Top Tips for Developing Leading Indicators for Plant Managers

Published on: July 14, 2020
By: Rich Nave

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.