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FAQ : How can I drive the change to JIT, Lean & Kanban with new performance measures?

What performance measures or key performance indicators are needed to facilitate and encourage the change from a traditional work order "push" to kanban "pull" systems, called Just in Time (JIT) or Lean Manufacturing is a very good question but also a very big question. The answer depends to some extent on the nature of the business, the way kanban has been implemented and the current performance measures.

Kanbans do not have any forward visibility so that a measure of the % of overloaded work centres (measured by either capacity requirements planning on an MRPII/ERP system or through Sales and Operations Planning using Rough Cut Capacity Planning) is a necessary performance measure for successful kanban operation. Well planned raw material supply is another necessary prerequisite for kanban so a performance measures should apply to suppliers whether parts are supplied using kanban signals or purchase orders. There should also be performance measures for on time in full delivery, increasing demonstrated capacity and cost of quality.

Lead time reduction is a high level performance measure and should be a company objective with targets and milestones. Lead time reduction is driven by a number of performance measures, many based on the concept of velocity. The time it takes between a kanban signal and the receipt of a part or the interval of time between a part arriving in the factory and leaving in the product are measures of velocity. As throughput rises on a product the number of kanban cards or tokens in the loop may have to be increased to maintain the velocity within limits. As production falls cards need to be taken out of the kanban loop. Velocity is therefore also an importance kanban maintenance measure.

The biggest sin in a kanban environment is the lack of parts when needed. The number of times a process is halted through lack of parts should be monitored - often called holes or rack-outs.

In a card based kanban system there needs to be a way of monitoring lost cards.

To encourage the cultural change, the % of parts controlled by kanban should be measured with a target and mile stone %ages and dates. Another useful measure is the % of parts stored at the point of use. Cross training and flexibility is an important performance measure (e.g. number of jobs that can be performed by the team compared to the total possible) as operators must be able to move to the point of need in a kanban system.

Having decided the relevant performance measures for the company, each performance measure should have a definition, a process owner, a method of collection, feedback and corrective action authorities clearly defined.

I hope these general ideas help but you should remember that the hard part is not new performance measures but stopping people using such old performance measures as output measured in cash terms and equipment utilisation both of which will inhibit change to a pull method of operation.

Jargon Warning - If you are not familiar with any of the terms used above, you can look them up in the free Jargon Buster on this site or, for more details, purchase the book "Business Excellence". Business Excellence is available in e-book format in addition to the paperback and is a component of the ERP Class "A" toolkit which you can also purchase and download from this site. Click here for more details.