Industrial Glossary

A KPI (Key Performance Indicator), or Key Performance Indicator, is a quantified, measurable metric for evaluating the effectiveness and success of an organization, process, project or employee in relation to a given strategic objective.

In-depth definition : KPIs are the essential dashboards that help companies understand where they stand in relation to the market.’Operational Excellence target. They provide clear, objective signals for decision-making, particularly in the context of the’Continuous Improvement (KAIZEN). In industry, KPIs are collected in real time by systems MES (Manufacturing Execution System) and ERP (Enterprise Resource Planning), often using raw data from the’IoT (Internet of Things). They must be SMART (Specific, Measurable, Achievable, Realistic, Temporally defined).

KPI categories in Industrial Performance

For the Industrial Engineering, KPIs are classified into categories that reflect the three axes of the Industrial Performance :

A. Efficiency and Capacity KPIs (Speed/Delivery)

These indicators assess the ability to produce quickly and reliably:

• Taux de Rendement Synthétique (TRS) : This is the most comprehensive KPI in production. It multiplies the Availability (actual operating time vs. planned time, affected by machine downtime), the Performance (actual vs. rated speed), and the Quality (compliant parts vs. produced parts). Real-time monitoring reveals Bottlenecks and the impact of Predictive Maintenance.
• Cycle time : The time needed to manufacture a single part.
• Crossing time (Lead Time) : Total time from order to delivery. Crucial for Pull System.
• Service rate : Percentage of orders delivered on time.

B. Quality KPIs

These indicators assess product compliance with Manufacturing file and Technical specifications (CCT) :

• Scrap rate : Percentage of products thrown away.
• Non-compliance rate : Percentage of products requiring touch-up.
• First Time Quality Rate (First Time Right - FTR) : Percentage of products that pass through the process without defect. This KPI is directly impacted by the use of anti-error methods (Poka-Yoke) and control technologies (Machine Vision).

C. Cost KPI (Profitability)

These indicators assess the financial efficiency of production:

• Cost per unit : Total cost to manufacture a single part.
• Resource utilization rate : Consumption of energy, raw materials or labor per unit of output (key to eliminating wastage or waste) Muda).
• Inventory levels (and turnover) : Measures inventory management efficiency.

KPI and Digital Transformation (Industry 4.0)

L’Industry 4.0 has revolutionized the way KPIs are used:

• Real-time collection : Technologies such as’IoT and the MY provide continuous data, enabling KPIs to be displayed and updated instantly on the dashboard. Visual Management of the workshop, facilitating rapid decision-making and reaction.
• Predictive Analysis : L’Artificial Intelligence (AI) and the Machine Learning can not only calculate past KPIs, but also predict future KPIs (e.g. TRS next week depending on the current state of the machines), supporting planning.
• Transversality : KPIs are now linked across functions. For example, a machine's quality KPI is directly linked to the customer satisfaction KPI and the profit margin financial KPI.

The role of KPIs in Participative Management

Too many KPIs create confusion, and poorly chosen indicators lead to scattered improvement efforts. The operational excellence consultant tackles this problem to make KPIs the driving force behind collective involvement:

• Selection of strategic and motivating KPIs : Co-construct with teams the 5 to 7 indicators that have the greatest impact. These Key KPIs objectives that are shared and understandable by all, reinforcing the transparency and the’commitment employees in the company's strategy.
• Measurement reliability and ownership : Ensure the accuracy of collection systems (especially the interface between MES/ERP). By guaranteeing data reliability, the company builds the trust teams towards indicators. KPIs based on bad data (“Garbage In, Garbage Out“undermine motivation and participative management.
• Anchoring PDCA through Collective Auditing : KPIs serve as verification points (Check) in the PDCA (Plan-Do-Check-Act). They provide objective proof of the impact of our initiatives. lean six sigma by the teams. Relying on KPIs to validate results, a Participative Management encourages’autonomy and the responsibility employees in continuous improvement.

In conclusion, the KPI are the beacons that guide the company towards its goal. They transform raw data into a common performance language, essential for steering the organization's efficiency.