Launch Your Next Mission - Part 1: Key Process Identification and KPIs

The funny thing is that this requirement is not a new requirement; it actually dates back to the 2000 version of ISO 9001 but has never been implemented correctly. The Aerospace client base have been better at this requirement than general ISO 9001 clients purely because the auditors have been trained differently and are forcing organizations to adopt the process based concept. 

However, the adoption is still not fully grasped so this article aims to help with the understanding and reasoning behind the process based approach and if followed should make the auditing process a lot smoother but more importantly organizations will gain benefit from having a clear structure to the system and more focus on performance improvements.

One of the most important documents needed within the management system is the interaction flowchart (or description of processes), the flowchart will need to define all of your processes and demonstrate that all clauses of the standard have been addressed within the processes defined. If the flowchart is not clear, correct or missing elements then technically we would not proceed to audit.

When I am planning an assessment, I will review the interaction flowchart and highlight all of the processes, I then map these out against the clauses of the standard (in Aerospace audits I use the QMS Matrix) and if I find that some of the clauses are not evident in a process then I will need to get this resolved by the client. For me to audit by process I need to understand the processes and also what elements of the standard are within each of those processes so I don’t miss anything out.

Organizations need to spend some time reviewing their interaction flowchart and identified processes to ensure that they are clear and cover all elements. When setting up a new system this should be one of the first activities that are performed.

Key Processes

Once all of your processes have been defined you then need to identify what are the key processes, a key process is a process which has a direct impact on the customer or service which is typically anything within section 8 of the standard. You can identify all processes as key but this is not usual practice, but I have seen it done.

Within the aerospace scheme, these are the processes which will be documented as PEARs (Process Effectiveness Assessment Reports) and KPIs need to be in place for each of the PEARs (more on that below).
Your key processes will typically be sales, purchasing, production and design but can vary greatly depending on the organization and the product and service.

Clause 4.4 Quality Management System and its Processes

It is a common misconception that this clause just means that you need to monitor the processes through internal audits, it is often the answer auditors are given when asked what the organization is doing about meeting this requirement.

The wording in bold italics is taken directly from the standard.

4.4.1 The organization shall establish, implement, maintain and continually improve a quality
management system, including the processes needed and their interactions, in accordance with the requirements of this International Standard.
 
The organization shall determine the processes needed for the quality management system and their application throughout the organization, and shall:
 
First let’s define a process; a process is a method of taking inputs and converting them into outputs. Each organization will have multiple processes to achieve the intended results of the business whether that is retail, manufacturing, construction or any other business you might be involved in. 

From a high-level perspective, you will have a need from a customer or market (input), you then perform several activities depending on the nature of the business but generate an output at the end whether it be a house, car, component or selling of a product or service. That’s the high-level process. You will need to determine all processes within the organization that enable you to deliver the output; sales, purchasing, manufacturing, installation, assembly, building, demolition… the list goes on and depends on the business and organizations structure.
 
No outside auditor will tell you that you are wrong about your processes, you as an organization will determine your processes that suit your needs, you can even call them anything you like that’s specific to the business.  You don’t need to use the example of Sales; your organization may use terminology such as “getting the business” etc. I will use simple terms throughout the article to aid understanding. However, auditors will raise issues should your processes not be clearly defined.

Simple Process Overview

a) determine the inputs required and the outputs expected from these processes;

This element is relatively self-explanatory and it enhances the process based thinking methodology, what are the processes of the business and what does each of those processes require to get them started, what do they produce as a result which will be the inputs of another process. 

Notice that the standard states processes not process, in other words there are multiple processes within an organization which need to be determined and managed. The business needs to break down their processes into various stages depending on a lot of factors such as the size, types of operation, process owners and complexity. 

As an easy visual for everyone we shall take purchasing, there aren’t many organizations out there that do not purchase something, it may be a very small element of the business or it could be a significant element, either way every organization will purchase something. 

