Top Tips for Developing Leading Indicators for Plant Managers

When you come back to work after one or more out of office days, how do you know whether you’re going to have an easy day or a hard day?

For many, the first indicator is the state of their inbox. If you have dozens (or more) unread messages, many marked urgent, you may feel an immediate increase in blood pressure. If you only have a few, you may find yourself breathing a sigh of relief.

Knowing that an overflowing inbox means a crazy day, you might even check your email before you go back to work so you aren’t unknowingly walking into a disaster.

In this example, the number of unread emails in your inbox acts as a leading indicator of how busy your day is likely to be. Similarly, leading indicators can provide critical information to plant managers responsible for keeping a pulse on plant health, allowing them to take action before problems occur.

The following are top tips for plant managers to develop leading indicators, including examples of metrics that can provide key insight into systems that need checking.

Leading vs. Lagging Indicators

While most organizations already track lagging indicators, a lot of confusion exists around leading indicators. To be clear, here are definitions of each:

  • Lagging indicators: Lagging metrics or indicators are aimed at the results you’re trying to achieve. Lagging indicators are often the fires plant managers must put out, such as customer complaints or defect rates.
  • Leading indicators: Leading metrics look at inputs that signal potential changes in lagging metrics, or areas where you might see problems in the future.

You don’t have to look far to find examples of leading indicators. Some common examples include:

Expedited shipping: When a company is behind requiring expedited shipping to meet customer requirements, corners can get cut and problems may occur resulting in customer complaints.

Missed Preventive Maintenance: When maintenance checks or requirements are skipped repeatedly this may signal problems with equipment that is no longer in the condition the standards require.

Developing Leading Indicators

Plant managers should coordinate with the executive or leadership team to develop leading indicators, drawing on information from areas such as enterprise resource planning (ERP), quality management system (QMS) and/or production system data.

What does the overall process look like?

  1. Begin with the end in mind: Start with a specific strategic goal, such as reducing customer complaints or warranty costs.
  2. Determine how to get there: Determine tactics to achieve that goal. One high value, low cost strategy is Layered Process Audits (LPAs). LPAs are high-frequency audits that verify process inputs to identify variation that could cause defects.
  3. Measure that systems are working: Finally, measure how well your tactics and systems are working.

Examples of Leading Indicators

It’s important to pay attention to indicators of how well systems are working, as well as how the plant as a whole is doing. The first category is important because systems such as LPAs and corrective actions are themselves leading indicators of problems in plant performance. Leading indicators of how systems are working include:

  • Shift to shift variation in LPA findings
  • High number of findings related to one part number or workstation
  • Findings related to inspection procedures

Plant leading indicators include items such as:

  • Total number of nonconformance findings on LPAs
  • Clusters of findings in certain areas
  • Number of repeat findings

Other leading indicators our team at The Luminous Group has used include:

  • Amount of internal scrap: If you make it, you will eventually ship it.
  • Amount of expedited shipping: If the plant is rushing to fill orders, mistakes are more likely to occur.
  • Employee turnover rates: New employees may not be fully trained or experienced in doing their jobs.

Leading metrics (indicators) are not always causative or even directly tied to changes in a lagging indicator. Instead, leading indicators point to areas where problems could be happening and should receive immediate attention from plant management.

Leading indicators are unique to each organization. It’s important to take the time to look at historical data and begin tracking internal metrics to identify leading indicators tailor-made to your needs. Once you’ve identified your leading indicators, you will transform from fighting fires to preventing them from occurring in the first place.


Making Problems Stay Away

In our work, we are often challenged with solving problems. Doing a very effective job in this area depends on three factors:

  • Identifying and addressing the root cause
  • Using that understanding to prevent the problem from surfacing again
  • Working with a leadership team that supports our work and allows us to help form a big picture understanding of problems and their underlying causes

Over the summer, an electronics component manufacturer we had been working with to help transition to the new ISO 9001 Quality Standard, came to us for help. They wanted a better approach to solving plant floor problems so that they could not reoccur.

We knew that they were in a mode of operation that many companies face:  lack of clear standards, new employees (many fresh out of school), some aging equipment, and many processes dependent upon proper human actions. These conditions don’t change overnight, but they were under pressure from a key customer to improve results quickly!

Working with their president and head of operations, we crafted a workplan to put three types of problems in the spotlight, each with a process owner and a small team.  One problem related to variation in a machined component, another was a product design issue, and the third was related to performance variation with an assembly machine.

Before training and challenging the three teams to address the problems, the president and his management team learned about the science of problem solving. Having the leaders work on a simple case study, we helped them see that:

  1. A problem is not described by one defective part in your hand… you have to look at other parts, observe the process and look for differences between conforming and non-conforming parts
  2. It is not possible to identify the cause of a problem if you don’t have enough clues about the problem… Guessing isn’t helpful
  3. You can’t create a lasting solution if you don’t know the true cause… Implementing an ineffective solution actually drives unnecessary costs

After the management group was trained to understand the process and ask the right questions of the team members, the three teams participated in our Effective Problem Solving workshop.  In two days, they were able to define their problem with facts and data, identify potential causes, and develop a plan to test causes that best fit the discovered clues.

