Column Lean Manufacturing Management

KPIs That Lead To 1st Quartile

Klaus M. Blache | November 15, 2018

By Dr. Klaus M. Blache, Univ. of Tennessee Reliability & Maintainability Center (RMC)

Getting to 1st, or top, quartile is a quest for many companies. The gains can be tremendous. Our studies show that going from 4th quartile to 1st quartile reduces maintenance cost/replacement asset value from an average of 13.3% to an average of 2.1%. To determine the financial impact, calculate what 1% of that savings is in your organization and do the math.

Moving toward the 1st quartile will
dramatically increase reliability, crush downtime, and reduce maintenance costs.

Also, most large companies have more than a hundred KPIs (key performance indicators). Yet, it’s really only possible to focus on the vital few that will change what’s most important. These KPIs must also support safety, people, quality, responsiveness (throughput), and cost (SPQRC). The KPIs discussed below cover all of the SPQRC items.

Reactive maintenance (emergency repair or unplanned work, expressed as a percentage of total maintenance hours) is the single metric that, when reduced, can have a positive impact on safety, throughput, and cost. Top quartile for North America averages 9% and the 4th quartile average is 64%.

Maintenance cost/replacement asset value is the amount of money spent each year maintaining assets, divided by the RAV of the assets being maintained, expressed as a percentage. At 2.1% (top quartile) it will take more than 46 years to spend maintenance money equivalent to replacing your production operation. At 13.3% (4th quartile) you will spend that same amount of money in 7.5 years.

Overall equipment effectiveness (OEE) is a measure of a single asset’s effectiveness. It was not intended to compare production lines or plants. It’s calculated by multiplying three asset factors—availability x performance compared to theoretical x quality of product or output—to start the continuous improvement on the single piece of equipment. It’s a good scalable metric when used properly.

Stores inventory turns is the value of stock (MRO spare parts) purchased over a set period of time divided by value of stock on hand. This is a good measure for stock levels. A value greater than 1 is typically considered good and a value exceeding 3 is a good value when critical spares are not included.

Inventory turnover of product produced is a ratio showing how many times a company has sold and replaced inventory during a given period. It is usually calculated as sales divided by average inventory. This metric is a good indicator of company health and performance within an industry sector. Average inventory turnover for the automotive sector is about 12.

Mean time between failure (MTBF)  measures reliability. Extending the time results in improved uptime and reduced cost. It’s the total uptime divided by the number of breakdowns.

Mean time to repair (MTTR) measures maintainability. Reducing this time results in improved uptime and reduced cost. It’s total downtime divided by number of breakdowns. Remember also that maintainability is a designed-in parameter.

Suggestions implemented per employee has been a proven indicator of employee engagement. I see significant plant-floor improvement at a level of three voluntary suggestions per employee. It’s your people-engagement metric.

It’s all related. Get to the top quartile in most of these metrics by implementing best practices and it will reflect similar results in your entire operation. EP

Based in Knoxville, Klaus M. Blache is director of the Reliability & Maintainability Center at the Univ. of Tennessee, and a research professor in the College of Engineering. Contact him at kblache@utk.edu.

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