The inputs to purchasing could be:

• MRP/stock shortage alert/need

• Customer request

• Purchasing requisition

• Outside process need such as heat treatment or something you can’t do internally

The outputs to purchasing could be:

• Delivery notes and certificates of conformity

• Handover certificates

• Purchased items delivered straight to customer

• Purchased parts or service ready for the next stage

The activities to convert the inputs into outputs could be:

• Approving suppliers

• Raising purchase orders and issuing to the supplier

• Goods receiving/receipt inspection

• Updating stock records

The lists can go on and be better defined but the above should highlight these key steps in the purchasing process. You would need to do the same for all the processes you have defined within the organization. There are many tools that can be used to document these; turtle diagrams, flowcharts, SIPOCs or you can just document in words as I have above.

b) determine the sequence and interaction of these processes;

This clause section is putting all the identified processes into some order which identifies how the overall system works (commonly called an interaction flowchart but you don’t need to have a flowchart). If we use Sales and Purchasing as two of our processes that interact, the outputs from the sales process are the inputs to the purchasing process. Following on from the example above regarding purchasing; the outputs from the sales process could be:

• MRP shows stock level after sales order entry

• Customer order received/tender won so need to purchase items to fulfil the order

• The sales team raise a purchasing requisition after receipt of customer order and issue to purchasing to enable them to raise a purchase order to fulfil the customer’s order

All your determined processes should interact with each other to deliver the high-level process/scope of the business.

c) determine and apply the criteria and methods (including monitoring, measurements and related performance indicators) needed to ensure the effective operation and control of these processes;
 
This is the element that most people overlook and in this version of the standard they have even given a big hint as to what you should be doing “Performance Indicators”. Once you have determined your processes you need to determine the criteria and methods needed to demonstrate that these processes are being operated effectively and that everything is in control as planned. 

This clause was never applied correctly in 2008 version and we are still seeing this being overlooked in the 2015 version. The “performance indicators” was not in the 2008 version so they have made it nice and obvious in this version.
 
So, what does it mean?  You need to be able to demonstrate that your processes are in control, you have achieved your planned results and the process is effective using performance indicators (or KPIs as they are more commonly known). 
 
Let’s take purchasing again, how do you know if your purchasing process is working effectively and is under control? Purchasing in my opinion is the easy one to start with as most organizations will do this anyway but maybe not in such a formal manner. 

If the supplier is providing your items on time and you are not rejecting the item or service due to failure then the system must be working. You have selected good suppliers, you have communicated the purchasing requirements clearly, they have understood the requirements and delivered as needed. You can select any measures you feel demonstrates that the process is working as planned to suit your business. 
 
Once you have determined what you are going to measure, you need to have a target in place which demonstrates that if the target is met, then everything is working as planned. There is great debate out there regarding what the target should be, some people think it should always be 100% but in my opinion, you need to be realistic. 

If your suppliers are currently delivering 80% on time, then 100% is far away and will be hard to achieve (think SMART), I am sure we would all love for everything to be delivered on time, all the time but you need to get to that point in steps, you can’t just flick a switch and expect someone to go from 80% to 100% overnight. 
 
To identify your target, you need to first establish where you currently are with the measure. You may already have delivery performance records in place for your suppliers which makes this part easy, just look at the historical data for the last twelve months, identify the average and then put a target above that average, let’s say 85% is achievable this year up from the 80% last year. The process is still not fully effective but we are on our way there (continual improvement).
 
Be clear with your target also, many organizations will monitor this each month and show me the results and I will always ask is the 80% to be hit each month, by the end of the year or an average over the year? The answers are usually mixed and can be different from employee to employee. It will not matter to an auditor what you are using as long as it demonstrates control over the process, it will matter if you are clear or not. If you don’t know, how are your employees and customers and more importantly in this case; suppliers to know?
 
If you don’t have that historical data you can do two things, think of another measure for the time being and then introduce some form of data capture for the next twelve months. Or you can go back through the records and do a manual data collection. The later may be a daunting task for some organizations so the first might be a better option but it’s up to you to identify this not the auditor.
 
People ask how much data they need, well the answer depends on the consistency of your performance. If you look back over six months of records and the delivery performance is within 5% of the 80% each month (76%, 78%, 83%, 85%, 80% etc) then you could say that you have a relatively stable process and you can identify that trend and be comfortable with that decision. 

If you look at your results and you are up high one month, down low the next (20%, 90% etc) then you will probably need longer. Personally, I think you need 6-12 months but I have been presented data for less and its shown very consistent levels so was happy to accept it.
 
You may say that it doesn’t matter if the deliveries are late so I won’t measure that, it’s more important that I have good stock levels. Ok, so measure the stock levels to planned targets instead.
 
When you’re identifying your target you also need to think about your process and system and how you are going to get to your target. Don’t just pick a target and run with it as I can almost guarantee that you will not meet it. Einstein’s theory of madness “the definition of madness is doing the same thing over and over and expecting different results”. 

