI or Process name

IRIS clause

Status

Definition examples

Target value

Process target

Reporting interval

Project Management or new Product development

7.7

Mandatory

(Realized Milestone) / (Planed Milestone) x 100 or delivery time deviation concerning final customer acceptance

X%

To manage Project deliverables

Monthly or Project milestone

To manage Project budget

Monthly or Project milestone

number of days

Project Management – Cost management

7.7.4

Mandatory

Internal and supplier non conformities throughout the entire Project Life Cycle

5.6.2

Recommended

Supplier on time delivery performance

5.6.2

Recommended

(sum deliveries on time) / (sum deliveries) x 100

X%

Response time on non conformities raised by the customer

5.6.2

Recommended

Response date of non conformities – issue date of non conformities

X days or X hours

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(Estimated costs) / (final costs) x 100

or

Reference to Annex

X%

Internal and supplier Costs / Month To reduce rework costs + internal and or variation and supplier scrap costs Costs per waste in the category entire Project Life or Cycle Costs per supplier or Costs per project To ensure on time delivery of suppliers To improve customer support

Monthly or Project milestone

Monthly

Monthly

X

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KPI or Process name

IRIS clause

Status

Definition examples

Target value

Process target

Quality Deficiency Costs

5.6.2

Recommended

Internal rework costs + internal scrap costs

Review of requirements related to the Product

7.2.2

Recommended

Number of changes due to non properly identified requirements

Number of changes

To properly identify customer requirements

Monthly or Quarterly

First Article Inspetion

7.9

Recommended

(Sum of successfully performed FAIs) / (sum of performed FAIs) x 100

X%

To ensure a stable production start

Monthly or Quarterly

Customer satisfaction

8.2.1

Recommended

(Sum of customers included X% in customer satisfaction measurement) / (total sum of customers) X 100 or Correlation between customer perception correlation in and internally measured X% delivery performance

To monitor and review information relating to customer perception

Yearly

Analysis of data

8.4

Recommended

(amount of data analysed) / (amount of data collected) x 100 or (amount of data collected) / (amount of data requested) x 100

To determine, collect and analyse appropriate data to demonstrate the suitability and effectiveness of the QMS.

Yearly

Costs / Month To reduce or variation and Costs per waste in the category entire Project Life or Cycle Costs per supplier or Costs per project

X%

Reporting interval

Reference to Annex

Monthly or Project milestone

X

NOTE 1: The definitions given in Annex 1 (IRIS KPIs) are for examples only. The organization may choose a different definition for the mentioned KPIs, if preferred.

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ANNEX 2: KPI examples Customer on-time delivery performance

Design and Development

Purchasing Process

Process:

production and service provision

design and development

purchasing

Objective of the process:

to be compliant with confirmed delivery dates

to be on time by keeping costs and quality criteria

to improve the supplier delivery quality

Process owner

please enter process responsible here

please enter process responsible here

please enter process responsible here

Prediction of the KPI:

on-time delivery to customer

quality of drawings and bill of materials

amount of deliveries that have to be claimed at supplier

Unit of measure:

percentage (%)

percentage (%)

percentage (%)

please enter actual company target here

please enter actual company target here

please enter actual company target here

Calculation of the KPI:

(sum deliveries on time) / (sum deliveries) x 100

(sum of design changes after design freeze) / (sum of design drawing) x 100

(non conform purchased product deliveries) / (sum of received purchased product deliveries) x 100

Accuracy of the KPI:

please enter here the accuracy with which the KPI can be determined

please enter here the accuracy with which the KPI can be determined

please enter here the accuracy with which the KPI can be determined

ERP-system

ERP-System, manual records, PDMsystem

ERP-system; manual record

Reporting interval:

monthly

monthly or quarterly

monthly

Framework condition:

none

none

none

Influence on KPI:

delivery performance of suppliers, maintenance of equipment

contract clarification, qualification of staff, new technologies

new item, new supplier, product modification at supplier, uncertain purchasing information, other problems at supplier

Data collected by:

please enter here the person responsible to collect the data

please enter here the person responsible to collect the data

please enter here the person responsible to collect the data

please enter here to which part of the management the KPI is reported

please enter here to which part of the management the KPI is reported

please enter here to which part of the management the KPI is reported

KPI Description:

Target and reporting period:

Data source:

KPI reported to:

Actions:

root cause analysis (bottleneck) and action plan

meetings with supplier, strong incoming goods inspection

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Supplier on time delivery performance

First Article Inspection (FAI)

Purchasing

first article inspection (internal and external)

Objective of the process:

to ensure on time delivery of suppliers

To ensure a stable production start

Process owner

please enter process responsible here

please enter process responsible here

Prediction of the KPI:

statement of the compliance of suppler confirmed delivery dates

assessment of the achievement of first article inspections

Unit of measure:

percentage (%)

percentage (%)

Target and reporting period:

please enter process responsible here

please enter actual company target here

Calculation of the KPI:

(sum deliveries on time) / (sum deliveries) x 100

(sum of successfully performed FAIs) / (sum of performed FAIs) x 100

Accuracy of the KPI:

please enter here the accuracy with which the KPI can be determined

please enter here the accuracy with which the KPI can be determined

ERP-system; manual records

ERP-system; manual records

Reporting interval:

monthly

monthly or quarterly

Framework condition:

none

none

Influence on KPI:

new items, new supplier, product modifications at supplier, purchase of primary material

quality of contract review, qualification of staff; capability of measuring equipment

Data collected by:

please enter here the person responsible to collect the data

please enter here the person responsible to collect the data

please enter here to which part of the management the KPI is reported

please enter here to which part of the management the KPI is reported

KPI Description: Process:

Data source:

KPI reported to:

Actions:

meetings with suppliers, strong expediting of supplier

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