Over the next four weeks, progressing at their own pace, each team narrowed the issues to the actual cause of their assigned problem, and were able to recommend systemic solutions that management was glad to consider, now with high priority.

Find out more about our two-day problem-solving workshop.

When your senior leaders are engaged, the Luminous Group brings maximum value to your organization.

By using a structured approach to problem solving to channel the knowledge and experience of your workforce, you will become better at fixing both the surface causes and underlying root cause of most problems.

Try it yourself.  When you see a costly problem in a new light, you might find that by following a structured approach, you’ll prevent problems from recurring.


The Luminous Group Sponsors the First “Coolest Thing Made In Michigan Award” with the Michigan Manufacturers Association

Gina Thorsen, President of Stormy Kromer, accepts the Coolest Thing Made in Michigan Award from Murray Sittsamer, President of The Luminous Group, at the MFG Excellence Awards event, November 8 2018.

The Michigan Manufacturers Association held its MFG Excellence Awards dinner on November 8, in East Lansing, Michigan. This annual gala is held to promote the inspiring stories of Michigan’s manufacturing industry, the thousands of unique manufacturing companies that operate in the state, and the 600,000 Michigan residents employed in the industry.

This year, The Luminous Group sponsored the first “Coolest Thing Made In Michigan Award.” This award recognizes amazing Michigan-made products and the finalists included a wide range of companies and products:

  • Excalibur Elite Windshield Pontoon
  • Founders Beer
  • Hudsonville Ice Cream
  • Koegel Viennas
  • Original Stormy Kromer Cap
  • Amigo Motorized Cars
  • Better Made Snack Foods
  • Gentex Full Display Mirror
  • Jiffy Corn Muffin Mix
  • Sanders Bumpy Cake

The inaugural award recipient is the Original Stormy Kromer Cap. This beloved Michigan-made product is a 4-panel handmade cap that was created in 1903.

Today the company continues to manufacture the cap in a variety of designs, employing Michiganders who make an expanded line-up of products, including the iconic cap.

Manufacturing in Michigan is rich with innovation. The list of finalists and the award winner are all great examples of Michigan’s manufacturing talent and leadership. We believe that they represent the future of Michigan – competing with businesses on a global stage.

The 2018 AIAG Quality Summit: Our Takeaway

The Automotive Industry Action Group (AIAG) held its 2018 Quality Summit September 18 and 19 in Novi, Michigan. The event is held to share supplier and OEM perspectives on improving quality management standards and tools developed to monitor and ensure industry quality and product safety. This year’s theme was “Tools to Sustain your Automotive QMS.”  Rich Nave and I attended this year.

This annual event is an ongoing part of AIAG delivering on their mission of bringing experts together to work on processes and standards globally.  For The Luminous Group and our clients, a key component of AIAG activities is Quality Management System requirements (IATF 16949) Core Tools, and CQI guidelines, especially:  APQP, FMEA, Layered Process Audits (LPA) and Problem Solving.

Core Tools matter more than in the past because the supply chain has become global and, the more diverse the suppliers are, the more important that they all adopt tools and processes that contribute to everybody’s bottom line: measurable operational excellence throughout the supply chain.

The Summit this year included important announcements – and one ‘non-announcement’ (the highly anticipated AIAG-VDA FMEA Handbook). In addition, our conversations with many of the services exhibitors were similarly important. Taken together, they were about updates to standards and the tools (methods and software solutions) that the industry employs:

  • A new set of IATF documents was announced. These included a set of best practices and Frequently-Asked Questions.
  • A revised Effective Problem-Solving guideline (CQI-20) was announced and made available at the Summit (and now via the AIAG website)
  • The long-anticipated AIAG VDA FMEA Handbook (which was to be released after the September IATF 16949 Transition deadline) — was NOT announced and the planned update presentation session was cancelled.  The handbook has not yet been accepted by the key OEMs and Suppliers… but might be released (or the committee will provide an update). If it is released by AIAG, it promises to change the way many companies develop their Design and Process FMEAs.  I’m glad to share my ‘’Good Bad and the Ugly” high-level observations regarding the new handbook if you’d like a copy.

A majority of the exhibitor conversations were about software tools designed to facilitate the deployment of quality standards and Core Tools. There are now some great software solutions for APQP, FMEA, Problem Solving, IATF QMS plant scorecards and Layered Process Audits.

I believe the new IATF 16949:2016 standards, Core Tools as well as the new software solutions, are good steps forward. However, I think these prescribed disciplines come with a good deal of risk for the industry if they are not managed with the big picture and bottom line in mind.

While the evolution of standards makes sense, suppliers need those standards to impact more than just quality –they need to be understood and then embraced by leaders and functions beyond the ‘Quality’ department. The implementation of any standard is difficult to defend if it is only important at the practitioner level. Standards must be important at the executive level and need to impact long-term goals that contribute to operational excellence.

Similarly, software is most effective when it is accompanied by processes that make sense and training that ensures better than “garbage in / garbage out” results. Without a solid methodology and understanding of the “whys” and “hows,” software alone will not contribute to any improvement; some things cannot be completely automated. For a practitioner functioning without the right organizational support and senior leadership, software that encourages “checking the box” without a long-term understanding, fails to drive the desired impact.

Let’s get this message to higher-level managers and leaders at your company for the good of the Automotive industry.