Mar 20 2024  |  Insights  |  Colin Prout

Navigating the KPI Challenge in Digital Lean Production System Implementation

The transition towards a Digital Lean Production System often presents a pivotal challenge: defining the Key Performance Indicators (KPIs) and their data collection points within an organisation. Despite organisations believing they’ve successfully implemented solutions with accurately defined KPIs, a deeper investigation frequently reveals gaps or inconsistencies hidden by their reliance on manual processes, such as transferring data between spreadsheets and aggregating averages for presentations.

Digitising highlights the complexity of aligning KPIs across various departments – from Manufacturing Engineering to Finance – with operational metrics, ensuring a cohesive and aligned measurement system that supports the digital lean journey. The ultimate goal is achieving reliable figures and effortless report generation, but the path is often fraught with inaccuracies needing resolution.

Understanding Tiers in Manufacturing Sites

A typical manufacturing site can be divided into four hierarchical tiers, starting from the ground up. Tier 1, the foundational level, focuses on immediate operational metrics like downtime and production rates, which are vital for aligning with strategic objectives and continuous improvement. As we move up to Tiers 2 and 3, KPIs offer more granular insights into manufacturing effectiveness and departmental alignment with long-term goals. The apex, Tier 4, encompasses strategic KPIs that integrate insights from across the organisation, reflecting overarching goals.

The ultimate goal is achieving reliable figures and effortless report generation, but the path is often fraught with inaccuracies needing resolution.


Figure 1 – An example best practice Tiered Hierarchy showing two Areas within a typical manufacturing site.

KPI Classification and Roll-Up

The distinction between KPIs directly entered at their respective tiers versus those aggregated from lower levels is crucial for maintaining data integrity and relevance. For example, while the number of defective parts might be tracked from Tier 1 upwards, their financial impact could only become relevant at Tier 3, requiring a nuanced approach to data entry and reporting.

Enriching KPIs with Targets and Reason Codes

Beyond merely tracking KPIs, their real value emerges when KPIs are augmented with targets and reason codes, offering a rich analysis of deviations from expected performance. This layered approach, facilitated by digital systems, allows for detailed Pareto Analysis, enhancing continuous improvement efforts.

Incorporating Non-Production KPIs

It’s also essential to integrate non-production metrics, such as those assessing departmental efficiency or adherence to service-level agreements. These KPIs, while not always contributing directly to the broader organisational metrics, play a crucial role in optimising internal processes and operations.

Beyond merely tracking KPIs, the real value emerges when KPIs are augmented with targets and reason codes, offering a rich analysis of deviations from expected performance.

Sources of Help

If you work in a large, Multi-Site and Multi-region organisation, there should be a Continuous Improvement or Transformation Lead tasked with ensuring KPIs throughout the organisation that are defined and aligned. Your Site Manager can provide critical input and a starting point as he will be reporting weekly and monthly performance.

If you don’t have such support our sister company Iter Consulting can help you define KPIs and gain their agreement.

Concluding Thoughts

While this discussion highlights the intricacies of managing KPIs within a digital lean production system, it also underscores the importance of action management in addressing any deviations from targets—a topic deserving its own detailed exploration.

By understanding the tiered structure and the strategic approach to KPI management, organisations can more effectively navigate the complexities of digital transformation in lean production, ensuring that their metrics drive meaningful, continuous improvement.

If you are implementing a Tiered Digital Daily Management solution, ensure you pick a vendor that can support you throughout the journey. We have supported many clients through this process and have worked with both exemplars like Toyota and smaller single-site manufacturers. To find out how we can help you please contact colin.prout@iterdigital.co.uk or book a demo by clicking here.

About the Author

Colin Prout

Colin focuses on the transformation and optimisation of manufacturing and supply chain operations, with a particular emphasis on LEAN. Colin has extensive experience in Agile Software Development and Programme Managing complex IT-based Business Transformations.