If you don’t change anything from what you were doing last year then the chances are you will end up with the same results. How are you going to achieve the target? What have you changed or introduced? How are you ensuring that people impacting the target are aware and their impact on meeting this target?

d) determine the resources needed for these processes and ensure their availability;

This element should be self-explanatory; you need to provide resources to ensure that the processes are performed. If you define your processes in a turtle diagram then you will have boxes on there for man, machine etc. Well these are the resources I need for that operation. 

For purchasing I will need maybe a computer, telephone, need a chair and general office equipment, I may need some software for generating the MRP or purchase orders, I may need Vernier callipers to inspect the parts upon receipt.  You should also remember that resources are people so you may state that you need the purchasing manager, storeman and administration to perform this process.

e) assign the responsibilities and authorities for these processes;

This element should also be easy, who is responsible for the process, who is the go to guy (or girl) if you need to perform the process or have something changed within the process. It may be a purchasing manager for a larger organization or it could be the Managing Director etc. 

If the people know who is who and who is responsible then it doesn’t matter to an auditor. It’s your business; we just need to know who is responsible for the overall process I am auditing.

f) address the risks and opportunities as determined in accordance with the requirements of 6.1;

This is a new requirement in the 2015 version of ISO 9001 that was not there in the 2008 version.  Address the risks and opportunities which have been identified. This one line can have a great impact on the way the management system is structured and will very much depend on how robust your risks and opportunities process has been in identifying these items. 

Your system needs to ensure that these risks are managed and opportunities attended to. Let’s just say that one of your risks in the business is that if you have poor on time delivery to your customer then they may go elsewhere and you will lose the business and it’s a downward spiral from there. This tells me that you need to ensure your suppliers are delivering their products and services to you on time as the late delivery has a knock-on effect to your own customers. This would push me more towards monitoring the on-time delivery of suppliers. 

You may have also determined that not having clear manufacturing procedures could result in poor product quality, rejects and lower profit margins due to scrap being so high. You may then decide that although the standard doesn’t need me to document a procedure, I would, as this could have a negative impact on the product and service.

Don’t forget opportunities, maybe there is a new market opportunity for a cheaper version of a generic MP3 player that can be powered by solar. Let’s get the system designed around getting this product to market.

g) evaluate these processes and implement any changes needed to ensure that these processes achieve their intended results;

This is another key element that is overlooked from the 2008 and 2015 versions. Now we have our processes identified and targets in place for our KPIs, what do we do if we miss the target? Do we just ignore it and carry on as we were? No, you need to ensure that you are fixing any reasons why you missed the target and implementing actions to bring it back on track or ensure you meet them next time. You need to review your performance against the targets and determine what went right and what went wrong.

Assume we had the target of 85% on time delivery from our suppliers as an average over the last twelve months and we only hit 82%. What went wrong? If you didn’t record the reasons why the suppliers were late then you are probably stuck, you need to record why the suppliers are delivering late to know what you need to fix. You might need to talk to them and ask, you may have already asked them for corrective actions.

The result might be that you are not giving long enough lead times to the suppliers and you need to change your stock levels to accommodate etc. It could be a myriad of things which you need to identify yourself to improve and meet your targets. If you don’t know what’s broken then how are you going to fix it?

h) improve the processes and the quality management system:

This element highlights the need for you to improve the processes; don’t stand still, always look to improve what you do and how you manage the system and business.

What should be your KPIs? 

KPI requirements have been in place for a number of years for anyone who has been adopting the aerospace scheme standards, and everyone should have them embedded by now but this is still a weak area and commonly NCRs are raised against this requirement.

I am often asked by organizations what they should use for KPIs, this is not something I can directly help you with and neither can any other auditor as it’s your system not ours. However, I can help with appreciating what is the purpose and some of the KPIs you should never use to enable you to determine what suits your business and needs.

OTD and Quality

We often see organizations have 3 or 4 key processes and for every single KPI within those processes they have used on time delivery and quality. This is not something which can be accepted. If you read the standard under the customer focus section it tells you that you must monitor quality and on time delivery, why is that mentioned there? It is there because it’s an important measure but it is a measure of the entire system not individual processes and should not be used within any PEARs. 

