Page 3: Setting and monitoring continuous improvement goals
Businesses seek to 'measure what is measurable'. These measures are usually set out in what are referred to as Key Performance Indicators (KPIs). In order to check on the success of continuous improvement, it is important to have a number of measures in place. In this way, the company can see where improvements have been made. In order to check on the success of continuous improvement, it is important to have a number of measures in place.
The measures that Leyland Trucks uses are clustered into a number of themes these are areas of business results that are similar. For example, one theme is Health and Safety. Useful measures under this theme are the number of accidents at work, and illness-related issues.
The main themes used are:
- on-time performance (meeting deadlines)
- productivity (how much is produced from given resources in a certain time period)
- quality (for example, the numbers of defects ideally zero)
- financial (for example, costs)
- inventory (the quantity of stock held)
- health and safety (reportable accidents, minor accidents)
- continuous improvement (Six Sigmasee below).
One or more KPIs are used to measure each of these themes. For example, the measure of productivity calculates the number of labour hours required to manufacture each truck (known as 'truck hours'). All of this information is set out on a chart, which is monitored each week. In the chart, you can see examples of productivity-related KPIs for a week at the end of 2006.
In the first measure of this fictional example, the goal for truck hours for 2006 is 52. For the year to date, results are above the annual target. In the second, you can see that in 2005 each employee produced an average of 14.9 trucks per week. The goal for 2006 was to raise this to 15.6. For the year to date, the average truck production numbers are on target.
An important KPI for continuous improvement is Six Sigma. This is a measure of quality that strives for near-perfection. To achieve Six Sigma, a process must produce no more than 3.4 defects per million opportunities. Six Sigma uses statistical tools and data as a base for analysis. It can be used to improve existing processes or develop new ones. It involves the systematic identification of defects and deficiencies within any product, system or process, with a view to eliminating them. A defect is anything that is outside customers' expectations. With its disciplined and logical approach, Six Sigma enables decision-takers in Leyland Trucks to improve their understanding of business and operational processes. This results in major cost savings and the development of best practices.
Leyland Trucks sets targets to create a vision for staff to work towards. In other words, it gives a clear picture of what can be achieved through high performance. In 2001, the Managing Director (MD) of Leyland set a visionary target for quality in the company based on a Quality Index. Quality relates to such areas as the number of breakdowns within 90 days and mechanical defects.
Leyland Trucks sets targets to create a vision for staff to work towards. In 2001 the value of this index was running at 13.2. In order to drive a reduction in these breakdowns and defects, the MD set the visionary target of 5.0. Leyland has achieved this target. Progress is benchmarked across PACCAR's nine manufacturing plants. Leyland is well ahead of its 'sister' plants.