EICC Working Hours Taskforce

KPI Scorecard

May 2010

2

Overview

• Objectives • Potential KPI Cause and Effect Diagram• KPI Impact Interaction Matrix• KPI Reporting Guidelines• Examples of Recommended Methodologies*• KPI Development Progress Scorecard• Summary

* The root causes included in this presentation and in the KPI guidelines are examples only and are not based on actual root cause analysis data or results. Each situation is unique and should be addressed accordingly with the Root Cause Analysis Tool provided as part of the Working Hours Task Force toolkit.

3

Objectives

• Provide high-level understanding of the various Key Performance Indicators that may be of value when addressing possible root causes of excessive working hours.

• Provide an understanding of the interactions between departments within an operation that may impact working hours performance.

• Recommend review process for KPIs.

4

Return

Impact

Reporting

Root CauseOrders outside of lead timeMaterial delivery / safety stock levelResource planning accuracy

# of workers exceeding working hours limit

# of workers without 1 day/wk off in 7 days

Overtime pay

Attrition rate

ProductivityTraining cost delta

Total cost trend

Satisfaction rating

High-Value KPIs: Excessive Working HoursC

ause

and

Eff

ect

KPI Impact Interaction ToolKPI

numberDescription

Direct impact to working

hours (yes/no)

Primary data collection and reporting responsibility

Potential causes & influencing factorsAdditional areas/ Organization with

influence

Leading/ Lagging

indicator

Return

1 Total Cost Trend No Cost ManagementSee KPI numbers 2,3,4,8,12 Executive pressure. P&L owners

Lagging

2 Worker Satisfaction rating Yes HR See KPI numbers 8, 12 HR Managers, Production Supervisors

Lagging

Impact

3 Overtime pay Yes HR/Cost MgrSee KPI numbers 6,7,12 HR Managers, Production Supervisors,

finance dept.Lagging

4 Training cost delta Yes HR/Cost MgrSee Kpi numbers 10, 11,12 HR Managers, Production Supervisors,

finance dept.Leading

5 Productivity Yes Production Planning See KPI numbers 2, 8, 9, 10, 12, 13 Workers, Production Supervisors LaggingReporting

6# of workers exceeding work hour limit

No HR/Production scheduling See KPI numbers 4,9,10,11,12,13 HR Managers, Production Supervisors

Lagging

7# of workers without 1 rest dqay per week

No HR/Production scheduling See KPI numbers 4,9,10,11,12,13 HR Managers, Production Supervisors

Lagging

8 Attrition rate Yes HRSee KPI numbers 2,3,4,6,7,13 HR Managers, Production Supervisors

Lagging

Root Cause

9Orders outside of lead time

Yes Buyer planning Communication & Contract negotiations Supplier production planning

Leading

10Material delivery / safety stock level/inventory accuracy

YesSupplier material

management / Purchasing

Sub-tier supplier contracts/orders outside of lead time. Quality problems. Communication, material supply interruption, orders, too low material safety stock

Sub-tier suppliers

Leading

11Life Cycle Volume accuracy

Yes Customer Sales predictions underestimated or overly ambitious, Product Ramp profile. Incentives (sandbagging).

Materials and production planning teams. Marketing Consultants Leading

12Resource planning accuracy

Yes Supplier

Cost pressures to be too lean. Not understanding the scope of work in detail. Incentives (sandbagging). Force Majeure. Vertically focused organizations not integrated with the rest of operations. Silos not collaborating/communicating with each other. Corporate culture/policy

Material planning, risk management, production planning, account managers

Leading

13 Worker attitude Yes HRAverage age of employees and relative availability of work force. Type of work. Culture of enterprise.