For an easy example, let’s take on time delivery.  If we have 3 processes; sales, purchasing, manufacture and have an on time delivery target of 98% and this KPI is set against each of the processes and the same results are presented for each of the processes this does not demonstrate OTD for each of those processes, it’s a measure of all of them together.

Let’s say we achieved 96% OTD against our target of 98%. How do we know which of those processes caused the OTD issue? Unless you break down all the reasons for being late (which is possible) then you can’t demonstrate which process is causing you issues and is not effective. Each of those operational steps could have caused you to be late; sales could have quoted the incorrect lead time, purchasing could have placed the orders too late, manufacturing took longer than expected. Using OTD across the board without breaking down each of the process impacts on OTD will not demonstrate process effectiveness and control.

The same could be said for quality; sales could have not picked out all of the specification requirements needed for the part, the purchase order could have been missing vital information to the supplier, manufacturing could have made oversize. Unless you break down the reasons for quality issues and measure against each of the processes individually you should not be using this as a measure.

So what can we use?

The easiest method to identify suitable KPIs is to understand what the purpose of the process is, why is the process there, who are the stakeholders of the process and what is the process owners goal or objective?

Always consider the entire process not just a single element, the measure should be of the entire process. I am going to highlight some possible examples below but please do not take these as gospel, I am trying to just change mindset and stir up some ideas which can be utilised by organizations.

Sales Process

Common KPIs are quote turnaround and increase in business. These do not necessarily measure the effectiveness of the entire sales process and if you consider the stakeholders and the resulting impact on the next process they would not be suitable. What we should more consider is things such as whether or not customer requirements were fully and accurately determined or if the customers’ requirements were relayed accurately to internal process owners.

How could we measure this? Evaluation of contract modifications, ECO’s/ECN’s etc

Design and Development Process

Not suitable - All of the design/development artefacts were completed for each stage of the design, Design reviews were completed and approved.

Alternative - Whether or not design requirements were properly conveyed or customer requirements were fully realized or corrective actions were taken as required.

How could we measure this? Evaluation of ECO’s, ECN’s, design re-spins, software patches, field fixes, design validation results not according to planned arrangements, poor customer satisfaction results.

Purchasing

Not suitable - Number of purchase orders completed, % of suppliers who have 3rd party certification.  Who are the stakeholders and what is the goal?

Alternative - Ability of suppliers to supply product as required or ability of buyers to understand supplier’s abilities and match them up to design/production requirements.

How could we measure this? Evaluation of incoming inspection reports or feedback from production processes on supplied product or rework of supplied product or modifications of purchase orders to more accurately reflect desired product.

KPI Tips and Tricks

• Don’t measure a process just because you have the capability, measure what is right;

• Question the validity of a process measurement that lacks a goal or objective;

• Make sure your performance measurement assigned to a given process measures that process (and not a different process);

• If you cannot say (and prove) that your process is improving (or regressing) over time, your measurement process is probably not adequate;

• An underperforming process can be masked by other closely related well performing processes;

• If the results of your measurement are not actionable, question the value of the information;

• Don’t confuse efficiency with effectiveness – you can’t be efficient without being effective first;

• OTD, Customer Satisfaction, Sales Numbers and Quality are not processes and should not be used as measures.

Tools for monitoring and presenting KPIs

There are various methods that can be used for monitoring the KPIs identified by an organization, this could be as simple as pen and paper but this does get difficult and will raise questions on the quality of the data being captured.

The most common tool is Excel, you can create simple tables and charts with data pulled from various sources and collated together or exported from another database or system such as an ERP. Excel is very good at displaying charts and in my opinion a picture tells a thousand words and can be quickly digested by readers or quick visual on production boards etc.

Another tool that I use personally is Microsoft Power BI, the software is relatively new and is free to a certain point, more than enough for a small organization to use for free forever. The software will talk to many databases such as excel or SQLs and can even be from your own ERP systems. The data can be presented in very professional and customizable visuals and can be published to websites, phones, PowerPoint or simply printing. The software is very powerful and keeps charts up to date automatically (if you use the web version which is also free) or just simply press the refresh button.

Organizations may also have their own ERP systems which holds large volumes of data and this information can be generated into tables and in some cases charts, this all depends on the ERP system being used. The good thing about using Power BI along with an ERP system is that the data can be presented in many ways using exported data without the need for software development costs or charges.

Whatever method you use is fine with any auditor, there are no rules on how you should present this information, and you chose whatever suits your business.