KPIs as a Strategic Change in the Food Industry
Many organizations are using Kaizen, Lean Manufacturing, Total Quality Management, Six Sigma and Continuous Improvement to improve their processes, drive productivity and maintain a competitive edge in today’s uncertain and complex business world.
I know that each practice uses Key Performance Indicators (KPIs) to assess, analyze and track their manufacturing processes to drive productivity by using common Key Performance Indicators for production line monitoring.
I believe that using KPIs will be helpful to evaluate production output, efficiency and quality in real-time.
When I visit food manufacturers, I see that some of them don’t use KPIs monitoring. This situation creates a lot of difficulties to evaluate the performance of the organization. It is clear that they are missing the results that help to decrease costs, increase efficiency and output, decrease waste, increase quality, people’s performance, optimize number of staff, operational excellence and organizational agility.
It is clear that we have to eliminate inefficiencies in the manufacturing processes and value chains by using KPIs.
1- The count of Good or Bad Products. This shows the performance of the employee and the related persons.
2- Reject Ratio. This is important to lower the scrap, increase the profitability and quality.
3- Rate. The performance of an operator, the quality of the product, the speed of the machine and the process; all are related to the cost, profit and quality. Therefore, operating speed has to remain constant to produce at a certain rate.
4- Performance Target. Target values must be defined for output, rate and quality. This is important to motivate employees to meet specific performance targets.
5- Takt Time. This shows the amount of time or cycle time fort he completion a specific operation. It is helpful to see the constraints or bottlenecks within a process of manufacturing operations.
6- Overall Equipment Effectiveness (OEE). This is an indicator of resource utilization. It shows the effectiveness in utilization of the machinery and available personnel.
7- Downtime. This is one of the best KPI metrics to track. It is a crucial parameter to reduce downtime in manufacturing operations to increase productivity, decrease costs, increase quality and employee performance.
Visual Management in KPIs
Real-time information is required to drive the productivity and perform a truly effective visual management to achieve a high performance manufacturing organization in the agrifood manufacturing industry. Therefore, many companies are using new technologies to monitor their production operations to drive productivity and improvements in costs, wastes, quality, people’s performance and profitability.
I know that if a company effectively monitors production operations and take right information, they can increase profitability and drive productivity with 10-15 percent faster completion time. This will create low cost and high profitability.
Specific Factors Affecting KPIs and Productivity
1. The capability of real time information capturing and data collection.
2. Working with the right skills and regular training.
3. Quality of the machines and equipment.
4. Input materials.
6. Floor area or space.
7. Power or energy.
9. Movement of man and materials.
10. Production plan and forecast
11. Measuring system for KPIs.
12. Right and valid data.
13. Leadership support.
Lean Practices in the Food Manufacturers
On the other side, when I visit the food companies, I ask two questions. First one is, “ Do you apply Lean practices and monitor your productivity?” A few of them, they apply and monitor.
The second question is, “Do you have satisfaction with their impact?” A few of them were happy with the impact.
According to my intensive experience in the infant food, bottled water, agriculture, artisan chocolate and pharmaceutical manufacturing operations, factory start up, supply chain management, quality, R&D, microbiology, regulatory compliance and people development, business development and innovation management, food companies have to use KPIs and Lean practices to create a competitive advantage.
I know that applying Lean practices to the food manufacturing industry is not easy. We have to consider a lot of parameters such as forecast, lead times, actual demand, inventory, reworks, procurement, transportation, quality, growing and maturing cycles, shelf life, warehousing and shipment, number of staff, processing and actual demand etc. All of these add complexity to an already complex business that have large batch processes.
Taking decisions on the table and saying Lean will create great productivity and financial impact is very easy.
I know that there is nothing wrong with Lean and productivity monitoring. The most important factor is to effectively manage Lean practice and engage the workforce.
Obstacles in Terms of Adopting Lean Manufacturing Methods
1. Weak leadership and failure of management.
2. Lack of a clear vision.
3. Lack of patience and follow through.
4. Failure to engage and involve employees.
5. Think of it as a source of cost.
6. Lean Transformations
When I look at the success rate of Lean transformations that are managed by expert Lean practitioners, it is smaller than 50%. The main reason is that many companies are back when they don’t see quantifiable improvements in financial terms in the early-to mid-stages of the Lean transformation.
I see that many Lean practitioners have very shallow manufacturing experience, know-how and skills. They may have mastered the necessary Lean “book learning”. Therefore, their Lean practices don’t have meaningful impact.
I have to say that effective Lean management requires excellent experience, know-how and skills in manufacturing operations to solve the issues to achieve high productivity, high quality and low cost. Another point is the high pressures over the leaders. Because their performance metrics are short- and/or medium-term and they don’t wait to see the impact of the Lean practices that can create the long-term impact as ROIs.
I know that Lean management is not a mystery and it can be successfully managed by well skilled and motivated people in the organizations. Starting with the eliminating the wastes and increasing the revenue can be a starting point and continuously complementing and supplementing the existing practice will be beneficial to the supply chain performance improvement and innovation.
Increasing Efficiency and effectiveness through Lean
Lean is a primary manufacturing improvement technique to improve processes, quality, productivity, delivery time and costs by monitoring KPIs. The main objective is to increase efficiency and effectiveness of the operations to achieve a financial impact as a result.
The most crucial factor in Lean transformation is the capability of the leadership and also experience, knowledge and skills of the people in the organization.
Using new technologies is a crucial factor to achieve high productivity and mass production. We are entering into the 4th industrial revolution and cyber-physical systems age within the next 10 years. In today’s conditions, companies see labor, quality, and development time as the main improvement areas. In future, these improvements are expected to be driven by digitization of knowledge work, advanced analytics, and touch operation/interfaces in the manufacturing industry. All of these developments will create great competitive advantages to achieve excellence in Lean practices, labour performance, product quality, delivery time, ROI, flexibility and mass production. The revenues are expected to increase by 23 percent and productivity by 26 percent, according to the McKinsey Industry 4.0 Global Expert Survey 2015. I believe that Industry 4.0 will change the manufacturing process and resource allocation of small to medium-sized manufacturers significantly and they have to take necessary adaptability actions on time.
Applying Lean practices and monitoring KPIs are helpful to identify and prioritize optimization opportunities around the value drivers in the manufacturing operations and/or supply chain management. These value drivers are resource/process, asset utilization, quality, supply/demand match and time to market.
1. Work with the great leadership and the right skills. Invest on the ability and skills of your staff and hunt for talented people.
2. Use new technologies to monitor real-time KPIs.
3. Perform Lean transformation by using real-time KPIs. This must be a systematic and continuous process. Improve product quality, cost and timeliness.
4. Benchmark productivity and created value with your competitors.
5. Make a competitive intelligence and perform a strategic marketing and innovation policy by regarding short and long-term customer needs, the future of the sector, new technologies, new products, and new services in the domestic and global markets.
6. Of course, the result will be dependent on the capability of the leadership and overall innovation performance of the manufacturing organization in the food industry. These outcomes may be;
1. Increase productivity up to 30%
2. Reduce work-in-process (WIP) inventory up to 50 - 90%
3. Reduce space requirements up to 10 - 40%
4. Improve quality up to 40 - 80%
5. Reduce lead time up to 50 - 90%
6. Increase gross margins up to 30%
7. Increase effective manufacturing capacity up to 30%
8. Thank you for sharing your experience and insights.