EICC Working Hours Taskforce KPI Scorecard. May 2010. Overview. Objectives Potential KPI Cause and Effect Diagram KPI Impact Interaction Matrix KPI Reporting Guidelines Examples of Recommended Methodologies* KPI Development Progress Scorecard Summary.
Overview • Objectives • Potential KPI Cause and Effect Diagram • KPI Impact Interaction Matrix • KPI Reporting Guidelines • Examples of Recommended Methodologies* • KPI Development Progress Scorecard • Summary * The root causes included in this presentation and in the KPI guidelines are examples only and are not based on actual root cause analysis data or results. Each situation is unique and should be addressed accordingly with the Root Cause Analysis Tool provided as part of the Working Hours Task Force toolkit.
Objectives • Provide high-level understanding of the various Key Performance Indicators that may be of value when addressing possible root causes of excessive working hours. • Provide an understanding of the interactions between departments within an operation that may impact working hours performance. • Recommend review process for KPIs.
High-Value KPIs: Excessive Working Hours Cause and Effect Total cost trend Return Satisfaction rating Overtime pay Impact Training cost delta Productivity # of workers exceeding working hours limit Reporting # of workers without 1 day/wk off in 7 days Attrition rate Orders outside of lead time Material delivery / safety stock level Root Cause Resource planning accuracy
Three Examples of KPI Development Tool in Use The following examples are intended to illustrate use of a KPI Scorecard to track specific indicators of, or contributing factors influencing excessive working hours. • Identification of working hour overages or lack of rest days (includes both EICC and China OT legal requirements) • Potential excessive working hours created by material shortage • Potential excessive working hours created by life cycle volume inaccuracy
KPI Development Methodology – Example Working Hours Elements of KPI • Primary owner (for reporting metric) HR, Finance • Method – Trend Analysis • Management Influence – Sales, planning/forecasting, HR/workforce planning, operations, materials • Type of Indicator – Lagging • Potential Causes – Orders exceeding capacity, unexpected demand, lack of required workforce resources, material availability • Comments – Requires accurate weekly/monthly data reporting from time and attendance system Steps to take • Establish methodology to extract time & attendance data • Collect and report out working hour and rest day data on weekly basis • Analyze working hour (and rest day) data to determine whether it meets EICC and local legal requirements • Identify potential trends and root causes of work hour overages; implement plans to address root causes • Continue to track performance against EICC/local legal requirements and address overages Work hours and rest days meet EICC requirement, but fail to meet China OT legal requirement for Feb – Sept.
KPI Development Methodology – Example Material Availability Elements of KPI • Primary owner- Suppliers’ Material Management and Brands’ Purchasing • Method – Waterfall Chart, Trend Analysis • Mgmt Influence – Sub-tier suppliers, Planning • Type of Indicator – Leading • Potential Causes – Force Majeure, Cost Pressures, Incorrect or poor data inference. • Comments – Impact to working hours occurs when material is not available and then a catch up schedule is introduced to match revised availability. Steps to take • Establish % flexibility of production in contract • Establish material lead times • Establish % material to be held in buffer/safety stock • Establish material delivery plan • Track performance to plan • Measure results using number of units short of plan and time to recovery with and without over time • Determine course of action keeping in mind elimination of excessive working hours Material shortage begins to drive need for additional work hours
KPI Development Methodology – Example Life Cycle Volume Accuracy • Steps to take • Establish a trusting business relationship with clear and transparent communication between all parties • Plan to EICC working hours requirement • With the Code in mind, define terms & conditions for the Retail/Brand relationship and the Brand/Supplier relationship (upside flexibility, lead times, committed capacity etc) • Establish agreed upon reporting metrics (forecasting signals, production planning methods, shipment plans) • Ensure adequate resources are in place to meet demand (Supplier) • In an *Unusual or Emergency Situation, Supplier tracks any excessive working hours as a result (per worker, per week) • Set up formal review of excessive working hours KPI data (Brand and Supplier) • Supplier develops a recovery plan to meet EICC requirement for excessive working hours • *Definition of Unusual or Emergency Situation - Per EICC Working hours Guidelines: • Unpredictable events that require overtime in excess of legal or EICC limits. Such events cannot be planned for or foreseen. • Equipment breakdown, power failure or other emergency resulting in prolonged shutdown of a production line. • Unforeseen raw material or component shortages or quality issues that shut down production. Excessive overtime is then needed in both situations to recoup lost production time and meet customer commitments. Elements of KPI • Primary owner- Brands’ Sales and Marketing & Communications Teams, Retailers, End Customer, Supplier’s Production and Shipping Teams • Method – Market Research, Trend Analysis (historic, present and future), Communication of Demand (Brand) Production & Shipping (Supplier) • Management Influence – Brand’s Planning Teams, Retail Forecasting Teams, Supplier’s Production, HR and Purchasing Teams • Type of Indicator – Leading • Potential Causes – Fluctuating Retail Demand (Retail / End Customer), Overly Aggressive Forecasting (Brand), Inadequate Resource Planning (Supplier), *Unusual or Emergency Situations • Comments – Requires monthly reporting of clearly defined and agreed upon metrics
Working Hours KPIs Over WH Limit One Rest Day LCV Accuracy Material Availability TBD (Based on root cause analysis) Evaluation Process Established Evaluation Process Established Evaluation Process Established Evaluation Process Established Evaluation Process Established Data Collected Data Collected Data Collected Data Collected Data Collected Results Analyzed Results Analyzed Results Analyzed Results Analyzed Results Analyzed Improvements Identified Improvements Identified Improvements Identified Improvements Identified Improvements Identified Supplier Production Management Supplier Production Management Customer Demand Planning, Supplier Production Planning Procurement, Sub-tier Supplier Performance TBD Sample Scorecard for Implementation of KPIs Indicators: Implement-ation Steps Responsible for reporting
How Do I Start? • Be proactive! • Engage senior management • Identify the root causes of excessive working hours • Select KPIs and gather data • Establish a regular, formal KPI review process to create accountability across the organization, monitor progress and take corrective action • Ensure that all departments and organizations which contribute to the conditions for excessive overtime take ownership for reducing working hours • Share your challenges and progress with your customers • Collaborate with customers to address brand-related factors The most important thing is to get started! Establish your baseline, and track your progress.