HR Managers, Production Supervisors, P&L Executives Leading

6

KPI Reporting Guidelines

Table of Contents 1 Purpose.............................................................................................................................................. 3

2 Scope ................................................................................................................................................. 3

3 Responsibilities................................................................................................................................. 3

4 Terms, Definitions & Acronyms ....................................................................................................... 3

5 General............................................................................................................................................... 3

5.1 Format ............................................................................................................................................ 3

5.2 Reporting Timeline ........................................................................................................................ 3

5.3 Historical Tracking Log................................................................................................................. 3

5.4 List of KPIs..................................................................................................................................... 3

5.5 Out of Goal..................................................................................................................................... 4

6 Reporting Procedure......................................................................................................................... 4

6.6 KPI #1 - Number of Workers Over Max Working Hours Limit ..................................................... 5

6.7 KPI #2 - Number of Workers without 1 Day per Week Off........................................................... 5

6.10 KPI #3 - Material Delivery / Safety Stock Level / Inventory Accuracy ........................................ 5

6.11 KPI #4 - Life Cycle Volume Accuracy........................................................................................... 5

7 References......................................................................................................................................... 6

KPI working guidelines

7

Three Examples of KPI Development Tool in Use

1. Identification of working hour overages or lack of rest days (includes both EICC and China OT legal requirements)

2. Potential excessive working hours created by material shortage

3. Potential excessive working hours created by life cycle volume inaccuracy

The following examples are intended to illustrate use of a KPI Scorecard to track specific indicators of, or contributing factors influencing excessive working hours.

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KPI Development Methodology – Example Working Hours

Elements of KPI• Primary owner (for reporting metric) HR, Finance • Method – Trend Analysis• Management Influence – Sales, planning/forecasting,

HR/workforce planning, operations, materials• Type of Indicator – Lagging• Potential Causes – Orders exceeding capacity,

unexpected demand, lack of required workforce resources, material availability

• Comments – Requires accurate weekly/monthly data reporting from time and attendance system

Steps to take• Establish methodology to extract time & attendance data• Collect and report out working hour and rest day data on

weekly basis• Analyze working hour (and rest day) data to determine

whether it meets EICC and local legal requirements• Identify potential trends and root causes of work hour

overages; implement plans to address root causes• Continue to track performance against EICC/local legal

requirements and address overages

Metrics/Indicators Jan Feb March April May June July Aug Sept Oct Nov Dec

Number of employees that exceeded 36 hours OT for the month (China requ)

0 75 44 8 16 29 72 117 120 0 0 0

Percentage of employees that exceeded 36 hours OT for the month (China requ)

0.00% 5.39% 3.16% 0.57% 1.16% 2.09% 5.24% 8.54% 8.80% 0.00% 0.00% 0.00%

Number of employees that exceeded 60 hours/ work week for the week or month (EICC requ)

0 0 0 0 0 0 0 0 0 0 0 0

Percentage of employees that exceeded 60 hours/ work week for the week or month (EICC requ)

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Number of employees not meeting the one day off rest per week requirement for the week or month (EICC requ)

0 0 0 0 0 0 0 0 0 0 0 0

Percentage of employees not meeting the one day off rest per week requirement for the week or month (EICC requ)

0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Total Operator Headcount 1416 1391 1394 1396 1382 1386 1375 1370 1363 1362 1365 1370

Work hours and rest days

meet EICC requirement,

but fail to meet China

OT legal requirement

for Feb – Sept.

9

KPI Development Methodology – Example Material Availability

Elements of KPI• Primary owner- Suppliers’ Material Management

and Brands’ Purchasing• Method – Waterfall Chart, Trend Analysis• Mgmt Influence – Sub-tier suppliers, Planning• Type of Indicator – Leading • Potential Causes – Force Majeure, Cost

Pressures, Incorrect or poor data inference.• Comments – Impact to working hours occurs when

material is not available and then a catch up schedule is introduced to match revised availability.

