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Key Performance Indicators
Version 1.0.0 © Marco Torchiano, 2018
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KPI
Request
for a
service
Output
(products and
services)
Organization 1
Organization 2
Organization 3
Activity 1
Activity 2
Activity 3
Activity 4
§ Process view w Involves one or more hierarchical nodes w Financial and non financial indicators w Process as a chain of services
SMART KPI § Specific purpose for the business, § Measurable § Achievable § Relevant § Timely
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KPI
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w Ex. Average delay to satisfy order w Ex. Average productivity of resource
Request
for a
service
Output
(products and
services)
Organization 1
Organization 2
Organization 3
Activity 1 Activity 2
Activity 3
Activity 4 Service KPI
Quality KPI
Efficiency KPI
KPI General framework
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General KPIs – examples
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General KPIs Hotel reservation
Lift maintenance
Product sale supermarket
Book sale on web
Building license (e.gov)
Input volumes # reservation requests, modify, delete
#urgent requests, #normal requests
#sales (person passing at register)
# orders #licences requested
Output volumes
#reserved rooms
#services completed
#invoices #products sold
# shippings # books sold
#licences issued
Human resources
#full time, part time employees
#personnel for maintenance (technical)
#personnel (at cash register, security)
#personnel for sales and distribution
#employees
Material resources
Call center, reservation system, workstations, supplies
Reservation and dispatch system, tools
Sales building, storage building, products
CRM, call center, web site, storage building
Supporting IS
Inventory #rooms -- #products on shelves #books --
Other resources -- -- -- -- Laws
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Efficiency KPIs § Cost per unit
w Total cost / I/O volume § Productivity
w Volume / Resource § Utilization
w Used resource / Available resource
Volumes and Resources refer to general KPI à indirect measures
KPIGeneral
Service
Quality
Efficiency
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Efficiency KPI
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Unit cost Productivity Utilization
Input Cost per unit of input -- --
Output Cost per unit of output
Human resources -- Output/ #
employees Used / Available
Non human resources -- Output/ resource
(ex # machines) Used capacity / available capacity
Inventory -- Sales/ stock Load factor
Time -- Time to produce/output
Time to service/ total time
Information Amount information/ output -- Amount info / total
amount information
Efficiency KPI
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Unit cost Productivity Utilization
Input Cost per unit of input -- --
Output Cost per unit of output
Human resources -- Output/ #
employees Used / Available
Non human resources -- Output/ resource
(ex # machines) Used capacity / available capacity
Inventory -- Sales/ stock Load factor
Time -- Time to produce/output
Time to service/ total time
Information Amount information/ output -- Amount info / total
amount information
Design and Sw Industries
Depends on industry
Inventory turnover
Immaterial sales e.g. plane seats
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Exercise § List efficiency KPIs for the following
processes w Hotel reservation w Product sale supermarket
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Hotel Reservation Unit cost Productivity Utilization
Input/output -- --
Human resources --
Non human resources --
Inventory --
Time --
Information --
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Hotel Reservation Unit cost Productivity Utilization
Input/output
Total cost / # reservation reqs Total cost / # reserved rooms
-- --
Human resources --
#reservation reqs/ #employees #reserved rooms/ #employees
Time servicing/shift duration
Non human resources -- #reservation reqs /
#workstations #hours worked(call center)/24hrs
Inventory --
Time -- Distribution of requests per hours
Information --
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Quality KPIs § Conformity
w With defined service/product description w Non conform items/total # items w Items
– Input requests (from customer) – Intermediate output – Final output (defects, complaints from customer)
§ Reliability w Probability that product /system satisfies its function after
time T w MTTF – mean time to failure w MTTR – mean time to repair w MTBF – mean time between failures (= MTTF + MTTR)
§ Customer satisfaction w Satisfaction through interviews/questionnaires
– Qualitative scales (very high, high ..)
KPIGeneral
Service
Quality
Efficiency
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Quality KPIs
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Input Internal Output
Conformity Non conforming requests
Number discarded Reject ratio Rework cost/total costs
Complaints Non conformity to to requests, contract, or expectations
Reliability -- MTTF MTBF MTTR
MTTF MTBF MTTR
Satisfaction -- --
Satisfied customers ratio Evaluation of product/service
Quality KPIs
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Input Internal Output
Conformity Non conforming requests
Number discarded Reject ratio Rework cost/total costs
Complaints Non conformity to to requests, contract, or expectations
Reliability -- MTTF MTBF MTTR
MTTF MTBF MTTR
Satisfaction -- --
Satisfied customers ratio Evaluation of product/service
Depends on industry
Judgment collected through polls
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Exercise § Define quality KPI for
w Hotel reservation process
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Quality KPIs
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Hotel Reservation
Input Internal Output
Conformity
Reliability --
Satisfaction -- --
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Quality KPIs
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Hotel Reservation
Input Internal Output
Conformity #reservations with problem/ #reserved rooms
#cancelled reservations/ #reserved rooms
Complaints from customers
Reliability -- #lost reservations/ #reserved rooms
Satisfaction -- -- Customers’ opinion
Service KPIs § Response time (supplier pov),
Lead time (customer pov) w Time to satisfy order, from reception to delivery of good/service
– To be checked in peak periods
§ Timeliness w delay = actual lead time - nominal lead time w Average delay w # delayed orders
§ Perfect orders w On time and within specifications
§ Flexibility towards customer w # modified orders/ total # orders w value modified orders/ total value of orders
– It is NOT internal flexibility = how internal resources can respond to changes in mix/number of orders
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KPIGeneral
Service
Quality
Efficiency
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Service KPIs
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Customer Provider
Time Lead time Response time
Timeliness Timeliness On-Time-Ratio
--
Perfect orders Perfect Order Ratio --
Flexibility Flexibility towards customers --
Exercise § Define service KPI for
w Hotel reservation process
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Service KPIs
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Hotel Reservation Customer Provider
Time
Timeliness --
Perfect orders --
Flexibility --
Service KPIs
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Hotel Reservation Customer Provider
Time
Lead time = t end call – t response
Response time = t end call – t operator answer
Timeliness Timeliness = # reservation
completed in time / # reservation
--
Perfect orders POR = # perfect reservation / # reservation --
Flexibility FtC = # modified reservation / # reservation --
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Processes and stakeholders § Process has several stakeholders
w Operator w Manager w Customer
§ Process (and consequently KPIs) should be designed by considering all stakeholders w Example cost
– Cost for operator: work fatigue – Cost for manager: financial cost – Cost for customer: price tag + cost for finding ordering
and obtaining the product
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KPIs and stakeholders Cost Quality Service
Operator • T non value
activity / T total • T occupied / T total • T info access
• Conformance and internal reliability (System error rate)
• Operator satisfaction
• System response time by Operator process
Manager • Unit cost • Resource
Productivity • Resource saturation • Time saturation
• Conformance (input & output quality) • Internal reliability (MTBF, MTTR) • Customer satisfaction
Customer • Price / Supplier cost • Time and cost to
get product or service
• Conformance to request
• Product/service reliability
• Satisfaction
• Response time, lead time
• Timeliness • Perfect orders • Flexibility
