[…] of failure and have less probability of leading to transgressions.. Quantifying Financial Benefits from an Asset Performance Initiative KPIs are very popular, most say they are a must, but unfortunately many organizations do not adequately benefit from their use. KPIs exist as a means of positively affecting results by affecting individual and group behavior. For KPIs to be effective the results we are targeting must be in line with the corporate objectives; the targets selected have to be attainable and a communication strategy must be in place to create awareness of the KPI with those whose behavior we are attempting to influence. The six basic rules of KPI development: • There must be an owner. • You must establish an aggressive, meaningful, and attainable target. • Impact on the parent KPI needs to be clearly defined. • The measuring method needs to be identified and should be as automatic as possible. • An action plan must be defined and agreed upon in the event that the target is not met. • There needs to be a communication plan in place prior to launching the KPI. The plan needs to include a regular review of the KPI. KPIs are used to manage the process to ensure successful results. KPIs, such as return on investment, measure results of the process and in themselves cannot be managed. These are called lagging KPIs. The leading KPIs measure the process that will lead to Quantifying Financial Benefits from an Asset Performance Initiative 9 the results. These can and should be managed. The relationship between the leading and lagging KPIs can be clearly defined, as shown in the following graphs. 07 Using Key Performance Indicators | two Quantifying Financial Benefits from an Asset Performance Initiative As shown in the above graph, return on investment is impacted by the currently exchange, finished goods, work in progress, productivity, variable costs, and fixed costs. These, in turn, are impacted by lower order KPIs. Examples of possible KPIs for each grouping are listed in the boxes. Please note that the finished goods and work-inprogress levels are indirectly impacted by a reliability initiative and have a dotted line from productivity. As the organization develops more confidence in its ability to meet market demands through higher, more stable productivity levels, these can be reduced. Each of the groupings can be subdivided many times, as shown in the two following graphs. The impact of each lower-order KPIs on their parent KPI can be defined. One of the factors that impacts availability is maintenance related outages, and this is impacted by maintenance efficiency and maintenance effectiveness. The latter is impacted by staffing, program quality, and the proper use of technology. Further, children groupings can be defined. In some cases the leading KPI may affect more than one parent. Quantifying Financial Benefits from an Asset Performance Initiative 10 We should only define KPIs that impact the results we are trying to achieve and limit the number of KPIs to that which we can properly manage and communicate. A deluge of KPIs will only confuse people and reduce the overall effectiveness of the metrics. A progressive introduction of KPIs is always preferred. 08 Using Key Performance Indicators | two Unfortunately few organizations will publish detailed information concer ning their results as this could help their competitors. Nonetheless, working closely with these companies, we were able to quantify the benefits while ensuring anonymity through a normalization exercise. In turn, this provides an ideal model that can be scaled to fit your specific situation and organization. The following data does not include reduction in spares inventory, work in progress, or finished goods. In all cases we only used labor savings related to contractor and overtime reductions and did not consider the internal resource reduction savings as the latter is often limited by the […]