Steps to take

• Establish % flexibility of production in contract

• Establish material lead times

• Establish % material to be held in buffer/safety stock

• Establish material delivery plan

• Track performance to plan

• Measure results using number of units short of plan and time to recovery with and without over time

• Determine course of action keeping in mind elimination of excessive working hours

Process WK 1 WK 2 WK 3 WK 4 WK 5 WK 6 WK 7 WK 8 Sch. Del 100,000 Act Del 100,000Usage 95,000 Delta 5000 Sch. Del 100,000Act Del 96,000Usage 98,000Delta -2000Sch. Del 100,000Act Del 85,000Usage 100,000Delta -15000Sch. Del 100,000Act Del 85,000Usage 95,000Delta -10000Sch. Del 100,000Act Del 85,000Usage 90,000Delta -5000Sch. Del 100,000Act Del 85,000Usage 103,000Delta -18000Sch. Del 100,000Act Del 0Usage 100,000Delta -100000Sch. Del 100,000Act Del 0Usage 100,000Delta -100000

Cum Delta 5,000 3000 -12000 -22000 -27000 -45000 -145000 -145000

Material shortage begins to drive need for additional work hours

10

KPI Development Methodology – Example Life Cycle Volume Accuracy

Elements of KPI• Primary owner- Brands’ Sales and Marketing &

Communications Teams, Retailers, End Customer, Supplier’s Production and Shipping Teams

• Method – Market Research, Trend Analysis (historic, present and future), Communication of Demand (Brand) Production & Shipping (Supplier)

• Management Influence – Brand’s Planning Teams, Retail Forecasting Teams, Supplier’s Production, HR and Purchasing Teams

• Type of Indicator – Leading • Potential Causes – Fluctuating Retail Demand

(Retail / End Customer), Overly Aggressive Forecasting (Brand), Inadequate Resource Planning (Supplier), *Unusual or Emergency Situations

• Comments – Requires monthly reporting of clearly defined and agreed upon metrics

Steps to take• Establish a trusting business relationship with clear

and transparent communication between all parties• Plan to EICC working hours requirement• With the Code in mind, define terms & conditions

for the Retail/Brand relationship and the Brand/Supplier relationship (upside flexibility, lead times, committed capacity etc)

• Establish agreed upon reporting metrics (forecasting signals, production planning methods, shipment plans)

• Ensure adequate resources are in place to meet demand (Supplier)

• In an *Unusual or Emergency Situation, Supplier tracks any excessive working hours as a result (per worker, per week)

• Set up formal review of excessive working hours KPI data (Brand and Supplier)

• Supplier develops a recovery plan to meet EICC requirement for excessive working hours

*Definition of Unusual or Emergency Situation - Per EICC Working hours Guidelines:• Unpredictable events that require overtime in excess of legal or EICC limits. Such events cannot be planned for or

foreseen. • Equipment breakdown, power failure or other emergency resulting in prolonged shutdown of a production line. • Unforeseen raw material or component shortages or quality issues that shut down production.  Excessive overtime is then

needed in both situations to recoup lost production time and meet customer commitments.

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Sample Scorecard for Implementation of KPIs

Supplier Production

Management

Customer Demand Planning, Supplier

Production Planning

Procurement, Sub-tier Supplier Performance

TBDSupplier Production

Management

Working Hours

KPIs

Over WH Limit

One Rest Day LCV Accuracy Material Availability

TBD(Based on root cause analysis)

Evaluation Process

Established

Evaluation Process

Established

Evaluation Process

Established

Evaluation Process

EstablishedData Collected Data Collected Data CollectedData Collected

Results AnalyzedResults Analyzed Results Analyzed

Improvements Identified

Results Analyzed

Improvements Identified

Improvements Identified

Evaluation Process

EstablishedData Collected

Results Analyzed

Improvements Identified

Improvements Identified

Indicators:

Implement-ation Steps

Responsible for reporting

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How Do I Start?

• Be proactive!• Engage senior management• Identify the root causes of excessive working hours• Select KPIs and gather data• Establish a regular, formal KPI review process to create

accountability across the organization, monitor progress and take corrective action

• Ensure that all departments and organizations which contribute to the conditions for excessive overtime take ownership for reducing working hours

• Share your challenges and progress with your customers• Collaborate with customers to address brand-related factors

The most important thing is to get started! Establish your baseline, and track your progress.