A hierarchical set of indicators in the production organization to tune entrepreneurial activities

Summary form only given. The aim of indicators in the production organization is to increase employee motivation. It is expected that this will lead to a higher quality of products and processes if the indicators are derived from the overall business goal and if no suboptimalisation takes place. From studies of the use of indicators in different production environments it appears that it is difficult to avoid: redundancy, suboptimalisation and calling every indicator a performance indicator. In this paper a more theoretical approach is followed to derive an hierarchical set of indicators avoiding mentioned drawbacks or misinterpretation. Customer satisfaction is taken as business goal followed by four 'information transformation' steps to specify and complete the wanted physical product: the observation of customer wants, the choice of the product concept and processes, the structuring of product and production system and the completion of the production function. To control the quality of these 'information transformation' steps, three decision levels are defined: strategy, tactics and execution with measurable indicators or ratios at each decision level. These ratios are respectively productivity, performance and effective use of capability, materials, energy and environment. The ratios at the three decision levels are used to control the planned production activities. In the event of observed deviations, the emphasis is on the analysis of the effective use of capability and material to find possibilities for improvements. Failure mode and effect analysis is used by improvement teams to set priorities.